'Covid-19 widens inequality in India; income, consumption recovery in mass market lags average'

The bounceback in consumption in June is an uneven one, illustrating an aggravation in the already existing inequalities in India during the Covid-19 pandemic, according to a report.

People have suffered from an income generation perspective as well, which has resulted in the broadening of the base at the lower tiers of the earning hierarchies during the pandemic, said the report by credit risk firm Creditvidya.

Experts have been observing a recovery in demand visible in the consumption levels for June as compared to April. The positive numbers are shown by FMCG (fast-moving consumer goods) brands in earnings this week also pointed to the same.

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"Even without any demand stimulus, we see some revival of consumption and income in June, with an increase in economic activity. The recovery has, however, been uneven along income lines, exacerbating inequality in India," the company's co-founder and Chief Executive Officer Abhishek Agarwal said.

Over 70 per cent of its sample size of 5 lakh people in urban areas were what it defined as the "mass market" segment, having a monthly income between Rs 10,000 and Rs 20,000, and the segment has expanded 14 per cent in June, indicating a decline in earnings, as per the report.

Even after a 9.6 per cent increase over May in June, consumption by the mass market segment remains 35 per cent below the pre-Covid-19 levels by value, as against a 26 per cent jump in overall consumption over May by value, it said.

The value of goods and services consumed in June 2020 was 17 per cent lower than the pre-Covid-19 levels, it said.

The consumption among the affluent segment (classified as those earning above Rs 60,000 a month) is only 5 per cent below the pre-Covid-19 level, having grown 20 per cent in June over May by value, it said.

Share of people who are earning less than Rs 3,000 a month continues to be high, with the 24 per cent of those surveyed falling under this bracket as against 15 per cent in the pre-Covid-19 times, it said.

However, the share of those with zero earnings has come down to 6.5 per cent, which is just a notch above the pre-Covid-19 level of 6 per cent, it said.

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From an earning perspective, the overall incomes by value rose 25 per cent in June over May, but were still 12 per cent below the pre-Covid-19 levels, the analysis showed.

The inequalities are existent on the earnings front as well, with the incomes of the mass market segment being 30 per cent below the pre-Covid-19 levels despite a 12 per cent recovery in June over May.

More numbers of Indians are digging into their savings and the overall savings decreased 18 per cent at the end of June as compared with the pre-Covid-19 levels, it said.