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

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Since the onset of the pandemic, there has been growing concern that income and wealth disparities have widened in the country during this period.  

What are the factors that support this view? 

Pandemic has led to rise in unemployment rate, increase in casualisation of the workforce, rising dependence on MGNREGA and financial distress among MSMEs, along with rising profits of large firms and a soaring stock market. 

This all point out towards the fact that Covid-19 has exacerbated inequality. 

What does the data from various survey says about the trend? 

Surveys in India tend to underestimate household consumption and income when compared to data from the National Accounts. This makes it difficult to arrive at precise estimates of the distribution of income, consumption or wealth.  

However, recently a think tank called People’s Research on India’s Consumer Economy (PRICE) has conducted a survey. It provides a good estimate of how pandemic has led to an increase in inequality. 

What does this survey indicate? 

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. 

The decline in incomes isn’t just limited to the bottom 20 per cent of households. Households in the second and third quintiles also witnessing a income fall, though of lower magnitudes.  

The urban poor have borne a disproportionate burden of the loss. 

What is the way forward? 

Since large parts of the economy continue to face financial distress, government should intervene through the upcoming Union budget to bridge this growing inequality.

Source– This post is based on the article “Covid-19 pandemic has widened economic inequities. Government interventions must be mindful of this challenge” published in Indian express on 24th Jan 2022.