Flawed, prejudiced to say India's post-pandemic recovery K-shaped, says SBI economist Ghosh

The popularity of Zomato is the “perfect example…to refute the claim that people are facing distress”, according to Soumya Kanti Ghosh, State Bank of India’s group chief economic adviser.

Theories about India's economic recovery post the coronavirus pandemic being 'K-shaped' are "flawed" and "prejudiced", according to Soumya Kanti Ghosh, State Bank of India's group chief economic adviser.

Using a variety of data, including from income tax returns and orders placed on restaurant aggregator apps such as Zomato, Ghosh has claimed the real picture in the hinterlands is rather different than what popular opinion suggests.

Also Read: Govt pegs FY24 GDP growth at 7.3% in another upside surprise

"The oft repeated conundrum debating a K-shaped recovery post-pandemic seems at best flawed, prejudiced, ill-concocted, and fanning interests of select quarters to whom India's remarkable ascendance, signalling more the renaissance of the new global south, is quite unpalatable," Ghosh said in a report on January 8.

As per Ghosh's calculations, the Gini coefficient – an indicator ranging from 0 to 1 which rises with higher income inequality – for India has declined from 0.472 in 2013-14 to 0.402 during 2021-22, according to income tax returns (ITR).

"The decline in income inequality is because of a Great Migration at the bottom of the pyramid; 36.3 percent of individual ITR filers belonging to lowest income in 2013-14 have left the lowest income group and shifted upwards resulting in 21.1 percent more income for such individuals during 2013-14 to 2020-21," Ghosh said. He further added that the income disparity of people earning less than Rs 3.5 lakh per year has declined from 31.8 percent to 15.8 percent during 2013-14 to 2020-21, suggesting that share of this income group in total income in comparison to their population has increased by 16 percent.

"Based on the current trends, we believe that by the end of the next decade around 50 percent of consumption (Rs 16 lakh crore) would be done by 90 percent of the people who are at the bottom the pyramid. Meanwhile, an additional Rs 8.2 lakh crore of consumption has moved to the lower end of the pyramid post pandemic following saving of expenditure through free food, shelter, and medical being provided by Government," Ghosh said.

Also Read: RBI's post-Diwali retail loan dampener – will higher risk weights hurt spending?

Ghosh's assertions are at odds with the consensus view that India's recovery after the economy's contraction in 2020-21 has been led by the upper class, with growth in demand for premium goods outstripping that for the mass-market segment. This pattern of recovery has been labelled 'K-shaped' by economists.

However, the SBI economist cited the popularity of Zomato as the "perfect example…to refute the claim that people are facing distress".

"As per Zomato, it is serving almost 1.4 crore active users in Metro, Urban and Semi-Urban areas… We estimate that around 0.44 crore active users are from semi-urban region only. With an average order size of say, around Rs 400 per user (as indicated in Zomato annual report) this indicates there is a clear indication of rising experience centric income groups transcending conventional boundaries," Ghosh said.