INTRODUCTION:
A V-shaped recovery is characterized by a quick and sustained recovery in measures of economic performance after a sharp economic decline.
The recoveries that followed the recessions of 1920-21 and 1953 in the U.S. are examples of V-shaped recoveries.
Indian economy has recently experienced V- shapes recovery
1. The government used the Year-on-Year (Y-o-Y) comparison method — which showed that the GDP grew by 20% in Q1 this year (FY2022) as against the Q1 last year — to claim that India was witnessing a V-shaped recovery.
2. Gross GST revenue collection which was the highest ever at Rs 1.68 lakh crore for April 2022.
3. The Economic Survey 2021 predicted a ‘V-shaped’ recovery.
4. External Trade: After dipping for 9 consecutive months, merchandise imports finally experienced a growth of 7.6% (y-o-y) in December 2020. The revival was led by gold, electronic goods and vegetable oils. India’s merchandise exports have reached pre-Covid-19 levels and exhibited a growth of 0.1% in December 2020.
5. Stock Market Surge: The COVID-19 pandemic kept the Sensex to a record low in late March 2020. However, it staged a strong recovery from the lows. Both the BSE and NSE indices finally wrapped up 2020 on a bullish note.
Indian economy has recently experienced K- shapes recovery
K-shaped recovery exhibits wealth inequality, greater corporate monopolies, a continuing racial wealth gap, long-term unemployment for low-income workers, and accelerating technological adoption.
Critics of the government chose to look at the Quarter-on-Quarter (Q-o-Q) method — which showed the economy contracted by 17% in Q1 this year (FY 2022) as against Q4 (January, February and March) of the last financial year — to claim that the economy was fast losing momentum.
Education, for example, is inherently K-shaped in many places, and this has become even more skewed due to Covid-19. Higher-income groups with smartphone and broadband coverage had far better access to remote learning during this pandemic, almost everywhere in the world.
Vulnerable Sectors: Sectors like supply chain, logistics, hospitality are dependent on human interactions which remain limited due to social distancing constraints.
A study conducted by researchers at Azim Premji University shows that business closures and job losses pushed more than 230 million Indians into poverty in the past year, and “the structure of employment has changed dramatically”.
Extra Reading:
https://www.thehindubusinessline.com/opinion/is-the-economic-recovery-v-k-or-w-shaped/article37238131.ece
https://www.business-standard.com/article/economy-policy/is-india-looking-at-a-v-or-w-shaped-economic-recovery-in-fy22-121090701123_1.html
