Income Distribution  refers to apportionment of total national income of a country among all its individuals and families. The principal objective of income distribution policy of a government is to minimise the inequality of income of its citizens, which arises mainly due to differences in their incomes from a variety of sources. The three main categories of income in a market economy are (a) salaries, wages and remuneration including a part of earnings in self-employment; (b) incomes from assets, including rent and profit from land and equipment, and interest from investment or lending; and (c) supernormal profits earned by some firms. These constitute the sources of primary income distribution. Secondary income distribution is based on primary distribution of income modified by direct cash transfers such as taxes and social security payments. And tertiary income distribution is the secondary distribution modified further by public sector activities such as the regulation of prices and the provision of public goods and services.

In Bangladesh, the distribution of income is measured indirectly on the basis of household income and expenditure, traditionally with the help of Gini coefficient. A household is defined as a dwelling unit where one or more persons live and eat together with common cooking arrangement. Persons living in the same dwelling but having separate cooking arrangements constitute a separate household. Household income includes (a) wages and salaries, pensions, contributions and professional fees earned by household members; (b) material return in cash or kind earned by them in exchange for goods and services; (c) their income from interest and dividends; (d) their earnings from agricultural activities, business, commercial and industrial establishments, and land and other property; (e) gifts and assistance; and (f) insurance benefits.

Calculated for household incomes in East Pakistan and Bangladesh, the Gini coefficient was 0.33 in 1963-64 and 0.37 in 1981-82. The value of the coefficient varied in urban and rural areas and the variation had widened over time. In terms of household incomes, it was 0.399 in urban and 0.334 in rural areas in 1966-67, and the corresponding figures in 1995-96 were 0.444 and 0.384. There had been little difference between the Gini index of income and that of consumption expenditures in Bangladesh up to the end of the 1980s, which may be attributable largely to the low rate of savings and partly, to considerable underestimation of incomes and overstatement of the consumption expenditures.

According to some estimates, the share of the top 5% high-income group households of Bangladesh in 1995-96 was 23.62% of incomes of all households compared to 18.85% in 1991-92 and 18.30% in 1983-84. On the other hand, the share of the bottom 5% low-income group households was 0.88% in 1995-96, 1.03% in 1991-92 and 1.17% in 1983-84. In 1995-96, the share of the bottom 10% low income group households was 2.24% of the total income of all households while the top 10% high-income group families claimed 34.68%.

The inequality in income distribution in Bangladesh as well as the number of people below poverty line increased over time largely as a consequence of the land tenure system and uneven access of the population to education, skill development and employment, and gender discrimination. However, although inequality in income distribution continued to increase, thanks to the introduction of high yielding varieties of different crops and the efforts of various government agencies and non-government organisations in poverty alleviation, there had been some improvements in poverty situation since the mid-1980s. Population below the poverty and absolute poverty lines measured in terms of calorie intake per person per day were 47.5% and 25.1% respectively in 1995-96 compared to 62.6% and 36.8% in 1983-84.

During 1970 - 81, the rates of growth of GDP and of inequality in income in Bangladesh were 4.1% and 0.37% respectively. The comparative figures were 1.9% and 0.43% in Argentina, 6.2% and 0.45% in the Philippines, 7.2% and 0.39% in Thailand, 7.8% and 0.42% in Indonesia, 7.8% and 0.49% in Malaysia, 8.4% and 0.60% in Brazil, and 6.5% and 0.52% in Mexico. There is practically no linear relationship between income inequality and per capita income or the rate of economic growth of a given country. Despite the fact that GDP of Bangladesh experienced a more than forty times increase between 1973 and 2000, the inequality in income distribution and the poverty level had not proportionately reduced. [Abul Kalam Azad]