Since the Coronavirus pandemic wreaked havoc on the world economy, exacerbating economic and social disparities, intellectuals and experts are using myriad terms to describe the economic outlook. One term that is widely being used to describe the divergence in recovery, post the COVID-19 pandemic, is ‘K-shaped recovery’.
K-shaped recovery meaning
According to Peter Atwatera, a lecturer at Virginia-based William & Mary University, who popularised the term, a ‘K-shaped recovery’ could be described as ‘stacked inequity on one side and stacked privilege on the other’. The divergent strokes of the Roman letter K apparently represent how the pandemic has segregated the populations of specific nations in haves and have-nots. A K-shaped recovery, hence, represents an uneven rebound, when different parts of an economy recover at varying rates, following a downturn.
This means that while some segments or industries will come out of the recession sooner, others will take time. The magnitude of recovery would also be different for the segments mentioned.
V-shaped, U-shaped, W-shaped and L-shaped recovery
Apart from K-shaped recovery, an economy can also undergo recovery in shapes of some other English letters, including V-shaped recovery (a strong and quick rebound), U-shaped recovery (a strong and quick rebound), W-shaped recovery (subsequent episodes of rebound and downturn also known as growth double-dip), L-shaped recovery (steep decline followed by a shallower upward slope), etc.
K-shaped recovery for India
For a country where the pandemic has made the poor poorer and some of the wealthy people wealthier, many experts have predicted a K-shaped recovery instead of V, once the contagion situation is fully curtailed.
The country’s K-shaped recovery would further bare the growing gap between winners and losers of the economic upheaval.
In April 2021, former RBI governor Duvvuri Subbarao, who helmed India’s central bank during the global financial crisis of 2008, said the country’s economic recovery was likely to be shaped like a K rather than a V, as rising inequality was poised to hit consumption and growth prospects.
“An important consequence of the pandemic has been the sharpening of inequalities. Growing inequalities are not just a moral issue. They can erode consumption and hurt our long-term growth prospects,” he said.
K-shaped recovery in Indian real estate
Even though there is no denying that the impact of the Coronavirus has been highly adverse on some segments of real estate in India, others have not been that badly impacted. This is also reflected in the fact that profit margins of India’s leading builders have shown improvement, in spite of the overall beating that the housing market in India suffered, in the aftermath of the pandemic.
While the developers that have remained fiscally sound despite the challenges due to an overall demand slowdown have managed to breeze through, cash-starved builders find it much harder to survive in the post-pandemic world.
What is K-shaped and V-shaped recovery?
A K shaped recovery indicates an unequal recovery following two distinct trajectories at the same time, while a V shaped recovery indicates a uniform, quick rebound after a downturn.
What is difference between recession and depression?
A recession generally refers to an economic scenario where the GDP falls for at least two quarters, whereas a depression is an extreme and prolonged economic contraction that lasts for several years.