Introduction

The Economic Research Department of the State Bank of India (SBI) recently released a study titled “Debunking K-shaped recovery,” addressing the ongoing debate about the post-pandemic recovery in India and its alleged K-shaped nature.
This debate has significant implications for the country’s widening inequality.

What is K-Shaped Recovery?

A K-shaped recovery occurs when, following a recession, different parts of the economy recover at different rates, times, or magnitudes.
This is in contrast to an even, uniform recovery across sectors, industries, or groups of people.
A K-shaped recovery leads to changes in the structure of the economy or the broader society as economic outcomes and relations are fundamentally changed before and after the recession.
This type of recovery is called K-shaped because the path of different parts of the economy when charted together may diverge, resembling the two arms of the Roman letter “K.”

Controversial Message: The report’s key message suggests a potential “conspiracy” against India’s growth, raising eyebrows about the credibility and intent of the economic evaluation.
Message Summary: It questions the validity of the K-shaped recovery concept, calling it “flawed” and driven by certain vested interests who are uncomfortable with India’s ascendancy on the global stage.

Parameters under Scrutiny: The report challenges traditional parameters used to assess economic well-being.
New Considerations: It highlights patterns in income, savings, consumption, expenditure, and policy measures designed to empower the masses through technology-driven solutions, questioning the reliance on outdated indicators like 2-wheeler sales or land holdings.

Polarized Environment: In a time of heightened polarization and India’s emergence as a major economy, the report’s language, including phrases like “fanning interests” and “renaissance of the new global south,” appears to align with current political narratives.
Narrative Shift: The report introduces a new narrative, emphasizing the reduction of inequality in India.

Inequality Reduction: The report asserts that income inequality has decreased, citing the Gini coefficient of taxable income, which fell from 0.472 to 0.402 between FY14 and FY22.
Limited Sample: However, the research relies on “taxable income” from a small fraction (around 5%) of the population, primarily those paying income tax, making it less representative of the informal workforce and the broader economy.
Food Orders as Proxy: The study also uses Zomato food orders, primarily from semi-urban areas, to challenge claims of economic distress.

Focus on Formal Sector: The SBI research primarily centers on the formal sector, which represents a privileged minority within the Indian economy.
Inequality Debate: This focus mirrors the crux of the inequality debate, where those excluded from economic growth continue to lag behind, while those already well-off experience significant growth.

Contrasting Reports: In 2022, another report, “The State of Inequality in India,” commissioned by the Economic Advisory Council to the Prime Minister, highlighted rising inequality in the country.
Unimaginable Disparities: It noted that an individual earning a monthly wage of Rs 25,000 was among the top 10% of earners, underscoring the stark income disparities.

While the SBI research provides a unique perspective on India’s economic recovery and inequality, its focus on a limited sample from the formal sector raises concerns about its representativeness.
The broader discourse on inequality remains critical, emphasizing the need for a more comprehensive understanding of the diverse economic landscape in India.