Inequality is a unique socioeconomic concept which can be both simple and complex to grasp. At one level, the idea has enormous public appeal, but at another it is open to a lot of intellectual debate. It is precisely this dual nature of inequality – and its ubiquity in today’s world – that is leading to an uneven recovery from the pandemic. Relatively low vaccination rates mean that poorer nations (and poorer areas within nations) are more exposed to the virus and its variants. While the Delta variant is raising concerns everywhere, policymakers need to realize that the way the virus is affecting the economy is also changing. The global economy had got used to the virus battering growth, as waves of infections caused a surge of lockdowns. In contrast, Delta seems to be having a stagflationary impact that is sapping growth less dramatically, but having unpredictable effects on inflation, particularly food inflation, which hits the poorest the hardest.
Apart from the unique economic challenges posed by the Delta variant, shrinking fiscal space will make it even harder for many developing nations to boost vaccinations and support their economies. India has been moderately successful in this regard, but there is still a real danger of leaving thousands of families unprotected and exposed to destitution and homelessness. The crisis has already led to rising food insecurity, and much of the success in containing it will depend on managing further spikes in food inflation as well as astutely refining regulatory policies.
Over the past year and a half, the world has taken some extraordinary and synchronized measures to contain the spread of Covid and boost economic growth. This is the time to build on these efforts with measured tailored to individual countries’ pandemic exposure and policy space. Once improvements in basic health metrics allow for a normalization of economic activity, policymakers should gradually scale up social spending and vocational training programmes to cushion the impact on unemployed workers. This would help heal the scars of the crisis which have particularly hit hard the socioeconomically marginalized.
Securing the recovery also necessitates a constant vigil on the monetary front. This needs to be coupled with closely monitoring inflation and the looming risks to financial stability. Overreacting to transient spikes in inflation should also be avoided. Any failure on this front will risk a divergent economic recovery, with those at the bottom of the pyramid being left to fend out for themselves. That would be incongruous with any sustained economic revival.
Just like all other sections of society, policymakers will also need to grapple with the issue of what exactly the new-normal will look like in the post-Covid world. The outlook is unclear, but it seems that both the spread and deadliness of the virus is fading. Obviously, that is no excuse for complacency. The global community has to step up in an unprecedented and innovative manner to pre-empt a divergent recovery, especially in emerging economies. With a tragic lack of imagination, the world has drifted into an arrangement that is convenient while it lasts, and it could last for a while more. But it will not be much longer. We need to be prepared to soon move out of our comfort zones.