OPINION I The Economic Times

India’s growth story continues to defy the expectations of analysts and economists. The news that the Indian economy grew at 7.6% in real terms in the second quarter is a great note on which to bring 2023 to a close. Something that did not seem possible not so long ago when the country was reeling under the impact of the pandemic.

How does the resilience of GDP growth translate into gains for the household consumer economy and distribution of income across socio-economic population strata? Has this increased inequality? Is the gap between rich and poor increasing? These are questions that can only be addressed objectively with real-time data.

According to People Research on India’s Consumer Economy’s (PRICE) survey tracking the status of economic well-being and welfare of Indian households through the ICE 360 surveys with rigour on a regular and consistent basis. ICE 360 surveys are nationally representative covering a sample size of 40,000 households spread across 121 towns and 722 villages in 105 districts of 25 major states and UTs. The insights presented here are based on the information that has been collated at significant time periods—2016 (pre-COVID), 2021 (Covid) and 2023 (post-COVID). Most importantly, the Wave 3.0 (2021) covers information related to two major waves of the COVID-19.

As the pandemic took a grip across India, the economic well-being of the poorest households took a severe beating. With more economic restrictions being implemented to combat the virus, income levels declined for a majority of households.

The hardest hit were poorest households (Q1-bottom 20%) whose income in 2021 dropped by a whopping 52% from their income level in 2016. The household income of the lower middle segment (Q2) declined by 32% and that of the middle (Q3) by 9%. Clearly, there was a huge negative impact on nearly 60% households.

During the same period, the upper middle and rich segments (Q4 and Q5) had actually managed to grow their income levels by 7% and 39% respectively.

Fast forwarding to 2023, the survey results brought in good news: The post-pandemic economic recovery saw household disposable income rebounding in 2022-23 (post-COVID).

The sharpest recovery was experienced by the bottom-most households (Q1), whose income levels grew by a staggering 75% over its income in 2021 (COVID period).

For the lower middle group (Q2), the growth was 52%.

The richest households (Q5) also saw their income rise by 10% reflecting the overall sharp recovery in the post-Covid period as well as a more equitable income distribution.

The gap in household disposable income between the lowest and highest income quintiles actually declined in 2022-23.

Households in the bottom most income group (Q1) increased their share of household disposable income from 3.3% in 2020-21 to a high of 6.2% in 2022-23 while those in the highest income quintile (Q5) decreased their share from 56.3% to 46.4% during the same period.

• The share of the poorest households and the richest households in 2015-16 was 7% and 44.6% respectively. While the poorest households still have some catching up to do in terms of restoring their income level after being dealt a crushing blow by the pandemic, the remarkable recovery in the short period of time also points to a significant fact. That the urban poor, which was the hardest hit by the pandemic, has also been faster to recover. As economic activity in urban areas began to grow, it drove earning opportunities for casual labour, rickshaw pullers, hawkers, street vendors, domestic workers, electricians, plumbers and the entire gamut of service providers.

   

  The recovery was also aided by benefits received through various welfare schemes of both state and central governments helped in bolstering support to those households who lost their earnings due to COVID. Indian households also experienced unprecedented gains in net savings in 2022-23 due to the combination of a higher disposable income and monetary benefits received from government schemes. It has resulted in the bottom 40% households moving from a situation of net dissaving during the Covid period to a net saving position today.

  Due to economic crises like Covid, large sections of the population become vulnerable and are not able to maintain minimum basic needs and welfare (particularly health and education). Maintaining food security and food subsidies for the vulnerable bottom 40% households is crucial until they are able to fully recover from the impact of loss of income and employment shocks. Financial inclusion of the bottom of the pyramid needs to be enhanced to ensure that they are not overwhelmed by informal debt. Extending the coverage of schemes such as PMJAY to include the middle 40% who hardly have any health insurance cover would be a significant step.

  Going forward, as a new year 2024 dawns upon us, it would be relevant for central and state governments including policy makers to take the lessons learnt and embark on a new wave of policy interventions that are aimed at boosting employment opportunities for the most vulnerable segments of the society, enhancing the primary healthcare system and focusing on preventive care to ensure that the gains made in terms of GDP growth are equitably distributed among all. Keeping that as a goal would make for a sustainable India growth story in the long run.