Vax milestone and a K-shaped problem

Synopsis: The Indian economy is facing a K-shaped problem even before the pandemic. But the pandemic worsened the K-shaped problem more.

Introduction

India has administered more than one billion Covid vaccines since it started its Covid vaccination drive in January. Out of India’s population of about 1.3 billion, 78%, or just over 1 billion, are adults and eligible for vaccination. According to the government, over 31% has received a second dose. According to this, one can assume that around 300 million eligible Indian adults do not receive any vaccine dose and remain unprotected.

Why does India’s covid vaccination face a K-shaped problem?

Smartphone penetration is 450-500 million and concentrated in higher-income groups. The vaccination campaign’s “smart design” (CoWin) made it hard for people without smartphone access to sign up. Hence, higher income groups received more vaccine doses. But the lower-income groups majorly comprise the unvaccinated sections.

Note: K-shaped Recovery occurs when an economy recovers unevenly and there’s a separate trajectory for two segments of the society.

Indian economy and the K-shaped problem

India already had a very K-shaped economy, prior to the pandemic. According to the annual Credit Suisse Global Wealth report, by the end-2020, the top 1% rich sections held 40.5% of assets. The GINI Coefficient, a measure of income equality, stayed at a very high 82.3.

But the Unemployment spiked in the April-June 2020 lockdowns, and employment has still not recovered to 2018-19 levels. Furthermore, these employment losses were mostly in the unorganised sector.

What sectors face the K-shaped problem at present?

The K-shaped problem in education: Higher-income groups with smartphone and broadband coverage have far better access to remote learning. Hence, education, which was inherently K-shaped, has become even more so. This reduces the likely future productivity and much-vaunted demographic dividend of a young workforce.

The K-shaped problem in employment: Corporate results from the last four quarters indicates the organised sector (which is higher-income) has made a much faster recovery than the unorganised sector (which is lower-income and a much larger generator of employment).

The government has to acknowledge these K-shaped recoveries and start focusing on the improvement of sectors that are facing issues.

Source: This post is based on the article “Vax milestone and a K-shaped problem” published in Business Standard on 23rd October 2021.