The epidemic of Covid-19 has worsened economic disparities: Government should intervene

Since the outbreak of the epidemic, there has been growing concern over the country’s widening income and wealth inequality throughout this time. When compared to booming profits of large firms, a soaring stock market, and the vaulting fortunes of the rich, the rising unemployment rate, increasing casualization of the workforce, rising reliance on MGNREGA and financial distress among MSMEs lends credence to the view that Covid-19 has exacerbated inequalities across various axes. However, it is difficult to correctly evaluate the extent to which the income distribution has worsened throughout this period in the absence of clear and reliable data. A new poll conducted by the think tank People’s Research on India’s Consumer Economy (PRICE) aims to fill the hole. According to the data acquired in the survey, the annual income of India’s poorest 20% of households fell by roughly 53% in 2020-21 compared to levels seen in 2015-16, as stated in this study. In comparison, the incomes of the richest 20% of households increased by 39% over the same period.

As a result of this disparity, the richest 20% of households (the top quintile) in 2021 accounted for 56.3 percent of total household income, up from 50.2 percent in 1995. On the other hand, the share of households in the bottom 20% of the income distribution fell from 5.9% to 3.3 percent over the same period. However, the income drop is not limited to the bottom 20% of households; households in the second and third quintiles also saw a drop, albeit in smaller amounts. According to the poll, the urban poor has borne a disproportionate share of the loss. According to the data, urban households now account for 30% of the poorest 20% of households, up from 10% previously. Casual wage labor, petty traders, and home employees in Tier 1 and Tier 2 cities have been the hardest hit.

When compared to statistics from the National Accounts, surveys in India tend to underestimate household consumption and income. In certain surveys, the margin of underestimating has gotten wider over time. As a result, precise estimates of the distribution of income, consumption, or wealth, or their averages across diverse population segments, are difficult to come by. The data acquired in this poll, on the other hand, provide some indication of the pandemic’s economic impact. Given that a vast swath of the economy remains in financial trouble, this must be addressed immediately. The government has an opportunity to intervene aggressively to alleviate the pain in the 2019 Union budget.