Covid-19 pandemic has widened economic inequities. Government interventions must be mindful of this challenge

A consequence of this divergence is that the richest 20 per cent of households (the top quintile) accounted for 56.3 per cent of total household income in 2021, up from 50.2 per cent in 1995. At the other end of the spectrum, the share of the bottom 20 per cent of households declined from 5.9 per cent to 3.3 per cent over the same period. But, the decline in incomes isn’t just limited to the bottom 20 per cent of households, with households in the second and third quintiles also witnessing a fall, though of lower magnitudes. The survey affirms that the urban poor have borne a disproportionate burden of the loss. As per the data, of the poorest 20 per cent of households, the share of urban households has risen from 10 per cent earlier to 30 per cent now, with the casual wage labour, petty trader, and household workers in Tier 1 and Tier 2 cities having been hit the most.

Surveys in India tend to underestimate household consumption and income when compared to data from the National Accounts. In the case of some surveys, the extent of underestimation has actually widened over the years. This makes it difficult to arrive at precise estimates of the distribution of income, consumption or wealth or their averages across various population subgroups. However, the data gathered in this survey does provide some sense of the extent of the economic pain caused by the pandemic. Considering that large parts of the economy continue to face financial distress, this needs to be urgently addressed. The upcoming Union budget provides the government an opportunity to intervene aggressively to ease the pain.

This editorial first appeared in the print edition on January 25, 2022 under the title ‘The growing gap’.