Covid leaves Indian adults poorer by 6.1% in 2020: Credit Suisse

What is the News? 

Credit Suisse has released a report titled Global Wealth Report 2021. 

Key Takeaways from the Global Wealth Report 2021: 

Report on Global Wealth: 

• The aggregate global wealth has risen by $28.7 trillion to reach $418.3 trillion at the end of 2020 despite the pandemic. 
• In terms of current US dollars, total wealth grew by 7.4% and wealth per adult was up 6.0%. 
• Gini coefficient — a broad-based measure of inequality has increased in most of the countries except in the US, where it fell marginally. 
• Developed regions were better off in 2020.Total wealth has increased by $12.4 trillion in North America and by $9.2 trillion in Europe. 

Report on India: 

Covid-19 Impact on Indian Adults: 

• The Covid-19 pandemic has left the Indian adults poorer by 6.1% in 2020. 
• Wealth per Indian adult in 2020 has dropped to $14,252 by 2020-end compared to pre-pandemic levels.On a cumulative basis, the drop in the wealth of Indian adults at $594 billion. 
• The drop in the wealth of Indian adults in 2020 was amplified by exchange rate depreciation: at fixed exchange rates. 
• Moreover, in real terms, the average wealth level in India in 2020 was at a level seen in the United States 70 years ago. 
• However, in the next five years, wealth per Indian adult will surge past $20,000, a rise of over 40%. 

India’s Wealthiest: 

• India’s wealthiest has seen their share in the country’s wealth rise in 2020 even though overall wealth in India declined. 
• The wealth share of the top 1% went up from 39.5% in 2019 to 40.5% at the end of 2020. 

Gini Coefficient of India: 

• India’s Gini coefficient, a measure of the distribution of income across the population has increased from 74.7 in 2000 to 82.0 in 2019 and reached 82.3 at the end of 2020. 
• However, India has done less badly than China on its Gini coefficient as China has seen a sharper concentration in 2020. 

What is the Gini Coefficient and why is it not a good indicator to measure inequality? 

• Gini coefficient is widely used to track wealth distribution.A higher Gini index indicates greater inequality. 
• However, the formula it uses, such as large aggregations of people as data inputs, simply lacks sensitivity to cases of a disproportionate share of wealth held by very few people. 
• Hence, it fails to adequately reflect changes in financial status if wealth levels at the bottom are negligible to begin with. 
• Therefore, a tiny change recorded in India’s Gini Coefficient for 2020 should not be taken as an assurance that covid did not widen our gaps of well-being by much. 
• Most evidence points to millions having been pushed into poverty, even as owners of corporate equity saw their net worth go up as stock markets boomed. 

Source: Business Standard