millions of Indians fell into poverty during the Covid-19 pandemic, but the period since the start of the strict lockdown has also seen a decline in income inequality in the country, a working paper published last month began.
The paper, titled “India’s Inequality Has Decreased During Covid”, posted by National Bureau of Monetary Research (NBER), a US-based unpaid company that specializes in conducting and disseminating research on economics, said the pandemic in India was associated with a decline in meaninglessness. the first changed in that the Indians in the most profitable firms had larger relative income reductions than the bad ones, and the second was that the admission inequality also fell, albeit slightly.
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The non-peer-reviewed study was conducted by 3 researchers – Arpit Gupta from the Stern School of Business, New York University, and Anup Malani and Bartosz Woda from the University of Chicago Law School.
The main source of data for the researchers was the Consumer Pyramids Household Survey (CPHS) which was conducted by the Center for Monitoring Indian Economy, which includes a sample of 1.97 lakh households, with information every month on their finances available from January 2015 to July 2021.
The study’s most startling finding is that income inequality fell in the months after the pandemic lockdown was postponed, which seems to contrast with what other recent studies have said about income inequality. income in the country.
Income inequality is actually the average gap between the incomes of the rich and the poor. This ‘inequality’ decreases if the incomes of the rich fall or if the incomes of the poor rise.
The authors say there was a “sharp increase in poverty” during the pandemic, but also mentioned that “increasing poverty is not a sufficient statistic for inequality”.
According to the study, income poverty in urban areas rose from 40% before the pandemic to nearly 70% during the lockdown. In this case, poverty was examined using the World Bank benchmark of $1.9 a day (or less). After the lockdown, poverty declined and income and consumption increased, “but did not recover to pre-pandemic levels,” the researchers said.
However, despite the increase in poverty, income inequality has declined in both urban and rural areas, largely due to lower incomes among wealthier households.
“In rural areas, the relative income of individuals in the top quartile households fell further before, fell further during, and remained more depressed after the lockdown compared to the incomes of those in the lower quartiles. Urban areas show a similar pattern, except the decline during the lockdown was identical in all quartiles,” the study said.
Similarly, the study shows that consumption inequalities even decreased during the confinement period, but not at all as fast as income inequalities.
According to the study, the sources of income of the wealthy Indians “disproportionate” services and capital income (essentially wealth derived from wealth, such as dividends and interest), both of which were “disproportionately affected during the pandemic”. Unlike the rich, capital income does not constitute a maximum share of the income of much poorer households.
The demand for the type of work provided by the rich has certainly decreased even more than for the poor. “The wealthy experienced bigger wage cuts and, after India’s lockdown, lower employment rates,” the study said.
The employment rate fell more for the poorest sections of society during the lockdown, but they even recovered faster. In fact, the employment rate “recovered almost completely for all quartiles – except the top quartile – after the lockdown,” the study says.
He added that the lower scale performance was “particularly remarkable” since India, unlike the United States, had “little fiscal stimulus in the form of income transfers”.