Covid has deepened inequalities. Government must use budget to address and mitigate the fallout.

The COVID-19 pandemic has led to what has arguably been the most unequal recession in recent history, exacerbating inequalities along several axes. While millions of Indians, especially those in the informal sector, lost their jobs, and had to dip into whatever meagre savings they had to finance their consumption, the richest Indians have continued to prosper. According to a report by Oxfam, the wealth of billionaires in the country increased by 35 per cent during the lockdown. While this is an increase in wealth, not income, to put this in perspective, the increase in the wealth of India’s top 100 billionaires would have been enough to give each of the country’s 138 million poorest a transfer of Rs 94,045.

The corporate results also bear out this facet of the economic crisis. Firms have protected their bottom lines by drastically slashing expenditure, mainly through a combination of job and salary cuts. This implies that the distribution of income, which was already skewed in favour of capital, will get even more unbalanced. Even more worrying is the fact that despite economic activities largely reverting back to pre-COVID levels, labour market dislocations persist — demand for work under MGNREGA continues to outstrip that observed last year by a wide margin, suggesting continuing lack of absorptive capacity in both urban and rural areas. But, worsening labour market inequality is just one part of the larger socio-economic consequences of the pandemic. The pandemic has also impacted access to education, health, and has led to a worsening of gender disparities. As the Oxfam report notes, during the pandemic, as education shifted online, the digital divide widened inequalities. Considering that only 3 per cent of India’s poorest 20 per cent households had access to a computer, and 9 per cent had access to the internet, the difficulties faced by the poor and the historically deprivileged in accessing education have worsened. The impact on the female workforce has been equally grim. Not only has the unemployment rate among women worsened, but 83 per cent of those who managed to retain their jobs, saw a salary cut, the report noted.

The full economic impact of the labour market scarring, the worsening of inequalities in access to education and health and the growing gender disparities will be visible over the medium-to-long term. But as evidence mounts of a K-shaped recovery, where the fortunes of those at the top and bottom end of the income distribution diverge, the government must unveil measures that address these issues in the upcoming budget.

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