The government’s first advance estimates for GDP growth for 2023-24 at 7.3% have been termed as optimistic by many economists, with the Reserve Bank of India (RBI) and international agencies forecasting a lower number. Optimism aside, there has also been much commentary about economic growth being uneven, with below par private consumption and concerns over joblessness. The tepid growth in agriculture and external trade – particularly in FY23 – have also raised concerns, with a general consensus that after the Covid19 pandemic, while recovery has been swift and the economic engine is firing on all cylinders, the benefits of this expansion have not reached those at the bottom of the income pyramid.
But an analysis of income tax returns data for seven years (between FY14 and FY21) by the State Bank of India (SBI) has now shown that the bottom one-third of individual taxpayers has seen a 21% increase in income during these years. People who were earning an annual income up to Rs 3.5 lakh in 2013-14 (or those making less than Rs 30,000 a month) began earning more. The SBI research also says that while the bottom earners were witnessing an increase in their income, the concentration of wealth at the top was getting less intense, with the combined share of total income of people with more than Rs 100 crore falling to 0.77% versus 1.64% earlier.
In other words, the SBI research seeks to debunk the current thinking of the rich getting richer and the poor, poorer by analysing income tax data. It has also used data for small, micro and medium industries, sales of two wheelers and tractors as well as entry level cars to emphasise that growth has indeed been evenly spread and that people at the bottom of the income pyramid have continued to move up. The research points to small-scale industries’ increasing turnover, more people opting for en
try-level cars in semi-urban and rural areas and low delinquencies in auto loans. It has also used the customer profile and growth of food delivery company Zomato to show how incomes have risen in the hinterland.
D K Srivastava, Chief Policy Advisor at EY India, said, “Post Covid-19, there has indeed been a lag between recovery in those sectors of the economy which are informal and contract-based versus the formal sectors. This gap would be corrected in the next few quarters. Even now, formal sectors and those which are capital-intensive are growing faster. Particularly this year, rural incomes remain impacted because of agricultural slowdown. But the next few quarters should fix these problems.”
“The Indian economy is now close to its potential growth of 7%. There has been a lag in recovery in informal and contract intensive sectors versus the formal sectors, as the former was more impacted by Covid19 restrictions. But this will get corrected in the next few quarters. Our real investment growth is quite high (34-35%) and incomes are also rising faster than CPI inflation”.
So it may no longer be a ‘K’ shaped recovery.
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