Despite the devastation caused by COVID-19 in 2020, India has seen a big increase in the wealth of some rich persons. The speed of wealth creation is nothing short of staggering. Five fastest growing billionaires’ added more than $56 billion of net worth in a single year 2020. Fewer billionaires also saw their wealth erode this year than they did in 2019.
Mukesh Ambani remains the wealthiest Indian for the 13th year in a row, adding $37.3 billion to his net worth; Cyrus S Poonawalla of the Serum Institute of India, the world’s largest vaccine manufacturer and the local manufacturer of Covid-19 vaccine “Covishield” developed by the Oxford-AstraZeneca, climbed up two places to sixth position on the list with a wealth of $11.5 billion.
The most interesting and significant incident is the rise of billionaire Gautam Adani, After starting out as a commodities trader in the late 1980s, Adani is now richer than Jack Ma and is India’s second-wealthiest person with a net worth of $25.2 billion. He added $9.5 billion to his fortune in the last year when his net worth grew by 61%, faster than the growth of Asia’s richest man. During last couple of years, Adani has emerged as India’s infrastructure king, diversifying from mines, ports and power plants into airports, data centers and defense — sectors that are considered as crucial to meeting India’s economic goals. In less than two years, Adani has gained control of seven airports and almost a quarter of India’s air traffic.
IT company HCL’s Shiv Nadar is at the third position in the list of wealthiest Indian with a net worth of $20.4 billion that is 42% more than his net worth in 2019.
Now, if we take a look at our economy which was already slowing down when the Covid-19 pandemic unfolded. After reaching 8.3 percent growth in FY17, GDP growth decelerated to 4.0 percent in FY20 and in absolute term economy is contracted by $276 billion. The pre-COVID slowdown was caused by a decline in private consumption growth and shocks to the financial sector (the collapse of a large non-bank finance institution), which compounded pre-existing weaknesses in investment. In response to the Covid-19 outbreak, the authorities implemented a nation-wide lockdown, which brought economic activity to a near standstill between April-June quarters of FY 20.
During the months of the pandemic, millions of working people all over the country were suffering from acute loss of employment and income. During the first phase of pandemic unemployment went up to nearly 24 percent in April 2020.
According to different reports, with close to 10.9 million jobs being lost across sectors, 2020 was termed the worst-ever year for the job market in India. The year gone by saw millions of Indians laid off, both in the formal and informal sectors, with many still struggling to find a job.
Even as India’s job scenario continues to recover after seeing a sharp dip due to the coronavirus pandemic, the competition for finding jobs become fierce according to LinkedIn’s labor market data. At the same time, the competition among professionals for jobs is 30 per cent higher than the year 2019.
A study by experts at the University of Pennsylvania, University of Chicago and the Mumbai-based Centre for Monitoring the Indian Economy (CMIE), found that across India, 84 percent of households reported a fall in income due to the lockdown. This fall in income is consistent with the sharp increase in unemployment.
The same study also noted that the fall in incomes affected people in the lower and middle segments of the income distribution most severely. Households in the lowest of the five income groups had average monthly per-capital earnings of less than Rs. 3,800 (about $50), while those at the high end made between Rs. 12,374 and upwards of Rs. 1 lakh ($167 to $1,370 and more).Households in the middle-income groups are hurt disproportionately more perhaps because they are most likely to be dependent on sources of income that are hit due to the lockdown.
A latest research by Pew research centre finds that the middle class in India is estimated to have shrunk by 33 million in 2020 as a consequence of the downturn, compared with the number it may have reached in absence of the pandemic. It was estimated that 99 million people in India would belong in the global middle class in 2020. A year into the pandemic, this number is estimated at 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. The poverty rate in India likely rose to 9.7% in 2020, up sharply from the January 2020 forecast of 4.3%.
Since the beginning of the pandemic, income inequality has continued to rise: while the super wealthy make even more money, middle and lower income class households have been impacted severely in terms of employment opportunities and earnings.
As per the Oxfam’s ‘Inequality Virus Report , Mukesh Ambani, who emerged as the richest man in India and Asia, earned ₹90 crore an hour during the pandemic when around 24% of the people in the country were earning under ₹ 3,000 a month during the lockdown.
The pandemic led to the creation of a new underclass of workers. These are the overlooked folks who stock shelves at different e-commerce marketplace, delivers food from restaurants and local food chains, deliver packages, drive rental cars, health care workers and engage in an array of other gig-economy and lower-wage work. Those essential jobs place these people in dire situations, which substantially increase their health risks. Usually these are dead-end, no-growth roles that they remain stuck in.
Let’s try to understand how the rich are getting richer during the pandemic.
It is very obvious that rich people always have financial cushion of enormous wealth that they have already accumulated and it allows them to multiply wealth, whereas the poor lack the financial bandwidth.
Rich and wealthy people hold a part of their wealth in the form of stocks, so that a stock market boom suddenly makes the rich appear much richer. Whereas, large masses of people hardly own any wealth and what little they own does not fluctuate much in value unlike stock market prices.
During the pandemic, there were two contradictory movement in stock market. When the pandemic was at its peak and stock prices were falling, the billionaires held their stocks and also bought stocks from smaller owners who were engaged in panic-selling; as a result, when stock prices increased after the ease of pandemic, they got enormous capital gains.
In the article “In Pandemic, India’s Super Rich Get Richer by 35% While Common People Suffer the Most”, well-known political economist Mr. Prabhat Patnaik (former professor at Jawaharlal Nehru University) (https://www.theleaflet.in/in-pandemic-indias-super-rich-get-richer-by-35-while-common-people-suffer-the-most/) stated that, the increase in concentration of wealth during the pandemic was not just vis-à-vis the very poor who are without any wealth anyway, but also vis-à-vis small wealth holders.
With the rising numbers of billionaires and rich getting richer, the biggest concern would be that a small group of people are going to enjoy the lion’s share of wealth, power, political connections and control, while the vast majority of the population is either just getting by or hanging on by their fingernails.
*Sujoy Ghosh is a Trend Watcher ( Economy and Politics and holds a masters degree in Economics
Kindly note that the point of views expressed in the article are entirely the author’s personal views. IPD takes no responsibility for the same.