Income inequality and the Indian case

Today more than ever, income inequality is a critical issue. The South of the world is on its way of catching up with the North and, consequently, income inequality between countries is shrinking. On the other side, though, income inequality within countries is increasing, because globalization and technology are pushing more and more shares of the population at the margins of the society. In many developing and underdeveloped countries, the gap between the bottom and the top of the income distribution is enlarging, opposite to what the economic theory based on the Hecksher-Ohlin and Stolper-Samuelson models states. India is the practical example. Since it's opening up to international trade, the country has experienced an alarming upsurge in inequality. The analysis will reveal that the phenomenon of the ¿missing middle¿ is one of the main reasons behind the dualism of the Indian labour market, which caused the marginalisation of the manufacturing sector and the growing importance of the service sector in the economy, with a sharp hike in top incomes. Moreover, there are other factors embedded in the society that continue to negatively affect inequality in the country.