The ongoing debate on India’s K-shaped recovery post-pandemic seems flawed, incomplete, and an ill-concocted analysis, the State Bank of India (SBI) said in a research report on Monday.

In its report, ‘Debunking K-shaped recovery’, SBI said the trends emanating from income, savings, consumption, expenditure and policy measures aimed at empowering the masses through enablers like food security and money transfer through DBT (direct benefit transfer) and various welfare schemes question the efficacy of using age-old proxies like low 2-wheeler sales or fragmented land holdings to support the narratives of India not doing well economically. A K-shaped recovery reflects uneven recovery, with some sectors of the economy thriving as other sectors continue to struggle. The report written by Soumya Kanti Ghosh, SBI’s group chief economic adviser, said income inequality, which sees a rise in a K-shaped recovery, has declined between FY2014 and FY2022. The report added its research on ITR (income tax return) data of taxable income of individuals using the Gini coefficient estimate showed that individual income inequality has significantly declined from 0.472 to 0.402 during FY14-FY22. “The decline in income inequality is because of a Great Migration at the bottom of the pyramid; 36.3% of individual ITR filers belonging to lowest income in FY14 have left the lowest income group and shifted upwards resulting in 21.1% more income for such individuals during FY14-FY21,” the report said. “The income disparity of people earning less than 3.5 lakh have declined from 31.8% to 15.8% during FY14-FY21, signifying share of this income group in total income in comparison to their population has been increased by 16%,” it added. Interestingly, the Reserve Bank of India (RBI) recently revised India’s growth outlook from its earlier estimate of 6.5% to 7% after it surpassed expectations, clocking impressive growth of 7.6% in Q2, to retain its crown as the fastest-growing major economy in the world. India clocked 7.8% gross domestic product growth in Q1 FY24. In its semi-annual economic review for FY24, released last month, the finance ministry said while there is widespread optimism about India’s growth prospect among domestic and foreign investors, the risks to growth and stability will primarily emanate from external factors. Though India has witnessed robust growth, the tightening of interest rates in the West, driven by persistent inflation, resulted in a slowdown in business, investment, and trade, which has had an impact on its exports, it added. Meanwhile, the SBI report said individuals’ weighted mean income has risen from 3.1 lakh to 11.6 lakh during FY14-FY21, with the bank estimating weighted mean income for FY22 to come in the range of 12.5 lakh to 13 lakh, based on the ongoing trends. “Mean income would shoot up if income is increasing along any bucket (upper, middle, or lower), but weighted mean income would increase more when the contribution of each income group is increasing towards total income growth,” it added. Livemint tops charts as the fastest growing news website in the world to know more.
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