“India to see K-shaped recovery as inequalities grow”: ex RBI governor
“Pointers that India is witnessing a K-shaped recovery”: The Hindu
“The politics and economics of India’s K-shaped recovery”- India News
“Is India experiencing a K-shaped recovery?”: The India Forum
We all have come across such headlines post covid-19 pandemic, but did we even know what a K-shaped recovery is? The news got ignored by most of us and we weren’t prepared for what was coming in the post-pandemic period. The economic impacts of the covid-19 have been felt far and wide, but what’s next? All of us expected the economy to recover. But the point here isn’t whether or not the country saw a recovery, but what letter of the alphabet represents this recovery? Is this a V, W, U, or K-shaped recovery? Of these 4 types, the k-shaped recovery is something we all should be concerned about.
A, V, W, U shaped recovery is easy to understand, just put the letter over the graph. But what about K? What is a K-shaped recovery?
A K-shaped recovery starts out the same way as any other recovery profile with an economic decline but while recovering it splits into 2 1 part of the economy gets better and better while the other part continues to decline. 1st part is the wealthy businesses and asset owners while the other one is small business owners and the salaried class which has already started while a few businessmen multiplied their wealth, while 97% of Indians are poorer than before. The income inequality has increased again directs us into thinking if we are facing a K-shaped recovery. We all have seen how the stock markets saw huge profits in those times, but what percent of Indians invest in stock markets?
Well before omicron variant surfaced, all evidence suggested far from a robust economic recovery. India had been witnessing a rebound only in the formal sector. The informal sector and labour had been left behind. This is a classic example of K-shaped recovery. Many people who live on their monthly salaries for basic necessities had to cut back on their expenses and had to sell their cars and cattle, and move to a smaller house as many couldn’t get government benefits or it wasn’t enough for the family to sustain a simple life. This made things worse for these people post-pandemic
Here the questions arise, how do we avoid the K-shaped recovery?
This is something both government and individuals have to take care of. Every businessman will try to make money at every opportunity they get, even if it comes out of someone else’s misfortune. Countercyclical stimulus in the form of government grants, business loans, and tax cuts is helpful but it’s not as important as Fiscal policy, which has two modes; expansionary and contractionary.
Expansionary means the government trying to get the economy back on track by pumping money into it but they almost always fail to get back to a contractionary fiscal policy which includes taxing more and giving less government money away. Only one of the 2 can be disastrous, hence, there should be a balance between the both in order to help people to sustain in hard times and remove the excess money in circulation by taxing more when the economy gets back to normal to avoid excessive inflation.
On an individual level, the solution is very simple, living below one’s means and saving money for hard times.
It’s way past the COVID times, we all live in this society and are an important part of the economy. Whatever we experience and observe shows what kind of economic recovery we are going through. Do we feel the rich industrialists have become richer? Are we living a less luxurious life than before? How badly the poor and middle class have been affected? Honest answers to these questions and a proper analysis are enough to predict what recovery India is going through. We as citizens of this country should know what our country is going through so as to take necessary steps in our lives and to judge the government’s efforts in this economic crisis.
By Pranav Jainani