Consumer Pyramids Survey: Income Inequality Decreases Despite Increase In Poverty Levels

COVID-induced crises were not limited to health and impacted all growth sectors within a country. While two-thirds of the economy was affected by COVID-19, nearly five million people lost their lives directly or indirectly because of the pandemic. Therefore, predictably, the overall economy of the country witnessed devastating lows. Even though there has been a V-shaped recovery, the output level in the country is still 10 per cent lower than that of 2019. Therefore, poverty rose inevitably during the pandemic. Moreover, the World Bank defined extreme poverty as the percentage of the population with an income below $1.90, which rose from 7.6% in November 2019 to 11.7% in July 2021.

Even as the poverty levels touched new heights, the income inequality in the country diminished. The income difference between the top 25 per cent and the bottom 25 per cent was approximately ₹ 45,000 and ₹8,000, respectively. Even though the income of the top quartile significantly reduced during the pandemic, the payment of the lowest quartile remained at the pre-pandemic levels, the Consumer Pyramids Survey 2021 reported.

Primary Sources Of Income For Indian Households

The three primary sources of income for a majority of the Indians came from government transfers, business profits, and labour income. Government transfers are cash or in-kind payments. Profits may be from any business, a food cart, a farm, or a manufacturing plant. Labour income is wages earned from hourly work or employment contracts. At the same time, only 30 percent of workers in the bottom quartile worked in the service sector, whereas over 45 percent of those from top quartile households do. During the pandemic, consumer spending on services fell by 30%-40%, far more than the decline in expenditure on manufacturing or agriculture.

However, as the economy is finally racing to exceed the pre-pandemic levels, the threat of the income inequalities returning to the pre-pandemic levels emerges yet again. The governments are partly tending to the situation by providing schemes to ensure food security and livelihoods to the rural and poor population in the country.

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