India's K-shaped recovery is not so easily debunked
The letter ‘K’, whose shape is often used to denote a divergence in how the rich and poor are faring, has animated India’s economic discourse of late. Now, SBI Research, a department of the government-run State Bank of India, has weighed in with a report that attempts to debunk the notion of a ‘K-shaped recovery,’ calling this label “ill-concocted" and flawed for overlooking data that points to reduced inequality in what Indians earn, as recorded by the Central Board of Direct Taxes (CBDT).
As its chief exhibit, the report spotlights an income escalation over seven years since 2013-14 among lower-bracket taxpayers, with top earners having seen their share of the total reduce. “Income inequality captured through the Gini coefficient… of taxable income has declined from 0.472 to 0.402 during FY14–FY22," it says, referring to a statistical formula that would yield 0 under perfect equality and 1 if a single person earned it all.
The SBI report speaks of a “great migration at the bottom of the pyramid." Its observations, however, do not dispel suspicions of the hard-up having faced heavy financial hardships in recent years while the well-off prospered. First, as tax data is released with a lag, 2021-22 is the latest fiscal year taken into account by the study.
While it spans a period that saw a cash-scarcity shock, with India’s informal sector bearing the brunt of it, 2021-22 was when our economy made up for its covid contraction and regained its pre-pandemic size of 2019-20 (plus a bit). Most readings of the rich getting disproportionately richer, however, relate to rather more recent signs, like a sharp profit pick-up and dividend bounce-back that went with a pacy recovery in 2022-23 and this year, even as sales trends
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