Urban households earn around 85 per cent more than rural ones. They save nearly double that of rural households. Much of this can be explained by differences in profession and education and place of working. Even for the same profession and levels of education, urban earnings are higher. The lowest income quintile accounts for 22% of the population and just 6% of income. But India is changing rapidly – the middle classes, which accounted for 3% of the population in 1995, accounts for 8 % today. However, the regional disparities are persisting. Two-thirds of the poor reside in the 10 low-income states

People belonging to the lowest income quintile (Q1) have an average annual per capita income of Rs 3,500. While they comprise 18 % of the households, their share in total income is only 5.4%. In contrast, the highest income quintile (Q5) accounts for 22% of the households, but half of the total income. At Rs 33,000 per annum, the average annual per capita income of the top-most quintile is about 9 times that of the lowest quintile.
The degree of deprivation is related to education (highest education level in a household) and the major source of income. While nearly 27% of non-poor households have at least one graduate, just 8% of poor households qualify this attribute. A higher percentage of poor are primary educated (25%) and illiterates (7%) compared to just 10% and 4% respectively in the case of non-poor households. Those earning salaries account for 22%of non-poor households whereas just about 4% of poor households earn their living through salary/wages.
Ownership of (select) consumer durable goods among the non-poor households is significantly higher than those of poor households. At an all-India level, 33%of non-poor households own colour television sets, 25% have telephone, 22%have refrigerators, 19% own cellular phones, nearly 7% have cars and 2 % own credit cards. In contrast, 8% of poor households own colour television sets, 4% have telephones, 3% have refrigerators, 3%own cellular phones, and less than 1%have cars and credit cards each.

The quantum of land owned by a rural household is perhaps an important indicator of the economic status of the household. Nearly 40 per cent of rural households in India do not possess any land while 30 per cent own between 0.1-2 acres of land. Levels of land possessed have as much of an impact on earning levels as occupation does. Households that do not own any cultivable land form the largest group with average household size of 4.68. While they comprise of 37% of the population, their share in rural income is 30%. In contrast, large farmers account for just 4.7% of the rural population and they contribute about 9 per cent to rural income.
Within these categories of land, a larger proportion of landless households have chief earners who are either illiterates or have low levels of education. Over a third of households in landless categories are illiterate and just 6 per cent of them are graduates. Nearly 10% of households with more than 10 acres of land are headed by those who are graduates.

Since landholdings by the households are interrelated to occupation, the bulk of landless households are labourers (68%). Households with large land holdings have a higher share of households with agriculture as a major source of income (78%) in comparison with just 2.5%agriculture households in landless categories.

At the all-India level, 17% of all households have at least one graduate member – the figure is 30% for urban areas and 11% for rural areas. Around a fifth of households across the country (26%in rural areas and 8% in urban areas) are headed by illiterates while a similar number are headed by those who have just passed primary school (5th class) (22% in rural areas and 11% in urban areas). Just around one-seventh of households across the country are headed by those who have completed graduation.
Salary levels range from Rs 37,600 per annum for illiterate households to Rs 131,000 (that is, 3.5 times that of lowest level) for graduate households. For each level of education, salary levels in urban areas are higher as compared to rural areas. In the case of illiterate households, the average earnings in rural areas is Rs 36,000 per annum versus Rs 49,500 in urban areas; for graduates and above, average rural earnings are Rs 109,000 as compared to Rs 143,000 in urban areas – on an average, urban earnings at each level of education are around a third higher as compared to rural areas.

At every level of education and occupation, urban income is higher than those in rural areas. In the case of the salaried class (such households comprise 37% of all urban households and 10% in rural areas); urban salary levels are around 15% higher (the household income is Rs 114,500 per annum in urban areas versus Rs 99,000 in rural areas). For labourers (35% of rural households and 23% per cent of urban households), urban earnings are 37% higher than rural ones; it is 74%  in the case of the non-agricultural self-employed and 64% higher in the case of households headed by agricultural labourers.

Another way to look at the rural-urban disparity is to compare the population shares with income shares across rural and urban areas. Households headed by salary earners in rural areas earn less than what they do in urban areas. The average salaried household in rural area earns almost double (Rs 99,000 per annum) the average for all rural households (Rs 52,000 per annum). As a result, while such households account for 10% of all rural households, they account for 20% per cent of all rural incomes. Similarly, rural households headed by labourers earn a lot less than their counterparts in urban areas – yet, the share of such households in total income is a lot less adverse than it is in urban areas. Such households comprise 35% of rural households and 20% of total rural income; in urban areas, the figures are 23% and 10% per cent respectively

As per CSO estimates, the per capita net domestic products at current prices for 2004-05 vary significantly across the country, ranging from Rs. 29,000 for Delhi to Rs. 6,300 in Bihar, a difference of around five times between the richest and the poorest states. If the various states are bunched into three categories6 of low, middle and high income (based on the level of their per capita income), we will find that 48% of Indians live in the low- income states, 30 % in the middle income ones and the balance in the high-income states. While accounting for 48% of the population, these low-income states account for just 36 % of the country’s GDP. The high income states account for 21% of the population and 30% of the total GDP. The bulk of the population in the low income states is poor – 30% of households in these states fall in the lowest quintile, and just 12.5% of households fall in the top-most income quintile. In the high- income states, the situation is the reverse – while just 11% of households fall in the lowest income quintile, 33% of households fall in the top most income quintile.
Looked at another way, nearly 67 % households in the lowest income quintile (Q1) are those residing in the low income states; 21% of households in the lowest income quintile are from middle income states and just 12% are from high income states.
In the highest income quintile, around 27% of households are from the poorest states, 38% from the middle income states and 35% from the high income states

a) Financial vulnerability may be defined as a state of financial well-being of households that results from the pursuit of “unsustainable livelihoods”. In other words, financially vulnerable households are no longer able to meet their financial needs. This can happen on account of two reasons – households lack access to key productive assets; and/or due to unwise financial management. In the present context, a household is characterised as financial vulnerable if its total reported income is less than its total (routine and non-routine) expenditure. If we follow the above criteria, we find that one fourth of Indian families (5 Crore households equivalent to about 26 crore persons) are financially vulnerable. In other words, the incomes of around 25% of Indian households are below their total expenditure and these household are unable to meet their needs through the financial resources at their disposal. Approximately three fourth of such households is located in rural India. Expenses on weddings and other social ceremonies account for around 57% of all non-routine expenses in the case of vulnerable households and this falls to 31% for non vulnerable households.
The level of income is an important determinant of financial vulnerability. As per this survey, a majority of vulnerable households – two-third in rural and urban India each – belong to the bottom two income quintiles (Q1 and Q2). Hardly one-third of non vulnerable households belong to these income quintile groups. While 40% of vulnerable households reported an outstanding loan, this share in the case of non-vulnerable households was only 18%.
b) Occupation levels vary significantly across financially vulnerable households and non-vulnerable households. Labourers constitute the largest segment of the vulnerable population, comprising over 43% of the vulnerable households. The salaried account for 22% of the non vulnerable households. Just around 10% of the vulnerable households earn their living through salary/wages. Other socio-economic and demographic characteristics such as education level and age of chief earners, size of landholdings and even ownership of high-end products etc, have not shown much impact on vulnerability. For instance, while 28% of landless households are financially vulnerable, this share for medium and large farmers is 23% each. Krsr140309
Main Sources: NCAER India Financial Protection Survey-2007, NSSO-AIDIS-2002.