India is celebrating quick economic recovery after two waves of Covid-19. First off-the-block, the RBI declared in its October 2021 bulletin that “the green shoots of revival have spilled out of the high frequency indicators and on to the headline metrics in a recovery that is progressively solidifying”.

To this finance minister Nirmala Sitharaman added later that India is poised to become one of the fastest-growing economies in the world due to all-round progress. “This year, the growth is on a low base, as you mentioned. We will have a good number next year because we’re building up on it. India will also be one of the fastest-growing economies and I am confident that India, Indian entrepreneurs and Indian people will all hold together, and as we say nowadays, sabka saath, sabka vikas, sabka vishwas and sabka prayas will help India move on that trajectory,” she told Fortune India recently.

While there is no doubt about the economic recovery and India may indeed become one of the fastest-growing economies in the years to come, the recovery and growth is certainly not inclusive, for all Indians.

Here’s why.

India’s tremendous growth in the post two decades has left a large segment of the population poorer. Household savings – both physical and financial – as percentage of GDP (based on 2011-12 GDP series and its back series data) peaked at 25.2% in FY09 and then fell to 19.6% in FY20 – the pre-pandemic year. It is bound to go down further in FY21 and FY22 with massive loss of lives, jobs and micro and small businesses due to the pandemic.

Separately, while household savings in physical assets peaked at 16.3% in FY12 and crashed to 11.6% in FY20 [PE], household financial savings peaked at 11.2% in FY04 and fell to 8% in FY20 [PE]. Physical assets refer to land, house, gold and silver jewellery, agriculture implements etc. and financial savings reflect bank deposits, financial investments etc. minus liabilities [borrowings].

The most remarkable part of the above graphs is the dramatic fall in household savings since FY12. Yet, it has drawn little attention from policymakers, economists and other experts.

Economic indicators also paint a similar picture.

A comparative analysis of the All India Debt and Investment Survey (AIDIS) of 2018-19, released in September 2021, with that of 2012-13 shows average household debts have risen faster than household assets both in rural and urban areas. Household assets grew by 58% and 19% in rural and urban areas, while debts grew by 84% and 42%, respectively.

A SBI research shows the pandemic has further increased household debts and estimates average debt to have gone up from ₹59,748 in 2018 (as per the AIDIS 2018-19) to ₹1.16 lakh in 2021 in rural, and from ₹1.20 lakh (as per the AIDS 2018-19) to ₹2.33 lakh in urban areas during the same period. This is 95.6% and 94% rise in 2021 over the AIDIS of 2018-19.

The growing reliance on manual work by rural households under the rural job guarantee scheme MGNREGS is another evidence of economic growth bypassing them. The MGNREGS wages are less than minimum wages in most states. In FY22, the all-India average per day wage under the scheme is just ₹208 – marginally up from ₹201 in FY21.

More than 75 million households worked under the MGNREGS in FY21 and FY22, their numbers crossed 60 million by November 3, 2021. The total number of rural households stood at 167.9 million, as per the 2011 Census, this would mean 45% of rural households are dependent on manual MGNREGS jobs for sustenance.

As for individuals, 112 million people availed the MGNREGS work in FY21 and 86 million had done so in FY22 (till November 3). The magnitude of this can best be understood by comparing it with India’s total workforce. According to CMIE, India’s total workforce stood at 406 million in March 2020 and 399.7 million in March 2021. This would mean more than 25% of workers are engaged in cheap, low productive manual labour for sustenance.

Another sign of impoverishment of households is the skyrocketing growth in gold loans while credit growth to the entire non-food sector is just about 5-7% during the first nine months (January-September) of 2021.

It is no secret that India has witnessed a skewed growth path in the past few decades. Inequality in both income and wealth has gone up sharply, more than any other country. According to the World Inequality Lab’s 2019 report, the rise in income inequality in India “has no precedent in recent history”.

Another good way of gauging the financial health of households is the National Statistical Office’s periodic household consumption expenditure surveys. Since India doesn’t map household ‘income’ consumption expenditure is used as a proxy for the same. The last such survey was carried out in 2017-18, which showed that ‘real’ monthly household consumption expenditure (MPCE) had fallen for the first time in 40 years – from ₹1,501 in 2011-12 to ₹1,446 in 2017-18.

This came to public notice when the report was leaked late in 2019, following which it was dismissed by the government. There has been no such survey since then but other indicators (like the AIDIS of 2018-19) show that India’s GDP growth and development is skewed in favour of the top 1% or the top 10% in the economic ladder, rather than the rest 99% or 90% of the population.

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