“Is the argument hinging on the fact that until they purchase luxury goods in rural areas, they will not accept its good growth?,” Sitharaman retorted on being asked by TOI if India is witnessing a ‘two-paced growth’.
A K-shaped recovery is one wherein certain sectors of the economy may witness robust expansion, while others persist in their downward trajectory. Furthermore, in such a recovery, rich allegedly get richer and the poor get poorer, leading to an inequitable distribution of wealth.
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The trajectory of the Indian economy since the breaking out of the COVID-19 pandemic in 2020 has been termed by many as a ‘K-shaped’ one. The proponents of K-shaped growth in India use data points like increased premiumisation in varied sectors like auto sales, real estate, labour participation rate, rise in agriculture employment & increased demand for MNREGA jobs as some of the main indicators.
“In the name of being an economist or an intellectual, you just want to chip into this debate and contribute such elements – it’s K-shaped, L-shaped, Yshaped, or any other letter – I don’t think you are worried about looking at data or at the ground and commenting on issues,” Sitharaman quipped.She further said that this ‘letter attribution’ describing the growth of the Indian economy has been rejected by the government and by those who are looking at the economy.“Every section of the economy is participating in growth,” she said.
India’s growth & income inequality
The Indian economy has grown at the fastest pace for any major economy in the world in the last two years. However, analysts and prominent figures including former Reserve Bank of India Governor Raghuram Rajan have continued to flag rising disparities in the economy.
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India is currently among the top countries with high income and wealth inequality, even as poverty has reduced to 15 per cent from 25 per cent between 2015-16 and 2019-21, UNDP’s Asia-Pacific Human Development report claimed late last year.
State-run lender State Bank of India’s Economic Research department however, said the K-shaped recovery seems “at best flawed, prejudiced, ill-concocted and fanning interests of select quarters to whom India’s remarkable ascendance, signalling more the renaissance of the new global south, is quite unpalatable”.
“Income inequality captured through the Gini coefficient (one of the most widely used measures of income inequality) of taxable income has declined significantly from 0.472 to 0.402 during FY14-FY22,” it said.
The income disparity of people earning less than Rs 3.5 lakh has declined from 31.8 per cent to 15.8 per cent during FY14-21, signifying that the share of this income group in the total income in comparison to their population has increased by 16 per cent, the report said.
According to the report, post-pandemic, households are reconfiguring their savings towards physical assets, including real estate.
Sitharaman had previously contradicted the claims of K-shaped recovery as well, and in late January said “I want them to stand up and say on what basis are they saying it but they wouldn’t be available for you to answer. They throw that idea and go away.”
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