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Covid-19 pandemic has widened economic inequities. Government interventions must be mindful of this challenge

🔴 The upcoming Union budget provides the government an opportunity to intervene aggressively to ease the pain.

By: Editorial |
Updated: January 25, 2022 9:16:55 am
The survey affirms that the urban poor have borne a disproportionate burden of the loss.

Since the onset of the pandemic, there has been growing concern over the extent to which income and wealth disparities have widened in the country during this period. The rising unemployment rate, increasing casualisation of the workforce, rising dependence on MGNREGA and financial distress among MSMEs, when seen against the booming profits of large firms, a soaring stock market, and the vaulting fortunes of the rich, lends credence to the view that Covid-19 has exacerbated inequalities across various axes. However, in the absence of firm and reliable data, it is difficult to accurately estimate the extent to which the distribution of income has worsened during this period. A new survey carried out by People’s Research on India’s Consumer Economy (PRICE), a think tank, attempts to fill the void. As reported in this paper, data gathered in the survey indicates that the annual income of the poorest 20 per cent of households in India declined by around 53 per cent in 2020-21 compared to levels observed in 2015-16. In comparison, incomes of the top 20 per cent households grew by 39 per cent over the same period.

A consequence of this divergence is that the richest 20 per cent of households (the top quintile) accounted for 56.3 per cent of total household income in 2021, up from 50.2 per cent in 1995. At the other end of the spectrum, the share of the bottom 20 per cent of households declined from 5.9 per cent to 3.3 per cent over the same period. But, the decline in incomes isn’t just limited to the bottom 20 per cent of households, with households in the second and third quintiles also witnessing a fall, though of lower magnitudes. The survey affirms that the urban poor have borne a disproportionate burden of the loss. As per the data, of the poorest 20 per cent of households, the share of urban households has risen from 10 per cent earlier to 30 per cent now, with the casual wage labour, petty trader, and household workers in Tier 1 and Tier 2 cities having been hit the most.

Surveys in India tend to underestimate household consumption and income when compared to data from the National Accounts. In the case of some surveys, the extent of underestimation has actually widened over the years. This makes it difficult to arrive at precise estimates of the distribution of income, consumption or wealth or their averages across various population subgroups. However, the data gathered in this survey does provide some sense of the extent of the economic pain caused by the pandemic. Considering that large parts of the economy continue to face financial distress, this needs to be urgently addressed. The upcoming Union budget provides the government an opportunity to intervene aggressively to ease the pain.

This editorial first appeared in the print edition on January 25, 2022 under the title ‘The growing gap’.

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