Here’s Why its V not K 

News: There has been a lot of debate on the issue that whether post pandemic recovery is V- shaped or K-shaped. 

Proponents of K- shaped recovery point claim that while corporations have returned to normal levels of activity, unemployment, poverty and distress among MSMEs continues to rise. 

Why the post pandemic recovery is more likely to be V-shaped recovery and not K-Shaped? 

The first argument is that as the workers and MSMEs are the backbone of the Indian economy, GDP could not have returned to its pre-Covid level without workers returning to work and MSMEs recovering too. 

Secondly, According to the PLFS Survey quarterly GDP at constant prices had dipped by 24% in April-June 2020 quarter but it returned to its pre-Covid level by January-March 2021 quarter. This sharp fall and full recovery within three quarters is what constitutes the V-shaped recovery of GDP.  

Urban unemployment rate spiked from 9.1% in January-March 2020 quarter, to 20. 8% in April-June 2020 quarter but fell back to 9. 3% by January-March 2021 quarter showing a V-shaped recovery. 

One counterargument for this can be that the fall in the unemployment rate merely reflects a withdrawal of workers from the workforce. However, According to PLFS labour force participation rate (which is percent of above-15 population looking for work) has also followed a V-shaped recovery path. 

Net additions to Employee Provident Fund (EPF) subscribers list which closely track movements in GDP and the urban employment rate also shows a V-shaped recovery. 

In the rural economy also, GDP data shows that agricultural activity has remained robust in both 2020-21 and 2021-22 and MGNREGA funds have also been generously expanded.

These are strong arguments against the narrative of massive unemployment and poverty in rural areas. 

Source: This post is based on the article “Here’s Why its V not K” published in Times of India on 4th March 2022.