  We investigate the nature and extent of reallocation occurring within the
Indian income distribution, with a particular focus on the dynamics of the
bottom of the distribution. Specifically, we use a stochastic model of
Geometric Brownian Motion with a reallocation parameter that was constructed to
capture the quantum and direction of composite redistribution implied in the
income distribution. It is well known that inequality has been rising in India
in the recent past, but the assumption has been that while the rich benefit
more than proportionally from economic growth, the poor are also better off
than before. Findings from our model refute this, as we find that since the
early 2000s reallocation has consistently been negative, and that the Indian
income distribution has entered a regime of perverse redistribution of
resources from the poor to the rich. Outcomes from the model indicate not only
that income shares of the bottom decile (~1%) and bottom percentile (~0.03%)
are at historic lows, but also that real incomes of the bottom decile (-2.5%)
and percentile (-6%) have declined in the 2000s. We validate these findings
using income distribution data and find support for our contention of
persistent negative reallocation in the 2000s. We characterize these findings
in the context of increasing informalization of the workforce in the formal
manufacturing and service sectors, as well as the growing economic insecurity
of the agricultural workforce in India. Significant structural changes will be
required to address this phenomenon.
