COVID-19 and Inequality

The covid-19 hit the global and Indian economy hard, freezing whole economic activities which rendered millions of labourers unemployed globally. Specifically, India is the second most populated region, next to China, and the number of infected individuals is growing day by day. Because of stringent actions (that is, lockdown or shutdown, restraint in movement or social distancing, etc) undertaken by the various level of authority in India, demand and supply have slumped and forced many economic activities to close or cut back in the enormous scale of their operation with a sharp impact on earning of many people. The International Labour Organization (ILO) and the Asian Development Bank (ADB) also pointed out that around 41 lakh youths lost jobs because of the covid-19 pandemic in India. However, the covid-19 crisis and its consequences may swell the degree of inequality in India.

According to Mahindra Dev (2018), consumption Gini was 0.36, income Gini was 0.55, and wealth Gini was 0.74 in 2011–12, magnificently revealing that India is one of the most unequal countries in the world even before the covid-19 crisis. Consumption Gini is 20 points lower than income Gini and 40 points lower than wealth Gini, which shows that income and wealth concentration is much higher compared to consumption Gini. This is because, if the marginal propensity to consume (MPC) of the rich is very low and that of poor is very high, then it may show a higher degree of equality in terms of consumption in society. We predict that the level of inequality will increase because of three reasons: (i) large unemployment, (ii) tremendous backward migration (moving to native place), and (iii) automation or technological progress. These factors are strengthening as a consequence of covid-19 crisis.