Since the dawn of COVID-19 in India, and the restrictions put in place to tame the surge and set this country free of this disease, i.e. from the February of 2020, the country's economy has been hit hard. India saw a financial downtrend like never before. The government kept on extending the restriction, and Indians saw the longest lockdown in a row, and there were constant concerns and protests about the loss of livelihoods and crumbling economy of the nation. These concerns were tried to be extinguished by the claims of a 'K' shaped recovery. The recovery did happen, the economy did boom again and is growing rapidly, but ultimately a price was paid by the poorest of the Indians, as they stand at the negative half of the 'K' shaped recovery.
Since 1995, India has seen a constant rise in the annual income of the poorest 20% of households, but this positive trend was hindered by the pandemic year 2020-2021 and their income plunged 53% as compared to their income levels in 2015-2016. In these 5 years the income of the richest 20% population of the country grew by 39%. This depicts the contrast in the impact of the COVID 19, on top and bottom of the economic pyramid. This also shows that the rich poor gap, that was tried to abrogate, has actually increased.
In the latest round of ICE360 Survey 2021, the K-shaped recovery was very evident. The nature of recovery is beneficial for the economy of India, but it certainly undermines the interests of those at the bottom of the economy.
This survey was conducted by a Mumbai-based think tank, People's Research on India's Consumer Economy (PRICE). Conducted between April and October, 2021, was done in two rounds. In the first round 2.00,000 households were included and in the second round there were 42,000 households. The survey was conducted across 100 districts, with 120 towns and 800 villages.
Another disturbing fact that emerges from the survey is, the urban poor were affected the most by the pandemic.
The lower middle class and the middle class witnessed a decline as well. The income of the lower middle class declined by 32% and that of the middle class declined by 9%. The upper middle class witnessed a growth in their annual income by 7%.
This was the first 5 year period to witness a decline in the income of the poor since the era of liberalisation. On an average, the poorest of the population has never seen a decrease in their income since 1995. It is disturbing that in 2021 they earned only half as much as they earned in 2016. The current situation is a stark contrast to the previous 11 year period (2005-2016) where the income of the richest 20% grew by 34% and that of the poorest 20% grew by 183% at an average annual growth rate of 9.9%.
Also this survey shows that the share of the poorest 20% decreased in the economy from 5.9% to 3.3%.
The dictum must take into consideration this survey while forming economic policies for the financial year 2022-2023. The CEO of PRICE, Rajesh Shukla said that, The finance ministry must work on the findings of this survey to give shape to the economic revival of the country. We need a K-shaped recovery policy tool that addresses the two ends of the spectrum and a lot more thinking on how to build the bridge between the two.
Since the big companies and the richest of the people are doing good, the future policies must concentrate on the bottom half of the economy.
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