Why inequality dipped when poverty worsened
SummaryA fall in middle-class incomes may explain this puzzle and India’s revival plan must account for it
There is now a raging debate on what happened to poverty during the last decade. The curiosity is justified, given how eventful the decade was, with large catastrophic events, both policy-induced and natural. First the droughts in 2014 and 2015, then demonetization and the hasty roll out of India’s goods and services tax (GST) and finally the covid pandemic; the impact on the economy has been clearly visible, with average growth decelerating to its lowest in the last three decades. However, the real issue of who gained and who lost is still a matter of debate. The balance of evidence is largely in favour of the last decade being a lost one as far as poverty reduction is concerned. But it also points to a decline in inequality.