In India's K-shaped economic recovery, keep a watch on middle-income groups

India's better-than-expected recovery story was scripted by households, and not government spending or private sector investments

The Indian economy has been recovering from the Covid-19-induced lockdown better than most expectations. Year-on-year real GDP contraction in the second quarter was much lower at 7.5 per cent compared to the 23.9 per cent in the first quarter. While the better-than-expected recovery is real, it is enigmatic. What drove such a dramatic recovery? It was clearly not driven by any government spending or initiative to spur growth. Neither was it driven by any increased investments by the private sector. 

While the government announced several schemes, its spending during April-November 2020 was 4.7 per cent higher than it was in