Wednesday, February 1, 2023
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India could afford to overlook economic inequality until now. Covid has changed that

For two decades, I had maintained that unlike the developed West, India should not be overly concerned about inequalities because our economy was in the growth phase.

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I am now concerned about the growth of economic inequality in India. No, not the type caused by a rapidly growing economy that critics have been complaining about. But the disparities deepened by the coronavirus pandemic that we must urgently focus on.

For the past two decades, I had maintained that unlike the developed West, India should not be overly concerned about growing inequalities and Gini coefficients because our economy was in the growth phase. Higher growth will lift all boats, albeit at different rates, but will result in everyone being better off in absolute terms. Trying to fix inequality in the midst of a high growth phase would slow the economy down, leaving us with fewer resources with which to address the challenges of economic inequality. Economic growth was, and is, a moral imperative for India.

As long as inequality was an unintended — but not unanticipated — consequence of a conscious pursuit of high economic growth, we need not have prioritised its correction over sustaining the growth. But when we see inequality rising as a consequence of the socio-economic impact of the Covid-19 pandemic, it is a different matter and one that merits prioritisation, not least when it appears that it will be some time before economic growth will pick up fast enough to lift all boats again.

Also read: Coronavirus lockdown has given us a blank slate. We can write a new world when it lifts

Why this impact must worry us

The pandemic has had two kinds of economic impact. First, it has caused immediate losses that people can recover from over the next year or so. Pay cuts, job losses and business closures are no doubt acutely painful but are of a nature that many people will be able to recover from over the next year. Even in the absence of cash transfers and wage support from the government that might have ameliorated some of the suffering, a lot of people are already back on their feet and will be able to rebuild their lives as the economy picks up, especially if banks start lending in response to the Narendra Modi government’s liquidity-promoting policy announcements. If we put in place a large-scale citizen-to-citizen direct cash transfer system, a lot of Indians will be able to get back on their feet much faster.

It is the second kind of impact that should worry us more: the one where the setbacks from the pandemic land a blow on an individual’s life chances. Those hit by such setbacks might not only be harder to identify but more difficult to provide for given the prevailing narratives of vulnerability and social justice. These long-term setbacks fall into at least four categories.  

Also read: Price controls are a terrible idea to tackle private-public healthcare gap in India

Health and education

First, the most readily recognisable impact is on individual and family health: an episode of hospitalisation can plunge many lower-income families into severe debt traps and poverty. It gets worse if this is accompanied by disability or death of an income-earner. While government-sponsored medicare schemes and ex-gratia payments do help some people, the scale of the pandemic is such that we should expect long-term, if not permanent, damage to hundreds of millions of families.

Second, we are beginning to see challenges to equity in education as the school year begins and state governments are caught in a bind about the best way to proceed. Education is the bedrock of creating a society where everyone has equal opportunities — so if the education system functions in a way where some children can access online classes and a lot of others cannot, we will only exacerbate the socio-economic divide. Television plus technology, as I have argued in an earlier column, offers a way to address part of the problem in some states. It is not an impossible task for some state governments to raise enough resources to provide a computer to every child in the state, but it is unlikely that such a programme will improve educational outcomes. Without schools, millions of children will miss out on mid-day meals, and loss of nutrition has long-term consequences. More immediately, the lockdown and subsequent disruptions have already had an unequal effect on students preparing for entrance examinations — and is something that we will find it nearly impossible to address.

Also read: When should Indian schools physically reopen? The best answer is: not yet

Digital to social

Third, there is a new kind of digital divide emerging between those who can shift their business or work online, and those who cannot. Some businesses and occupations — like software design, professional services and education, for instance — can adapt to a contactless digital sphere almost completely, and will soon find that they can access national and international markets. The innovative and the competitive among them will thrive. On the other hand, businesses that need to be in the physical world will struggle; and if the workers are unable to acquire digital skills, the businesses might languish or have to close down. A plumber who is unable to use a smartphone and accept digital payments will find it harder to survive. While everyone now has an incentive to quickly learn how to operate in a digital world, not everyone can. And that’s the problem.

While ‘work from home’ technically allows many professionals to continue working, we are already seeing that it affects job performance for reasons not related to talent and effort. Women find themselves having to do disproportionately more housework in addition to their professional work, inevitably hurting relative job performance. So too, individuals who do not have a conducive working atmosphere at home. People working from homes that do not have reliable power supply and internet connections will see their productivity suffer.

Lastly, there is the impact to social progress arising from people being unable to leave their homes, neighbourhoods and villages. A workplace, a factory or a different city is often an escape from traditional iniquities that an individual seeks to be free of. With travel restricted, migrations difficult and workplaces closed, individuals will find it that much harder to redefine themselves. This has been one of the major routes to socio-economic progress since the 1992 reforms, and one that we must keep open.

If at all they are aware of the problem, political leaders and policymakers might believe that the inequalities the pandemic will create can be addressed with the usual mix of income redistribution and reservations. That might be a political solution, but I’m afraid it’s not a substantial one.

The author is the director of the Takshashila Institution, an independent centre for research and education in public policy. Views are personal.

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