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GS Paper: GS3

  • Declaring a National Calamity

    Under the existing Scheme of State Disaster Response Fund / National Response Fund of the Ministry of Home Affairs, there is no provision to declare any disaster including flood as a National Calamity.

    How does the law define a disaster?

    • A natural disaster includes earthquake, flood, landslide, cyclone, tsunami, urban flood, heatwave; a man-made disaster can be nuclear, biological and chemical.
    • As per the Disaster Management Act, 2005, “disaster” means:
    1. A catastrophe, mishap, calamity or grave occurrence in any area, arising from natural or man-made causes, or
    2. It results in substantial loss of life or human suffering or damage to, and destruction of, property, or damage to, or degradation of, environment, and
    3. Damage is of such a nature or magnitude as to be beyond the coping capacity of the community of the affected area.

    How can any of these be classified as a national disaster?

    • There is no provision, executive or legal, to declare a natural calamity as a national calamity.
    • The existing guidelines of the State Disaster Response Fund (SDRF)/ National Disaster Response Fund (NDRF), do not contemplate declaring a disaster as a National Calamity.

    Has there ever been an attempt to define a national calamity?

    • In 2001, the National Committee under the chairmanship of the then PM was mandated to look into the parameters that should define a national calamity.
    • However, the committee did not suggest any fixed criterion.

    How, then, does the government classify disasters/calamities?

    • The 10th Finance Commission (1995-2000) examined a proposal that a disaster be termed “a national calamity of rarest severity” if it affects one-third of the population of a state.
    • The panel did not define a “calamity of rare severity” but stated that a calamity of rare severity would necessarily have to be adjudged on a case-to-case basis taking into account.

    What happens if a calamity is so declared?

    • When a calamity is declared to be of “rare severity/severe nature”, support to the state government is provided at the national level.
    • The Centre also considers additional assistance from the NDRF.
    • A Calamity Relief Fund (CRF) is set up, with the corpus shared 3:1 between Centre and state.
    • When resources in the CRF are inadequate, additional assistance is considered from the National Calamity Contingency Fund (NCCF), funded 100% by the Centre.
    • Relief in repayment of loans or for grant of fresh loans to the persons affected on concessional terms, too, are considered once a calamity is declared “severe”.

  • What is Retractable Roof Polyhouse?

    The CSIR-CMERI has recently inaugurated a “naturally ventilated polyhouse facility” and laid the foundation stone of “retractable roof polyhouse”.

    What is a Polyhouse?

    • A polyhouse is a specially constructed structure like a building where specialized polythene sheet is used as a covering material under which crops can be grown in partially or fully controlled climatic conditions.
    • It is covered with a transparent material as to permit the entry of natural light. Polyhouses are also helpful in reducing threats such as extreme heat and pest attacks in crops.
    • This is especially important for crops growing in the open field with no protection from the weather, and therefore its yield, quality, and crop maturity timings are changed.

    Retractable Roof Polyhouse

    • The retractable roof system is a modular screen system for greenhouses that helps in saving costs and time along with providing stability, flexibility & durability for the greenhouse structure.
    • Such polyhouse will have an automatic retractable roof which will be operated based on weather conditions and crop requirements from the conditional database using the software.

    Advantages offered

    • Ability to use the benefits of natural weather conditions
    • Long life of the system and material used
    • Easy assembly and installation
    • Maximum insulation and complete protection from insecticides
    • Easy maintenance & even easier repair work during operation

    Why need such polyhouse?

    • With rapidly rising temperatures due to mounting greenhouse gases in the atmosphere from human activities, crops are increasingly facing both threats — extreme heat and pest attacks — simultaneously.
    • Crop losses in India due to insect pests are about 15 percent at present and this loss may increase as climate change lowers the plant defense system against insects and pests.
    • Conventional greenhouses have a stationary roof to reduce the effect of weather anomalies and pests.
    • However, there are still disadvantages due to roof covering which sometimes lead to excessive heat and insufficient light (early morning).
    • Besides this, they are also prone to insufficient levels of carbon dioxide, transpiration, and water stress.

  • What changed for Indian industry after 1991 economic reforms?

    Context

    It has been 30 years since the spirit of liberalisation was unleashed in 1991 economic reforms. The private sector, which had been seen very differently up to 1990, was placed at the centre of the reform process. And this has continued and grown since then.

    Challenges and opportunities for Indian industry after economic reforms

    1) Entry of MNCs and centrality to consumers

    • The first challenge was the entry of MNCs through the joint venture (JV) route.
    • Centrality to consumers: The reforms gave centrality to the consumer who till 1991 did not have a choice.
    • The Indian consumer was given choices and companies, both foreign and Indian, wanted to be their first choice.
    • Growth in demand: The surge of new demand from the marketplace transformed the scenario, reflected in GDP growth rapidly moving up to 7 per cent per annum.

    2) Increased competition

    • For the first time, Indian companies faced real competition from other Indian as well as foreign companies.
    • But, many corporates restructured themselves and transformed into competitive forces.
    • The new reality of reduced customs duties and industrial licensing disappearing, removed the protection umbrella and Indian companies, by and large, who had been planning for this day, were ready to face this challenge.

    3) Government-industry partnership

    • Till June 1991, the government and industry were at a distance from each other.
    • June 1991 changed all of that, the government’s dialogue with industry deepened, consultations were frequent.
    • Feedback on what was happening on the ground was taken regularly.
    • A government-industry partnership became a reality.

    4) Boost to aspiration of industries

    • The most significant change brought about by the reforms pertained to the level of “aspirations” of the industry.
    • There was excitement and ambition to be world-class.
    • Rise of IT industry: In this, the IT industry led by TCS, Infosys and Wipro played a major role.
    • They showed that Indian engineers and managers were the best in the world.
    • They exuded confidence which spread to others.

    5) Boost to entrepreneurship

    • Not just the big industry, but also, the small and medium sectors that became part of the new energy in industry.
    • Component manufacturing and exports were new initiatives from ancillaries and suppliers of major manufacturers.

    6) Infrastructure

    • The public sector had a monopoly over infrastructure.
    • This changed and the private sector was invited to participate, to get into public-private partnerships and end the government’s monopoly.

    7) Birth of new private sector bank

    • Banking had been nationalised in 1969.
    • But the reforms of 1991 gave birth to a new private sector bank — HDFC Bank — which, after due diligence by the government and the Reserve Bank of India, opened its doors in 1994.
    • This was a huge step forward in the reform process.

    8) Improvement in corporate governance

    • An industry-led initiative brought out the first-ever task force guidelines and report on corporate governance.
    • This was followed by many other actions and policies.

    Conclusion

    There is still a long way to go, but the die that was cast in 1991 has led to a new tsunami of change.

  • Centre moves to redact Retrospective Tax Law

    The government took the first step towards doing away with the contentious retrospective tax law of 2012, which was used to raise large tax demands on foreign investors like Vodafone and Cairn Energy.

    Retrospective Tax Law: A backgrounder

    • The roots of this law date back to 2007, when Vodafone bought over a majority stake in the telecom operations of Hutch in India for $11.1 billion.
    • While the deal involved the changing of hands of Indian operations of Hutch, the companies party to it were registered outside India and all the paperwork and financial transactions, too, were done outside the country.
    • But the Indian government ruled that Vodafone was liable to pay capital gains tax to it as the deal involved the transfer of assets located in India.
    • Importantly, there was no rule in the Indian statutes then that allowed such taxation.
    • Vodafone challenged this claim and the case went to Supreme Court, which ruled in 2012 that there was no tax liability on Vodafone’s part to Indian authorities.

    What was the law made then?

    • In 2012, Parliament amended the Finance Act to enable the taxman to impose tax claims retrospectively for deals executed after 1962 which involved the transfer of shares in a foreign entity whose assets were located in India.
    • The target, of course, was the Vodafone deal. Very soon, tax claims were also raised on Cairn Energy.

    How did the Companies react?

    • The changes to the Finance Act allowed India to reimpose its tax demand on Vodafone.
    • Tax authorities had slapped a tax bill of Rs 7,990 crore on Vodafone, saying the company should have deducted the tax at source before making a payment to Hutchison.
    • By 2016, reports say, the bill had risen to Rs 22,100 crore after adding interest and penalty.
    • The demand on Cairn was for Rs 10,247 crore in back taxes over its move, beginning in 2006, to bring its Indian assets under a single holding company called Cairn India Ltd.
    • A few years later, when Cairn India Ltd floated an IPO to divest about 30 per cent of its ownership of the company, mining conglomerate Vedanta picked up most of the shares.
    • However, Cairn UK was not allowed to transfer its stakes as Indian officials held that the company had to first clear the tax liability.

    Note: This story is of no use to aspirants. But one must understand how such cases create regression for the Indian economy in the long run.

    A case in the Hague

    • That prompted Cairn UK to move the Permanent Court of Arbitration to The Hague, Netherlands.
    • It said that India had violated the terms of the India-UK Bilateral Investment Treaty by imposing a retrospective tax due on it.
    • The treaty provides protection against arbitrary decisions by laying down that India would treat investment from the UK in a “fair and equitable” manner.
    • Vodafone, too, had sought arbitration before the Permanent Court of Arbitration, citing the “fair and equitable” treatment clause in the India-Netherlands BIT.

    India’s response

    • In September last year, the Hague court ruled in favour of Vodafone, quashing India’s tax claim after holding that it violated the “equitable and fair treatment standard” under the bilateral investment treaty.
    • India refused to pay the compensation, Cairn launched recovery proceedings across countries as part of which a French court ordered the freezing of some Indian assets in Paris.
    • This move discourages foreign investors from coming to India and that the Centre should look to resolve the case at the earliest.
    • The amendments now mooted are designed to do just that.

    Taxation Laws (Amendment) Bill, 2021

    • The Bill offers to drop tax claims against companies on deals before May 2012 that involve the indirect transfer of Indian assets would be “on fulfilment of specified conditions”.

    Various conditions:

    • The condition includes the withdrawal of pending litigation and the assurance that no claim for damages would be filed.
    • As per the proposed changes, any tax demand made on transactions that took place before May 2012 shall be dropped, and any taxes already collected shall be repaid, albeit without interest.
    • To be eligible, the concerned taxpayers would have to drop all pending cases against the government and promise not to make any demands for damages or costs.

    Why is the amendment necessary?

    • The retrospective taxation was termed “tax terrorism”.
    • It is argued that such retrospective amendments militate against the principle of tax certainty and damage India’s reputation as an attractive destination.
    • This could help restore India’s reputation as a fair and predictable regime apart from helping put an end to taxation.

  • Little progress since years after Indo-US nuclear deal

    Other than the imported Russian-built reactor-based project in Tamil Nadu, which is grandfathered under an earlier 1998 agreement, progress of greenfield projects since the Indo-US nuclear deal has been tardy.

    Indo-US Nuclear Deal

    • The deal was signed in 2008 jointly by then Indian PM Dr. Manmohan Singh and then US President George Bush.
    • India agreed to separate its civil and military nuclear facilities and to place all its civil nuclear facilities under International Atomic Energy Agency (IAEA) safeguards.
    • In exchange, the United States agreed to work toward full civil nuclear cooperation with India.
    • The implementation of this waiver made India the only known country with nuclear weapons which is not a party to the Non-Proliferation Treaty (NPT) but still allowed to carry out global nuclear commerce.

    Q. In India, why are some nuclear reactors kept under “IAEA Safeguards” while others are not? (CSP 2020)

    (a) Some use Uranium and others use thorium.

    (b) Some use imported uranium and others use domestic supplies.

    (c) Some are operated by foreign enterprises and others are operated by domestic enterprises.

    (d) Some are State-owned and others are privately-owned.

     

    [wpdiscuz-feedback id=”3yibtmqjzl” question=”Spark the debate!” opened=”1″]Answer this PYQ in the comment box:[/wpdiscuz-feedback]

    Implementation not in spirit

    • The US has been discussing the sale of nuclear reactors to India since the 2008 pact, two subsequent agreements were signed only in 2016 and 2019.
    • A “project proposal” to set up six reactors in collaboration with Westinghouse Electric Company (WEC) has been announced, but work is yet to begin.
    • WEC, alongside Wilmington-based GE Hitachi Nuclear, has been negotiating to build reactors in India since the nuclear deal was inked.
    • The project, however, came under a cloud after WEC filed for bankruptcy in mid-2017 following cost overruns on reactors coming up in the US.
    • The GE Hitachi project has barely made any progress.

    Back2Basics: Non-Proliferation Treaty (NPT)

    • NPT, is an international treaty whose objective is:
    1. to prevent the spread of nuclear weapons and weapons technology,
    2. to promote cooperation in the peaceful uses of nuclear energy, and
    3. to further the goal of achieving nuclear disarmament and general and complete disarmament
    • Between 1965 and 1968, the treaty was negotiated by a Committee on Disarmament, an UN-sponsored organization based in Geneva, Switzerland.
    • The treaty defines nuclear-weapon states as those that have built and tested a nuclear explosive device before 1 January 1967; these are the United States, Russia, the United Kingdom, France, and China.
    • Four UN member states have never accepted the NPT, three of which possess or are thought to possess nuclear weapons: India, Israel, and Pakistan.
    • In addition, South Sudan, founded in 2011, has not joined.

  • Places in news: Agalega Island

    Mauritius has denied a report that it has allowed India to build a military base on the remote island of Agalega.

    Agalega Island

    • Agaléga are two outer islands of Mauritius located in the Indian Ocean, about 1,000 kilometers north of Mauritius island.
    • The islands have a total area of 2,600 ha (6,400 acres).
    • There is an MoU between the governments of Mauritius and India to develop the Agaléga islands and resolve infrastructural problems faced by Agaleans.

    Why in news?

    • India asserts that these new facilities are part of its Security and Growth for All in the Region (SAGAR) policy, which aims to increase maritime cooperation between countries in the region.
    • Mauritius, for its part, has indicated that its coastguard personnel will use the new facilities.
    • But it is clear that the Indian investment of $250m in developing an airfield, port, and communications hub on this remote island is not aimed at helping Mauritius develop its capacity to police its territorial waters.

    Significance of this area

    • The Agalega area is currently a blind spot for the Indian Navy and by building a military facility in it, New Delhi hopes to expand its maritime domain awareness.
    • In times of conflict, knowing the location of enemy ships and submarines, without being detected in the process, creates a significant advantage.
    • China’s naval forays into this region are the true motivator for its expanding naval presence.
    • In peacetime, effective maritime domain awareness helps establish international partnerships with like-minded militaries and also acts as a deterrent to both state and non-state adversaries, by signaling reach.

    Conclusion

    • The Indian Ocean is now increasingly contested.
    • Whether or not China is deterred by India’s surveillance efforts, Agaléga is now a pawn in this new era of major power competition across the Indian Ocean and indeed the wider Indo-Pacific region.

  • Need to deal with the flaws in the existing structure of GST

    Context

    After four years, the promise of the Goods and Services Tax (GST) remains substantially unrealised.

    Why tax base of GST is not expanding

    • The GST is strongly co-related to overall GDP.
    • Revenue collection of the GST is dependent on the nominal growth rate of Gross Value Added (GVA) in the economy.
    • Since inception, GVA per quarter has been between ₹40-lakh crore to ₹47-lakh crore and GST revenue has not been higher than ₹2.7-lakh crore to ₹3.1-lakh crore.
    • The Tax to Gross value addition is only about 5% to 6.5% though GVA growth was much higher.
    • Issues: A very large segment is covered by exemption, composition schemes, evasion and lower tax rate.

    Five Issues with the GST structure

    1) Dominance of the Centre

    • The political architecture of GST is asymmetrically loaded in favour of the Centre.
    • No body to adjudicate: There is no particular body is tasked to adjudicate if there is a dispute between States and between the Centre and the States.
    • Centre’s domination: In the voting, the central government has one-third vote and States have two-thirds of total votes.
    • All states have equal voting rights regardless of size and stake.
    • With the support of a dozen small States whose total GST collection is not more than 5% of the total central government can dominate the decision making process in GST Council.
    • Small states dictate the terms: With equal value for each States’ voting, larger and mid-sized States feel shortchanged.

    2) Flaw in tax structure

    • Nearly 45% to 50% of commodity value is outside the purview of the GST, such as petrol and petroleum products.
    • Certain states not getting revenue as origin state: States which export or have inter-State transfers or mineral and fossil fuel extractions are not getting revenue as the origin States and need a compensation mechanism.
    • The pre-existing threshold level of VAT has been tweaked too often which has led to an evaporation of tax base incentivising, enabling evasion and mis-reporting.
    • Most trading and retail establishments, (however small) are out of the fold of the GST.
    • At the retail level, irrespective of whether Input Tax Credit (ITC) is required or not, the burden can be passed off to the consumer.
    • As a result, the loss could be as high as one third.

    3) Exemptions

    • Exemptions from registration and taxation of the GST have further eroded the GST tax base compared to the tax base of the pre-existing VAT.
    • Ground for evasion: Exemptions are purely distortionary and also provide a good chance to remain under the radar, thereby directly increasing evasion or misclassification.
    • Theoretically, exemptions at the final stages reduce tax realisation.
    • Multiple rates: As multiple rates are charged at different stages, it goes against the lessons of GST history.
    • This tax works well with a single uniform tax rate for all commodities and services at all stages, inputs and outputs alike.
    • While most countries have a single rate, India stands out and is among the five countries to have four rates/slabs.

    4) Exclusion

    • Against the interest of States: Petroleum products remaining outside the purview of GST has helped the Centre to increase cesses and decrease central excise, in what would otherwise have been shareable with the States.
    • Now, States will be keen on including petrol and diesel under the GST as their share of tax goes up in the process, even if there is a special rate fixed for it.
    • Equity requires that petrol and diesel be brought under the GST.
    • Cascading of taxes: Apart from the complexity it creates in record keeping and ‘granting ITC’, in the present form it also leads to a cascading which the GST avowedly tried to avoid.

    5) Lack of compliance

    • Compliance with GST return (GSTR-1) filing stipulation and the resultant tax information is not up to date.
    • Fraudulent claims of Input Tax Credit (ITC) because of a lack of timely reconciliation are quite high though it has come down by two thirds.
    • Tax evasion, estimated by a National Institute of Public Finance and Policy’s paper, is at least 5% in minor States and plus 3% in the major States.

    Conclusion

    Policy gaps along with compliance gaps do need to be addressed. Without proper tax information, infrastructure and base, the States would go in for selective tax enforcement. In the long run, voluntary compliance will suffer and equity in taxation will be violated.

  • Air Quality Commission Bill, 2021

    The Lok Sabha has passed the Bill to formalize the Commission for Air Quality Management For National Capital Region and Adjoining Areas.

    Highlights of the AQC Bill

    • The AQC would be a ‘permanent’ body to address pollution in the National Capital Region Delhi and address sources of pollution in Delhi, Punjab, Rajasthan, Haryana and Uttar Pradesh.
    • The all-powerful body assumed several powers to coordinate action among States, levy fines — ranging up to ₹1 crore or five years of prison — to address air pollution.

    Key features

    • Over-riding powers: While the Central Pollution Control Board (CPCB) and its state branches have the powers to implement provisions of the Environment Protection Act for air, water and land pollution.
    • In case of dispute or a clash of jurisdictions, the AQC’s writ would prevail specific to matters concerning air pollution.
    • Chair: The body has a full-time chairperson and a range of members consisting of both representatives from several Ministries as well as independent experts and will have the final say on evolving policy and issuing directions.
    • Curb on stubble burning: the Commission may impose and collect environment compensation causing pollution by stubble burning.
    • No penalties to farmers: The Centre, facing flak earlier this year from farmers protesting the farm laws, had committed to removing a clause in the Air Commission Bill that would penalize farmers for burning stubble, an important contributor to noxious air quality.

  • Indigenous Aircraft Carrier 1 (INS Vikrant)

    The much-awaited sea trials of India’s maiden indigenous aircraft carrier (IAC-1), built by the public sector Cochin Shipyard Ltd (CSL) have begun.

    Indigenous Aircraft Carrier 1

    • IAC is the first aircraft carrier designed and built in India.
    • It has been designed by the Indian Navy’s Directorate of Naval Design (DND), and is being built at Cochin Shipyard Limited (CSL), a public sector shipyard under the Ministry of Shipping.
    • The IAC-1, the biggest warship made indigenously, has an overall length of 263 m and a breadth of 63 m.
    • It is capable of carrying 30 assorted aircraft including combat jets and helicopters.
    • Propelled by four gas turbines, it can attain a top speed of 30 knots (about 55 kmph).
    • The vessel will have a complement of 1,500 personnel.

    Significance of IAC 1

    • An aircraft carrier is one of the most potent marine assets for a nation, which enhances a Navy’s capability to travel far from its home shores to carry out air domination operations.
    • Many experts consider having an aircraft carrier as essential to be considered a ‘blue water’ navy — one that has the capacity to project a nation’s strength and power across the high seas.
    • An aircraft carrier generally leads as the capital ship of a carrier strike/battle group.
    • As the carrier is a valuable and sometimes vulnerable target, it is usually escorted in the group by destroyers, missile cruisers, frigates, submarines, and supply ships.

    Why does it matter that this is a Made-in-India warship?

    • Only five or six nations currently have the capability of manufacturing an aircraft carrier — India joins this elite club now.
    • According to the Navy, over 76 per cent of the material and equipment on board IAC-1 is indigenous.
    • India’s earlier aircraft carriers were either built by the British or the Russians.
    • The INS Vikramaditya, currently the Navy’s only aircraft carrier that was commissioned in 2013, started out as the Soviet-Russian Admiral Gorshkov.
    • The country’s two earlier carriers, INS Vikrant and INS Viraat, were originally the British-built HMS Hercules and HMS Hermes before being commissioned into the Navy in 1961 and 1987 respectively.

    Why will this warship be named INS Vikrant?

    • INS Vikrant, a Majestic-class 19,500-tonne warship, was the name of India’s much-loved first aircraft carrier, a source of immense national pride over several decades of service before it was decommissioned in 1997.
    • India acquired the Vikrant from the United Kingdom in 1961, and the carrier played a stellar role in the 1971 war with Pakistan that led to the birth of Bangladesh.

    Now that India has the capability, will it build more carriers?

    • Since 2015, the Navy has been seeking approval to build a third aircraft carrier for the country, which, if approved, will become India’s second Indigenous Aircraft Carrier (IAC-2).
    • This proposed carrier, to be named INS Vishal, is intended to be a giant 65,000-tonne vessel, much bigger than IAC-1 and the INS Vikramaditya.
    • The Navy has been trying to convince the government of the “operational necessity” of having a third carrier.

  • Vaccination and normalising of monetary policy hold key to economic rebound

    Context

    Increasing pace of vaccination and normalising of monetary policy hold key to economic rebound.

    K-shaped recovery and its impact

    • Growth indicators so far suggest resilience in the short term — a shallow dent in May’s economic activity followed by a recovery in June, back to April’s levels.
    • K-shaped recovery: The external, investment and industrial sectors have been relatively resilient, with consumption and services bearing the brunt.
    • Notwithstanding signs of some fatigue in ultra-high frequency indicators in July, damage from the second wave seems largely limited to April-June 2021.
    • However, K-shaped recovery means light cracks on the top conceal much larger structural faultlines below.
    • Rising poverty: The Pew Research Centre estimates that the pandemic has led to India’s poor rising by 75 million while the middle and upper-middle class has shrunk by 39 million.
    • MSMEs and informal workforce worst hit: A recent survey by the ILO finds that the worst-hit — MSMEs and their informal workforce — have struggled to access the government’s pandemic support programmes.
    • These more structural scars may become blurred in the GDP data in coming quarters but will almost certainly affect the medium-term growth story.

    Way forward in the near term

    1) Policy

    • Achieving two objectives: When inflation is under control, then flush liquidity and ultra-accommodative monetary policy will help achieve two objectives—
    • 1) Ensuring easy financial conditions.
    • 2) Help control borrowing costs of the government’s expansive borrowing programme.
    • Inflation risk: The above strategy is not costless, it effectively uses the central bank’s credibility in controlling inflation as “collateral”.
    • So when inflation flares up and remains sticky, this arithmetic becomes increasingly complicated.
    • The RBI’s consistent message recently has been to view the current inflation surge as a “temporary hump”.
    • Much as the current monetary policy stance maintains that the economy is ill-equipped to handle policy normalisation, it is a matter of when rather than if.
    • As growth strengthens and the RBI’s inflation-targeting credibility comes under greater scrutiny, a policy pivot would become increasingly likely.

    2) Vaccination

    • The “ultimate unlocking” of the economy remains contingent on a critical mass getting vaccinated, which on materialising should trigger a revival in consumer and business sentiment.
    • The uptick in the pace of vaccination over the last few days and higher seroprevalence reported in some states are welcome news.

    Conclusion

    Even with widespread vaccinations, future pandemic waves may well be unavoidable. Fiscal, monetary and administrative policies cannot remain in a suspended emergency.

    Back2Basics: K-shaped recovery

    • A K-shaped recovery occurs when, following a recession, different parts of the economy recover at different rates, times, or magnitudes.
    • This is in contrast to an even, uniform recovery across sectors, industries, or groups of people.
    • A K-shaped recovery leads to changes in the structure of the economy or the broader society as economic outcomes and relations are fundamentally changed before and after the recession.
    • This type of recovery is called K-shaped because the path of different parts of the economy when charted together may diverge, resembling the two arms of the Roman letter “K.”