INCOME DETERMINANTS IN INDIA: THE ROLE OF INDIVIDUAL ABILITY AND FAMILY BACKGROUND – A THEORETICAL ANALYSIS

Abstract

This paper critically examines how individual ability and family background affect income in India, a nation with deep-rooted socio-economic inequalities. While individual ability and education are crucial determinants of income, factors such as caste, parental income and educational attainment significantly influence access to opportunities. Drawing from recent studies and data, this paper argues that inherited social and economic status continues to have a disproportionate impact on income, challenging India's commitment to meritocracy and social mobility. Income inequality in India is influenced by the complex interplay between individual ability and family environment. While human capital theory emphasizes the role of education, skills, and individual effort in determining income, social and economic inheritance—such as ancestral wealth, education, and social networks—continues to shape opportunities and outcomes. This article critically examines the relative impact of these factors on income in the Indian context. Using secondary data from the National Sample Survey (NSS), the Periodic Labour Force Survey (PLFS), and published studies, this article highlights the persistent influence of family environment, even when individuals demonstrate high qualifications or a high level of education. The evidence suggests that highly skilled individuals from privileged families tend to achieve higher income levels, while those from disadvantaged backgrounds face structural barriers that limit their economic mobility. Furthermore, caste, gender, and geographic location exacerbate inequalities, posing multifaceted challenges to the equitable distribution of income. This study underscores the need for policy interventions that increase access to quality education, skills development, and social mobility programs, especially for marginalized populations. In conclusion, while individual ability contributes significantly to income, family background remains a decisive factor in determining income in India, highlighting the importance of structural reforms alongside merit-based growth.