K shaped economic recovery is a graphical representation of unusual recovery paths in which some companies and businesses show robust growth while other sinks deeper. It is due lack of accessibility to the government relief and stimulus packages to bail out sectors in crisis.
If the recovery path of given economy manifest contradictory trend or unusual patterns with two extremities boom and trough, such economic recovery is called K shaped economic recovery.
Most of the time when economies face sudden unexpected tough challenge, start sinking or get downturn for indefinite period of time.
Economic recession, depression and economic recoveries
In economic terms, when the period of recovery more than 18 months, it is called economic recession while if the downturn period persist more than 18 months upto four years is labelled as economic depression.
However, not all the time economy recovery experience same pattern of path like K shaped recovery. It may be V, U, W, and L shaped economic recovery depending on the situation of given economy. Here, I’m going to explain K shaped economic recovery.
Understanding K shaped economic recovery
Sometimes, economy crashes due to sudden unexpected act of god or war like situation. To bail out of the difficult situations, as expectation, governments announce relief and stimulus packages. Actually, the direct accessibility and reach of large cap companies, and businesses is more than small and medium enterprises.
Therefore, the benifits of governments relief and stimulus packages do not percolate beyond these handful sectors. And most needy remains stuck in the decline for longer duration hoping to reach relief.
Two contradictory trend in economic recovery
As I explained above that government efforts breed two contradictory trend in recovery. One economic recovery path shows greater boom based on relief and stimulus packages, while other remains at the bottom or floor due to lack of accessibility to the government help.
So, K shaped economic recovery is a graphical representation of two contradictory recovery paths or trends. Between them, aggressively rising represent handful companies, while most of the vulnerable remains untouched and declines even deeper for more time.
Impacts of K shaped economic recovery
It is observed that the small and medium businesses play important role in generating employment generation. And, always, these companies and businesses remain unnoticed when they face difficult situations.
Most of the time what happens, they fail to access the efforts of governments like stimulus and relief packages. Consequently, they decline further loosing revival potential. In this situation, people depend on such companies and businesses loose theirs job and become unemployed.
Now, just imagine, if the numbers of small and medium enterprises are in million, what would be the numbers of unemployed people? This is the reason when economies recover out of sudden or unexpected shock, all these businesses experience doom and gloom.
Post COVID K shaped economic recovery
Almost all the economists across the world agree that in developing countries like India, the trend of economic recovery is similar to K shaped recovery.
“India’s economy recovery steadies, but remains K-shaped” — Hindustan Times.
“Despite India’s economic growth, few jobs and meagre pay for urban youth” — the Hindu.
“Government should prevent K-shaped recovery: Raghuram Rajan” — The Hindu.
These are some finding from leading newspaper of India highlight that the Post COVID Indian economic recovery is more or less K shaped.
Data suggest that handful companies and businesses are reaping all the benifits offered by government, and other deserving sectors are crawling on the floor.
Unquestionably, it is hard to digest that Indian economic recovery is manifesting huge economic disparities and inequalities after COVID pandemic.
Recent COVID pandemic is not the only cause of economic recession world facing. Before this, many a times, world underwent this phenomenon. But, this shock was so strong and sudden that only developed economies could sail through choppy waters successfully.
Short summary on K types of economic recovery
Economic boom and economic downturn are parts and parcel of modern day economics.
Economic boom always make most of the stakeholders better off while economic downturn invites doom and gloom for most of the people including consumers and businesses.
K type economic recovery is characterized by contradictory trend with boom and decline.
Some businesses experience further downturn instead to recover in the same speed like others.
Government fiscal and monetary policy have great role in correcting K shaped recovery.
Post COVID economic growth is the finest example of K shaped economic recovery.
Economic disparities, income inequalities, job losses, decline in overall market demand erosion of savings are the major impacts of K shaped economic recovery.
But, not all the recession pave the way for K types of economic recovery but it happens in certain cases.
Inference and logical reasoning
Indian economic recovery after Covid
Economic growth and development
Understanding stages of economic growth
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