The latest IMF World Economic Outlook (October 2022) projects that the global economy continues to suffer from the lingering effects of Covid-19 and reiterates that a “broad-based and sharper-than-expected slowdown” has now combined with inflation that is higher than experienced in several decades. Essentially, this translates into a full-blown cost-of-living crisis for hundreds of millions of people. Global growth is now forecast to slow down to 2.7 per cent in 2023 from 3.2 per cent in 2022; the weakest growth in two decades except for the peak of the global financial crisis and the worst of the Covid-19 outbreak (IMF, 2022).
Post the pandemic, the world has seen a large-scale reversal of the development goals achieved during the last decade. The latest Multidimensional Poverty Index (MPI) report which is based on the data gathered before the pandemic, finds 1.2 billion people living in acute multidimensional poverty (UNDP, 2022). Though there has been marked progress in reducing extreme poverty — from 36 per cent in 1990 to 10 per cent in 2010 — over the past decades, the World Bank report (2021) shows that the rate of decrease in extreme poverty had slowed before Covid-19. The latest MPI report suggests that 593 million people lack both electricity and clean cooking fuel, 437 million people lack access to both drinking water and sanitation, and 374 million people are deprived of nutrition, cooking fuel, sanitation and housing at the same time. The situation in all likelihood has been made worse with the advent of the pandemic, with the exact quantitative estimates still awaited. Strictly measured in terms of income using the World Bank’s poverty lines, an additional 150 million people fell below the poverty line by end of 2021 as compared to the 2020 level due to Covid-19 and the severity of contraction (World Bank, 2020). The headline developmental message from the pandemic-induced economic distortions pinpoints a major reversal of the gains made in poverty alleviation. In January, 2021, the World Bank estimated that the per capita income levels in low-income countries fell by 3.6 per cent in 2020, with output falling by 0.9 per cent, the largest contraction in 30 years implying that the loss in per capita incomes has translated into a reversal of the hard-fought gains in the living standards of the poor.
In spite of trade and financial globalisation in the last three decades, the global inequality trends too have remained pronounced and they are as profound today as they were at the peak of Western imperialism in the early 20th century. As per the World Inequality Report (2022), the Covid pandemic has further exacerbated global inequalities with the top 1 percentile accounting for 38 per cent of all the additional wealth accumulated since the mid-1990s and this trend has become more pervasive since 2020 with wealth inequality remaining at extreme levels world over. Resultantly, interconnected inequalities have resurfaced which have only widened in the backdrop of geopolitical uncertainties and precipitated food and energy crises. Stark global inequality patterns coupled with the supply and demand side shocks as well as the revenue squeezes in the commodity-dependent economies have rendered the economies vulnerable. Inequalities are also predicted to stem from climate change, and the Covid-19 pandemic has been very illustrative of inherent inequalities in society. A recent study showed that heat waves, intensified by climate change, have cost the global economy trillions of dollars in the last three decades, but this cost was disproportionately borne by the countries and regions least culpable for global warming.
Reducing inequalities and ensuring no one is left behind are integral to achieving the UN’s Sustainable Development Goals (SDGs). However, there is evidence of an increase in intra-country inequality across the countries. Jensen’s SDG report (2022) suggests that between-country inequality rose by 1.2 per cent between 2017 and 2021, the first such increase in a generation. Post-Covid-19, the evidence of new inequalities is still being analysed and debated, but there remains a consensus that the pandemic has exacerbated pre-existing inequalities. A survey during the pandemic’s peak revealed that female-owned businesses were 5.9 percentage points more likely to have faced closure than male-owned ones. Similarly, women — including small business owners — have a disproportionate share of the role in managing the household chores, and child and elderly care responsibilities.
Notably, women are more likely to be employed in low-paying, insecure and informal jobs (such as domestic workers, street vendors, frontline workers, etc.), even as the global gender pay gap remains persistently high at nearly 20 per cent. Cultural and social norms add to the mix, putting women at a disadvantage.
India at the G20 could work on developing an economic and social rescue framework that protects the rights of the poorest people and tackles extreme inequality worldwide. This means combating inter-country and local income inequalities by addressing the concerns of the global South and urging the international community to come together to fix structural inequalities in the least developed countries (LDCs) and low-income countries (LICs) by easing trade flows, opening up the markets, and reducing non-tariff barriers (such as rigid product standards). In addition, the G20 can promote technology transfer and urge the industrialised world to provide climate finance so as to ensure a green transition that is historically just and fair, and in line with a common but differentiated responsibility framework. G20 should call on developed member nations to gradually but consistently move toward providing full duty-free and quota-free (DFQF) market access to exports from LDCs. The developed nations have consistently affirmed to provide LDC duty-free, quota-free (DFQF) access to their market so as to narrow down global inequality and achieve the sustainable development goals (SDGs) but such commitments and pledges remain largely unmet. It is thus time for India, as G20 president, to finally deliver on this promise by urging member nations to comply with the tariff line endorsed at WTO (2005) ministerial declaration for exports originating from low-income countries. G20 can further undertake measures to boost inequality-busting aid and seek a consensus on widescale debt relief and initiate steps on significant debt cancellation for the poorest countries.
Sahoo is professor and Bhunia is consultant at the Institute of Economic Growth (IEG), Delhi University. Views are personal