As Davos 2022 Warns of A “Darkened”​ Economic Climate, A Sobering Take On The Post Pandemic “Real”​ India

Darkened Economic Climate
Photo by Motamarri Phani on Unsplash

As the who’s who of the global elite gathered in Davos for the annual talkfest, at which the “people who matter” ponder on the state of the world, a report compiled on the state of inequality in India, using governmental data, released last week should have reminded the Davos 2022 participants, that Indians who earn as little as Rs. 25,000 per month, should count themselves as “lucky” to be in the Top 10 per cent of the Income bracket in India. When all that it takes is an Rs. 25,000 monthly income, to be considered “rich” or for that matter, even middle class, one wonders as to what exactly are the rest 90% earning, more so when the official poverty rate categorizes anyone living on less than $2 a day as poor. Calculated on a monthly basis, this translates to Rs. 4,500 per month, meaning that it does not take much for them to “sink back” into near poverty when crises such as the pandemic strike.

The aforementioned report, the State of Inequality in India report by the Institute for Competitiveness found, and commissioned by The Economic Advisory Council to the Prime Minister, has been prepared mainly to understand the impact of the pandemic on the Indian populace, as far as incomes and wealth distribution are concerned. Without repeating what others have been “shouting from the rooftops” about the “rich getting richer, and the poor poorer”, it still needs to be elaborated that if the findings of this report are corroborated by other statistics, then the situation is indeed “dire” when 90% of the population are barely able to scrape through.

Davos 2022 was notable not only because the 0.1 per cent (note how it used to be 1% earlier) gathered in person after two years, but also because of the “sizable” Indian contingent, which drew pride from the media about the “new realities” of India, that is increasingly being seen as the Next Big Thing in the Global Economy. Indeed, so much so that the reputed magazine, The Economist, called this decade “India’s to lose” which is as close to a “marquee” endorsement that we can get in the Davos sweepstakes. So, how does one square the “hype” and the “reality”? More to the point, which is the “real” India and which is the “New India”?? Some tough questions indeed as it becomes clear that there are many “paradoxes” and “puzzles” about the Indian Economy, which left unaddressed can lead to social unrest.

As I have written earlier, Davos 2022 should have had an “alternative agenda” where discussions on the “invisible” poor could have helped matters much. One of the themes of this year’s Davos gathering was to “understand the world in all its complexity”. Perhaps, instead of adding more layers of complexity, a simplified and jargon-free summary of the state of the world can help indeed. More so with the “turbulence” that lies ahead for the global economy, a fact that the Davos elite acknowledged as well as deliberated upon at great length, a creditable achievement, made more notable by the near consensual warnings about a “darkened” economic climate, what with each Davos 2022 attendee, and their dog, predicting a global recession.

The noted non-profit, Oxfam, has been repeating for some years now that just a 1% tax on the Billionaires is enough to finance a massive anti-poverty initiative such as Ayushman Bharat or the Rural Employment Guarantee Scheme, or for that matter, alleviate the “abysmal” state of government-provided education. Indeed, the pandemic has made an impact on this as well as those without the means to afford or access “online classes” simply dropped out of the schooling matrix, leading to a “lost generation of learners” just as the last two years have also resulted in what can be called the Indian version of “The Great Resignation” as Tens of Millions of Indian workers became so discouraged that they stopped looking for jobs.

Having said that, it is a fact that the Indian economy has been growing well so much so that it is the fastest major growing economy. However, as the former Reserve Bank Governor, Raghuram Rajan, pointed out, the gains are being “cornered” by a few and this is the K Shaped growth, where you have the Unicorns and the Indian Services sector on the cusp and the poor at the bottom leg. Of course, even the much-celebrated Unicorn bubble is close to bursting as can be seen from the stupendous crash in Cryptos and other Web 3.0 enablers, as well as the record numbers of layoffs in recent weeks in the Indian Startups. So, perhaps the “party is over” for those who were emblematic of the Indian Middle-Class Dream.

The last time there was so much concern about inequality was back in 1991 when the Indian Economy had to be “rescued” from the depths of despair through bailouts. However, a crucial and a “Very Big” difference this time around is the healthy Dollar Reserves and the Sound Fundamentals, along with no real crisis points. On the other hand, the rising social tensions and societal unrest point to the return of the 1990s, with attendant consequences for the economy. Then as should be the case now, there has to be a focus on “equitable growth” and this is where the real challenge is. This is also a challenge for those who contest the growth narrative as they must reinvent themselves as with “no growth” there is no chance for equity, and so, the left must ditch its baggage and offer meaningful suggestions.