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India’s K-shaped recovery Debate Syllabus :GS 3/Economy |

India’s K-shaped recovery Debate Syllabus :GS 3/Economy

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∙ According to a study by the State Bank of India, the ongoing debate about a K-shaped recovery of the domestic economy post-pandemic seems flawed and biased.

Key Findings of the SBI’s study

∙ Income inequality decreasing: The gap between different income levels, measured by the Gini coefficient of taxable income, decreased notably from 0.472 to 0.402 from FY14 to FY22 respectively.

∙ The Gini coefficient, also known as the Gini index or Gini ratio, is a measure of economic inequality in a population.

∙ Business growth: It highlighted the visible change in the income pattern of MSMEs (micro, small and medium enterprises) as the formalisation drive brings more entities into the net.

∙ Around 19.5 percent of majorly micro-sized firms have been able to shift their income upwards.

∙ MSME units are getting bigger and getting integrated into larger value chains with initiatives like PLI.

∙ Rise in individual’s weighted mean income: The study shows the individual’s weighted mean income has risen from 3.1 lakhs to 11.6 lakhs during FY14-FY21.

∙ The weighted mean income represents a more nuanced and granular barometer of increase in income within specific income brackets and their contribution to the overall increase.

∙ Rising female labour force: SBI quoted PLFS (Periodic Labour Force Survey) data which shows female labour force participation has risen from 23.3 in 2017-18 to 37 in 2022-23, marking an increase of 13.7.

∙ There has been an increase in the share of agriculture as an occupation among females at all India level Meanwhile, it has declined for the males .

∙ Post-pandemic consumption trends: the bottom of the pyramid consumption share has increased.

ο The consumption of people spent below $3.65, or ₹303, per day has increased by nearly ₹8.2 lakh crore.

ο Nearly half of India’s consumption will be carried out by the lower-income segment, comprising 90% of the population, by the end of the next decade.

Economists view

∙ Growth in any economy always tends to be K-shaped where some sectors are moving up and down.

∙ Seldom do all sectors of the economy all move in the upward direction and when it happens, it is more when the growth is at a continuously elevated rate of over 8% per annum

∙ If we look at the Indian economy there are several sectors moving in the upward direction especially those related to infrastructure like steel, cement, machinery.

∙ However, consumer-oriented industries are still lagging as per H1 (first half) performance of companies and similarly the agricultural sector has witnessed a setback due to the monsoon being less than normal.

Highlights of Economic Survey – 2022-23 in this context

∙ The Indian economy underwent wide-ranging structural and governance reforms that strengthened the economy’s fundamentals by enhancing its overall efficiency during 2014-2022.

∙ India’s economic growth in FY23 has been principally led by private consumption and capital formation.

∙ It has helped generate employment as seen in the declining urban unemployment rate and in the faster net registration in the Employee Provident Fund.

∙ Still, private capex soon needs to take up the leadership role to put job creation on a fast track.

∙ Schemes like PM-Kisan and PM Garib Kalyan Yojana have helped in ensuring food security in the country, and their impact was also endorsed by the United Nations Development Programme (UNDP).

∙ The results of the National Family Health Survey (NFHS) also show improvement in rural welfare indicators from FY16 to FY20, covering aspects like gender, fertility rate, household amenities, and women empowerment

Other types of economic recovery

∙ Economic recoveries can take a variety of forms, most of which are determined by the rate at which they occur.

a. V-Shaped: A V-shaped recovery is a rapid and sudden improvement in an economy that follows a rapid and severe fall.

1. This usually happens following a one-time shock to the economy.

b. U-Shaped: The economic damage from a U-shaped recovery lasts for a longer amount of time before returning to the baseline level of growth.

1. The economy recovers, but the harm at the bottom persists for some time.

c. L-shaped: The most gloomy scenario is an L-shaped recovery.

1. In this form, the economy rebounds to some extent from a sharp dip, but growth never returns to pre-crisis levels for years, if at all. Following this is a period of economic stagnation.

d. W-shaped: This is a situation in which the economy experiences a rapid collapse, followed by a small and temporary recovery, and then another

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