Multi-Speed Rebounding

“The storm has come and hit us all. We are all in this together, but sailing our different boats.”

The global health tragedy COVID-19 has whirled the entire human existence upside down triggering turmoil in the economies of the countries. The major concern of every nation, now, has been boiled down to “How do we make a path for ourselves out of it?” Moving ahead from normal to the new normal, it is imperative to discuss the recovery path of the nation.

Primarily, the traditional recovery shapes are U – where the country observes a gradual rise from the crisis, V – where the economy is promising and improves immediately, and W – where the economy is brought back up through short-term government impetus followed by a descent and then another time leading to healthy growth. However, either of the alphabets doesn’t appear to align with the shape of India. India is witnessing multiple degrees of recovery – different sectors of India rebounding at different rates, thereby, increasing inequality to a bigger level. This recovery model of deviated recovery pace rides on another alphabet i.e., K. A “K” shaped recovery model undergoes a similar decline phase but the recovery path is fragmented into two. One sector of the country, often the formal sector, recovers quite promptly and are back to the pre-crisis level. Another sector of the country i.e., the informal sector comprising of daily wage earners and laborers, finds it difficult to recover and continues to suffer. They are the ones who bear the real pain of the downturn. The crisis just adds to their miserable state making it impossible to ever experience the pre-crisis level.

India’s urban section demands a huge human workforce that generally is satisfied through the informal section. The rural workers migrate to cities and towns in search of a source of livelihood. They considerably contribute towards the formation of the industrial sector. However, their works remain undocumented. The implementation of the stringent lockdown policy without any government assistance left these migrants helpless. They were compelled to walk on their foot back home depriving them of income streams. On the other hand, the formal sector i.e., the corporates though suffered through initial lay-offs, eventually adjusted to the remote working model. This indicates the basic difference in the impact of the pandemic between the two sectors.

History infers that pandemics progressively widens the gap between the rich and the poor. A report by International Monetary Fund (IMF) exhibits that the current crisis could lead to a higher income and employment inequality between the informal sector (people with basic educational qualifications) and the formal sector (people with higher education). Furthermore, a study by Oxfam expressed that, “The mass exodus on foot triggered by the sudden lockdown and the inhuman beating, disinfection and quarantine conditions the informal workers were subjected to turned a health emergency into a humanitarian crisis." It declared that out of a total of 12.2 crore people who lost their jobs, 75%, which accounts for 9.2 crore jobs, were lost in the informal sector.

An estimate by the International Labour Organisation (ILO) records that nearly 40 crore informal sector workers have delved deeper into poverty amidst the pandemic. Evidence points that wages of formal workers were cut by only 3.6 percent, while informal workers suffered an extensively sharper fall in wages of 22.6 percent during the Covid-19 lockdown. Moreover, according to Estupinan and Sharma the total wage loss for all workers in the period between March 24, 2020, and May 3, 2020 (at 2017-18 prices) was ?86,448 crore (?864.48 billion). The wage loss of formal workers was ?5,326 crore while of informal workers was ?81,122 crores. In ratio, informal workers suffered more losses than formal workers, i.e., informal workers lost 22.62 percent wages in comparison to 3.66 percent for formal workers.

The government of India argues at this by being persistent on the V-shaped recovery expressed by the upliftment of nationwide and consequent state-wide lockdowns thereby re-starting the business activity and the economy. The data by the Ministry of Statistics and Programme Implementation signifies that India has been comparatively improving showing a 7.5% contraction in Q2 2020-21 against the 23.9% contraction in Q1. However, the data are not identical for both the formal and informal sectors as the informal sector is not formally captured in the GDP calculation despite its accounting for more than 50% of gross value added. The 23.9% contraction picture reveals that the scenario must be worse in the informal sector taking into account that they are more severely affected. If the informal sector would have been evaluated formally in GDP calculation, India’s GDP contraction could be reasonably above 35% during April – June.

The K – shape recovery, thereby, sketches a gloomy image of inequality between the rich and the poor. It develops a much wider economic and social wedge of difference between the two. Commonly stated, the rich get richer while the poor get poorer, post such catastrophes. There is a primary need to admit the facts and undertake resilient steps towards equal prosperity. Rather than shutting one's eye towards the varied pace at which the economy is recovering, it is crucial to focus on concentrated efforts and deploy an inclusive remedial measure. It is the time where policies should cater to successfully transition the recovery path from K to V.