There are two main reasons why the novel Coronavirushas been such a disaster for the world economy: One, that it infects everyone — regardless of their economic status, and two, because it essentially spreads just the way economic growth does — via human interaction. In other words, controlling the virus’ spread and limiting the damage on the health side necessarily, by definition, results in incurring economic losses.
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While this was known from day one, this odious trade-off explains why so many governments and populations have been caught napping with more damaging second and third waves.
India is no exception. But, unlike other countries such as China, which controlled the virus much sooner, or the US and the UK, which despite being hit hard by Covid had the financial resources to protect the livelihoods of their people, India has suffered grievously.
Starting April, it was expected that India’s economy will register a fast economic rebound and quickly make up for the losses incurred in 2020. But the massive and unabated surge in Covid cases all across the country, which has exposed the government’s lack of preparation over the past year as grossly inadequate, points to the possibility of a scenario where India may not even be able to make up for the economic (GDP) contraction it suffered in the last financial year (2020-21).
But what does it mean in real terms?
Such a sharp contraction in GDP growth essentially means that millions of people will not only lose part or all of their current incomes but also the means to earn their income. What’s worse, since India’s economy was already decelerating before the pandemic, people do not have the savings to fight for long. Sooner rather than later they will see a sharp worsening in their economic, physical and social wellbeing.
A lot of focus has been on the pitiable state of India’s migrant workforce, but there is an equally primal shriek of desperation being let out by India’s middle class — one which has largely gone unheard.
“Prior to the pandemic, it was anticipated that 99 million people in India would belong in the global middle class in 2020. A year into the pandemic, this number is estimated to be 66 million, cut by a third. Meanwhile, the number of poor in India is projected to have reached 134 million, more than double the 59 million expected prior to the recession,” stated the Pew Research report.
While the fact that 75 million people will be pushed back to abject levels of poverty (of living at less than $2 a day), what is equally, if not more, worrisome is that fact that India’s middle class was reduced by one-third — and that is just the impact of the last year. Given its severity, the current second wave and its economic impact could well mean that India’s middle class will be reduced to half of what it was before the pandemic.
What exactly is the middle class?
Typically economic researchers tend to use income or expenditure (as a proxy for income) to spot the middle class. For instance, in the above case, the poor live on $2 or less daily, low income on $2.01-$10, middle income on $10.01-$20, upper-middle income on $20.01-$50 and high income on more than $50. But it is possible to define the middle class as those whose expenditure ranges between 75% to 125% of the median expenditures.
Further, cash is not the only marker of being middle class.
It is also characterised by certain values, mindsets, educational and occupational choices. For instance, people belonging to the middle-class aim to have decent well-paying jobs or small businesses, hope to own a house of their own, seek to have a secure retirement, and want to secure the healthcare and educational needs of their family. Every generation of a middle-class household hopes that its next-generation would be slightly better off.
Why does the middle-class matter?
Unlike its humble name, the middle class is often considered the glue that keeps modern liberal democratic economies from falling apart under the strain of ever-rising inequalities.
In his 1984, a well-known political economist Lester Thurow said the shrinking of the American middle class was a “cause of concern for the American political democracy”. “What Karl Marx saw as an inevitable revolution was based on the assumption that the economy would eventually generate a bipolar income distribution composed of rich and poor. Once this bipolar situation existed, he said, the poor would revolt, destroy the rich, and establish communism. But Marx’s predicted revolution did not occur because he did not foresee the rise of the middle class. The middle class had an interest in preserving capitalism and voted to alleviate the worst excesses of capitalism with social welfare programs. Their very presence gave the poor hope that they too could escape from poverty,”.
Beyond the political aspect, it is now well established that economic growth is stronger in countries that have a strong middle class. A 2011 Asian Development Bank paper, titled “The Role of the Middle Class in Economic Development: What Do Cross-Country Data Show?” looked at no less than 72 developing countries, including India, to confirm the finding by researchers like Nobel winners Abhijit Banerjee and Esther Duflo and many others that middle class has a salutary impact through various ways. For instance, the middle class is where entrepreneurs that foster innovation and growth emerge. Middle class “values” also encourage the accumulation of human capital (via education) and savings (that can then be used for productive investment in the economy).
Moreover, in comparison to the poor, the middle class has the ability and power to demand better public service delivery and greater accountability from public officials, and support growth-oriented policies.
But the world over, the middle class has been shrinking and this trend is considered worrisome. “Among middle-class households, there is now a growing discontent with economic conditions. In this context, the stagnation of middle-class living standards in OECD countries has been accompanied in recent years by the emergence of new forms of nationalism, isolationism, populism and protectionism.
Nationalistic and anti-globalization sentiments can arise because a shrinking middle class produces disillusionment and damages political engagement, or turns voters towards anti-establishment and protectionist policies. Political instability is an important channel through which a squeezed middle class may upset economic investment and growth,” states a 2019 OECD book, titled “Under Pressure: The Squeezed Middle Class”.
In India, all the data pointed to the middle-class coming under severe strain even before the pandemic. Unemployment levels had risen to a 45-year high even as consumption expenditures had fallen sharply (although the latter survey was disowned by the government). Health and nutrition data also showed a significant decline even as educational outcomes continue to lag. National accounts data showed Indians getting more and more indebted since 2017. Further fuelling the middle-class discontent in recent years has been the high retail inflation especially led by heavy taxation on every fuel like petrol and LPG.
It was at this juncture that the Covid pandemic wreaked havoc.
So what can be done to remedy the situation?
The ADB paper concluded that “policies that factor in the welfare of the middle class and nurture their growth may be a more effective long-term strategy for alleviating poverty compared to policies focusing solely on the poor”.
That’s because a growth strategy that includes the middle class is likely to be more sustainable, given that more people across different racial and ethnic groups share in the growth process.
“A politically and economically strong middle class is more likely to hold a government accountable, which would, in turn, ensure the rule of law, protection of property rights, and continued economic reform,” it stated.
More specific to the Indian middle class, the starting point has to be a reordering of the taxation and benefits matrix. In other words, the overall tax burden should be reduced even as the benefits such as public healthcare — which has been exposed to be woefully inadequate — and education are ramped up. Doing this would necessarily require the government to make the tax system more progressive and demand higher taxation from the rich.
Similarly, the government must do everything it can to bring down the cost of living for the middle class. For instance, making housing affordable.
The third big thrust has to be to address the lack of jobs and falling labour force participation rate. In particular, this will require a concerted effort to improve the skills of India’s middle class.
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Steve Ovett, the famous British middle-distance athlete, won the 800-metres gold medal at the Moscow Olympics of 1980. Just a few days later, he was about to win a 5,000-metres race at London’s Crystal Palace. Known for his burst of acceleration on the home stretch, he had supreme confidence in his ability to out-sprint rivals. With the final 100 metres remaining,
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]Ovett waved to the crowd and raised a hand in triumph. But he had celebrated a bit too early. At the finishing line, Ireland’s John Treacy edged past Ovett. For those few moments, Ovett had lost his sense of reality and ignored the possibility of a negative event.
This analogy works well for the India story and our policy failures , including during the ongoing covid pandemic. While we have never been as well prepared or had significant successes in terms of growth stability as Ovett did in his illustrious running career, we tend to celebrate too early. Indeed, we have done so many times before.
It is as if we’re convinced that India is destined for greater heights, come what may, and so we never run through the finish line. Do we and our policymakers suffer from a collective optimism bias, which, as the Nobel Prize winner Daniel Kahneman once wrote, “may well be the most significant of the cognitive biases”? The optimism bias arises from mistaken beliefs which form expectations that are better than the reality. It makes us underestimate chances of a negative outcome and ignore warnings repeatedly.
The Indian economy had a dream run for five years from 2003-04 to 2007-08, with an average annual growth rate of around 9%. Many believed that India was on its way to clocking consistent double-digit growth and comparisons with China were rife. It was conveniently overlooked that this output expansion had come mainly came from a few sectors: automobiles, telecom and business services.
Indians were made to believe that we could sprint without high-quality education, healthcare, infrastructure or banking sectors, which form the backbone of any stable economy. The plan was to build them as we went along, but then in the euphoria of short-term success, it got lost.
India’s exports of goods grew from $20 billion in 1990-91 to over $310 billion in 2019-20. Looking at these absolute figures it would seem as if India has arrived on the world stage. However, India’s share of global trade has moved up only marginally. Even now, the country accounts for less than 2% of the world’s goods exports.
More importantly, hidden behind this performance was the role played by one sector that should have never made it to India’s list of exports—refined petroleum. The share of refined petroleum exports in India’s goods exports increased from 1.4% in 1996-97 to over 18% in 2011-12.
An import-intensive sector with low labour intensity, exports of refined petroleum zoomed because of the then policy regime of a retail price ceiling on petroleum products in the domestic market. While we have done well in the export of services, our share is still less than 4% of world exports.
India seemed to emerge from the 2008 global financial crisis relatively unscathed. But, a temporary demand push had played a role in the revival—the incomes of many households, both rural and urban, had shot up. Fiscal stimulus to the rural economy and implementation of the Sixth Pay Commission scales had led to the salaries of around 20% of organized-sector employees jumping up. We celebrated, but once again, neither did we resolve the crisis brewing elsewhere in India’s banking sector, nor did we improve our capacity for healthcare or quality education.
Employment saw little economy-wide growth in our boom years. Manufacturing jobs, if anything, shrank. But we continued to celebrate. Youth flocked to low-productivity service-sector jobs, such as those in hotels and restaurants, security and other services. The dependence on such jobs on one hand and high-skilled services on the other was bound to make Indian society more unequal.
And then, there is agriculture, an elephant in the room. If and when farm-sector reforms get implemented, celebrations would once again be premature. The vast majority of India’s farmers have small plots of land, and though these farms are at least as productive as larger ones, net absolute incomes from small plots can only be meagre.
A further rise in farm productivity and consequent increase in supply, if not matched by a demand rise, especially with access to export markets, would result in downward pressure on market prices for farm produce and a further decline in the net incomes of small farmers.
We should learn from what John Treacy did right. He didn’t give up, and pushed for the finish line like it was his only chance at winning. Treacy had years of long-distance practice. The same goes for our economy. A long grind is required to build up its base before we can win and celebrate. And Ovett did not blame anyone for his loss. We play the blame game. Everyone else, right from China and the US to ‘greedy corporates’, seems to be responsible for our failures.
We have lowered absolute poverty levels and had technology-based successes like Aadhaar and digital access to public services. But there are no short cuts to good quality and adequate healthcare and education services. We must remain optimistic but stay firmly away from the optimism bias.
In the end, it is not about how we start, but how we finish. The disastrous second wave of covid and our inability to manage it is a ghastly reminder of this fact.
On March 31, the World Economic Forum (WEF) released its annual Gender Gap Report 2021. The Global Gender Gap report is an annual report released by the WEF. The gender gap is the difference between women and men as reflected in social, political, intellectual, cultural, or economic attainments or attitudes. The gap between men and women across health, education, politics, and economics widened for the first time since records began in 2006.
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The Global gender gap index aims to measure this gap in four key areas : health, education, economics, and politics. It surveys economies to measure gender disparity by collating and analyzing data that fall under four indices : economic participation and opportunity, educational attainment, health and survival, and political empowerment.
The 2021 Global Gender Gap Index benchmarks 156 countries on their progress towards gender parity. The index aims to serve as a compass to track progress on relative gaps between women and men in health, education, economy, and politics.
Although no country has achieved full gender parity, the top two countries (Iceland and Finland) have closed at least 85% of their gap, and the remaining seven countries (Lithuania, Namibia, New Zealand, Norway, Sweden, Rwanda, and Ireland) have closed at least 80% of their gap. Geographically, the global top 10 continues to be dominated by Nordic countries, with —Iceland, Norway, Finland, and Sweden—in the top five.
The top 10 is completed by one country from Asia Pacific (New Zealand 4th), two Sub-Saharan countries (Namibia, 6th and Rwanda, 7th, one country from Eastern Europe (the new entrant to the top 10, Lithuania, 8th), and another two Western European countries (Ireland, 9th, and Switzerland, 10th, another country in the top-10 for the first time).There is a relatively equitable distribution of available income, resources, and opportunities for men and women in these countries. The tremendous gender gaps are identified primarily in the Middle East, Africa, and South Asia.
Here, we can discuss the overall global gender gap scores across the index’s four main components : Economic Participation and Opportunity, Educational Attainment, Health and Survival, and Political Empowerment.
The indicators of the four main components are
(1) Economic Participation and Opportunity:
o Labour force participation rate,
o wage equality for similar work,
o estimated earned income,
o Legislators, senior officials, and managers,
o Professional and technical workers.
(2) Educational Attainment:
o Literacy rate (%)
o Enrollment in primary education (%)
o Enrollment in secondary education (%)
o Enrollment in tertiary education (%).
(3) Health and Survival:
o Sex ratio at birth (%)
o Healthy life expectancy (years).
(4) Political Empowerment:
o Women in Parliament (%)
o Women in Ministerial positions (%)
o Years with a female head of State (last 50 years)
o The share of tenure years.
The objective is to shed light on which factors are driving the overall average decline in the global gender gap score. The analysis results show that this year’s decline is mainly caused by a reversal in performance on the Political Empowerment gap.
Global Trends and Outcomes:
– Globally, this year, i.e., 2021, the average distance completed to gender parity gap is 68% (This means that the remaining gender gap to close stands at 32%) a step back compared to 2020 (-0.6 percentage points). These figures are mainly driven by a decline in the performance of large countries. On its current trajectory, it will now take 135.6 years to close the gender gap worldwide.
– The gender gap in Political Empowerment remains the largest of the four gaps tracked, with only 22% closed to date, having further widened since the 2020 edition of the report by 2.4 percentage points. Across the 156 countries covered by the index, women represent only 26.1% of some 35,500 Parliament seats and 22.6% of over 3,400 Ministers worldwide. In 81 countries, there has never been a woman head of State as of January 15, 2021. At the current rate of progress, the World Economic Forum estimates that it will take 145.5 years to attain gender parity in politics.
– The gender gap in Economic Participation and Opportunity remains the second-largest of the four key gaps tracked by the index. According to this year’s index results, 58% of this gap has been closed so far. The gap has seen marginal improvement since the 2020 edition of the report, and as a result, we estimate that it will take another 267.6 years to close.
– Gender gaps in Educational Attainment and Health and Survival are nearly closed. In Educational Attainment, 95% of this gender gap has been closed globally, with 37 countries already attaining gender parity. However, the ‘last mile’ of progress is proceeding slowly. The index estimates that it will take another 14.2 years to close this gap on its current trajectory completely.
In Health and Survival, 96% of this gender gap has been closed, registering a marginal decline since last year (not due to COVID-19), and the time to close this gap remains undefined. For both education and health, while progress is higher than economy and politics in the global data, there are important future implications of disruptions due to the pandemic and continued variations in quality across income, geography, race, and ethnicity.
India-Specific Findings:
India had slipped 28 spots to rank 140 out of the 156 countries covered. The pandemic causing a disproportionate impact on women jeopardizes rolling back the little progress made in the last decades-forcing more women to drop off the workforce and leaving them vulnerable to domestic violence.
India’s poor performance on the Global Gender Gap report card hints at a serious wake-up call and learning lessons from the Nordic region for the Government and policy makers.
Within the 156 countries covered, women hold only 26 percent of Parliamentary seats and 22 percent of Ministerial positions. India, in some ways, reflects this widening gap, where the number of Ministers declined from 23.1 percent in 2019 to 9.1 percent in 2021. The number of women in Parliament stands low at 14.4 percent. In India, the gender gap has widened to 62.5 %, down from 66.8% the previous year.
It is mainly due to women’s inadequate representation in politics, technical and leadership roles, a decrease in women’s labor force participation rate, poor healthcare, lagging female to male literacy ratio, and income inequality.
The gap is the widest on the political empowerment dimension, with economic participation and opportunity being next in line. However, the gap on educational attainment and health and survival has been practically bridged.
India is the third-worst performer among South Asian countries, with Pakistan and Afghanistan trailing and Bangladesh being at the top. The report states that the country fared the worst in political empowerment, regressing from 23.9% to 9.1%.
Its ranking on the health and survival dimension is among the five worst performers. The economic participation and opportunity gap saw a decline of 3% compared to 2020, while India’s educational attainment front is in the 114th position.
India has deteriorated to 51st place from 18th place in 2020 on political empowerment. Still, it has slipped to 155th position from 150th position in 2020 on health and survival, 151st place in economic participation and opportunity from 149th place, and 114th place for educational attainment from 112th.
In 2020 reports, among the 153 countries studied, India is the only country where the economic gender gap of 64.6% is larger than the political gender gap of 58.9%. In 2021 report, among the 156 countries, the economic gender gap of India is 67.4%, 3.8% gender gap in education, 6.3% gap in health and survival, and 72.4% gender gap in political empowerment. In health and survival, the gender gap of the sex ratio at birth is above 9.1%, and healthy life expectancy is almost the same.
Discrimination against women has also been reflected in Health and Survival subindex statistics. With 93.7% of this gap closed to date, India ranks among the bottom five countries in this subindex. The wide sex ratio at birth gaps is due to the high incidence of gender-based sex-selective practices. Besides, more than one in four women has faced intimate violence in her lifetime.The gender gap in the literacy rate is above 20.1%.
Yet, gender gaps persist in literacy : one-third of women are illiterate (34.2%) than 17.6% of men. In political empowerment, globally, women in Parliament is at 128th position and gender gap of 83.2%, and 90% gap in a Ministerial position. The gap in wages equality for similar work is above 51.8%. On health and survival, four large countries Pakistan, India, Vietnam, and China, fare poorly, with millions of women there not getting the same access to health as men.
The pandemic has only slowed down in its tracks the progress India was making towards achieving gender parity. The country urgently needs to focus on “health and survival,” which points towards a skewed sex ratio because of the high incidence of gender-based sex-selective practices and women’s economic participation. Women’s labour force participation rate and the share of women in technical roles declined in 2020, reducing the estimated earned income of women, one-fifth of men.
Learning from the Nordic region, noteworthy participation of women in politics, institutions, and public life is the catalyst for transformational change. Women need to be equal participants in the labour force to pioneer the societal changes the world needs in this integral period of transition.
Every effort must be directed towards achieving gender parallelism by facilitating women in leadership and decision-making positions. Social protection programmes should be gender-responsive and account for the differential needs of women and girls. Research and scientific literature also provide unequivocal evidence that countries led by women are dealing with the pandemic more effectively than many others.
Gendered inequality, thereby, is a global concern. India should focus on targeted policies and earmarked public and private investments in care and equalized access. Women are not ready to wait for another century for equality. It’s time India accelerates its efforts and fight for an inclusive, equal, global recovery.
India will not fully develop unless both women and men are equally supported to reach their full potential. There are risks, violations, and vulnerabilities women face just because they are women. Most of these risks are directly linked to women’s economic, political, social, and cultural disadvantages in their daily lives. It becomes acute during crises and disasters.
With the prevalence of gender discrimination, and social norms and practices, women become exposed to the possibility of child marriage, teenage pregnancy, child domestic work, poor education and health, sexual abuse, exploitation, and violence. Many of these manifestations will not change unless women are valued more.