Does the Income Volatility Decline in India? Evidence From a Household Survey

ABSTRACT Income fluctuation increases risk and lowers well‐being. In this study, we document trends in household income volatility and earnings volatility in India and examine the dynamic interactions between macroeconomic variables and their respective volatilities. We utilize a large database obtained from the CMIE‐Consumer Pyramids Household Survey 2014–2022, comprising more than 10 million households. The income volatility has been measured using the standard deviation of the arc‐percentage change in income. On analyzing the household and individual member income, we find that male earnings volatility decreased by 11.8% between 2014 and 2022, while female earnings volatility only reduced by 2.6%. The household income volatility also declined by 4.6%. Earnings volatility is higher for the younger population, less educated, and for farmers and entrepreneurs, and lower for the daily wage earners.