SBI study questions flawed narrative of K-shaped recovery, highlights five major trends of Indian economy

According to a study by the Economic Research Department of the State Bank of India, the ongoing debate about a K-shaped recovery of the domestic economy post-pandemic seems flawed and biased, favouring certain interests that find India's remarkable progress unpalatable.

The financial firm underscored that the patterns seen in income, savings, consumption, expenditure, and policies question the reliability of using outdated indicators like low two-wheeler sales or fragmented land holdings to paint a negative picture of India's performance.

"The oft-repeated conundrum debating a K-shaped recovery post-pandemic seems at best flawed, prejudiced, ill-concocted and fanning interests of select quarters to whom India’s remarkable ascendance, signalling more the renaissance of the new global south, is quite unpalatable," said the SBI report.

"The patterns emanating from income, savings, consumption, expenditure and policy measures question the efficacy of using ages-old proxies like low two-wheeler sales or fragmented land holdings to support some pre-destined narratives of India not doing well," SBI stated.

In a K-shaped recovery, some parts of the economy bounce back from a recession while others keep going down. It's like two different paths where some parts improve, but others struggle or worsen after a downturn.

The SBI report has come in the wake of the initial advance estimate report of the National Statistical Office (NSO) which says India’s economy is projected to grow at 7.3 per cent in the ongoing financial year.

Also Read: India's GDP likely to grow by 7.3% in FY24: NSO data

SBI indicated that income-tax data, rising female labour force participation and the rising popularity of food-ordering platforms paint a healthy picture of India's growth.

Here are five major trends that the SBI report has highlighted about the Indian economy:

Income inequality decreasing

"The gap between different income levels, measured by the Gini coefficient of taxable income, decreased notably from 0.472 to 0.402 from FY14 to FY22 respectively," the SBI report said.

The Gini coefficient, also known as the Gini index or Gini ratio, is a measure of economic inequality in a population.

Moreover, about 36.3 per cent of taxpayers shifted from lower income brackets to higher ones.

"The income disparity of people earning less than ₹3.5 lakhs has declined from 31.8 per cent to 15.8 per cent during FY14-FY21. Top 2.5 per cent of taxpayer's contribution in income has declined from 2.81 per cent to 2.28 per cent during FY14-FY21," the report further said.

"The decline in income inequality is because of a great migration at the bottom of the pyramid; 36.3 per cent of individual ITR filers belonging to the lowest income in FY14 have left the lowest income group and shifted upwards resulting in 21.1 per cent more income for such individuals during FY14-FY21," said the SBI report.

Also Read: GDP growth at 7.3% in govt’s crystal ball

Business growth

The SBI report highlighted the visible change in the income pattern of MSMEs (micro, small and medium enterprises) as the formalisation drive brings more entities into the net.

"Around 19.5 per cent of majorly micro-sized firms have been able to shift their income upwards. Out of these, 4.8 per cent of firms have transitioned themselves into small firms, around 6.1 per cent of firms transitioned into medium-sized firms, and around 9.3 per cent of firms have transitioned into large-sized firms. This indicates MSME units are getting bigger and getting integrated into larger value chains with initiatives like PLI," said SBI.

Rise in individual’s weighted mean income

SBI's study shows individual’s weighted mean income has risen from ₹3.1 lakhs to ₹11.6 lakhs during FY14-FY21.

"The weighted mean income represents a more nuanced and granular barometer of increase in income within specific income brackets and their contribution to the overall increase. Mean income would shoot up if income is increasing along any bucket (upper, middle, or lower) but weighted mean income would increase more when the contribution of each income group is increasing towards total income growth," said SBI.

Rising female labour force

SBI quoted PLFS (Periodic Labour Force Survey) data which shows female labour force participation has risen from 23.3 in 2017-18 to 37 in 2022-23, marking an increase of 13.7.

Furthermore, females have shifted more towards agriculture.

"There has been an increase in the share of agriculture as an occupation among females at all India level from 57 per cent in 2017-18 to 64.3 per cent in 2022-23. Meanwhile, it has declined for the males from 40.2 per cent to 37.1 per cent during the same period," the SBI report said.

Post-pandemic consumption trends

SBI pointed out that the bottom of the pyramid consumption share has increased.

"The consumption of people spent below $3.65, or ₹303, per day has increased by nearly ₹8.2 lakh crore. Based on the current trends, we believe that another ₹16 lakh crore will shift to the bottom segment by 2030. This will mean that perhaps for the first time, 50 per cent of consumption will be accounted for by these 90 per cent," the SBI report said.

SBI said the rising popularity of food ordering platforms across latitudes indicates vanishing inequality.

"Zomato has a market share of more than 50 per cent in the Indian food delivery market (it caters to more than 750 cities currently) and hence a perfect example of a case study to refute the claim that people are facing distress. We estimate that around 0.44 crore active users are from Semi-urban regions only," said SBI.

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