K-shaped recovery Vs V-shaped recovery

K-shaped recovery Vs V-shaped recovery

Subject: Economy

Context: Economic Adviser (CEA) Krishnamurthy Subramanian acknowledged on Thursday that some parts of the economy may be witnessing a K-shaped recovery, as smaller firms and urban poor had been hit harder by the pandemic, but stressed that India’s overall economic rebound remains V-shaped.

Concept:

K-shaped recovery

• Z-shaped recovery: It is the most-optimistic scenario in which the economy quickly rises after an economic crash.
• A K-shaped recovery occurs when an economy recuperates unevenly, and there’s a separate trajectory for two segments of the society.
• While the financial markets recover and grow, the real economy, or the flow of goods and services, gets worse.
• It makes up more than for lost ground before settling back to the normal trend-line, thus forming a Z-shaped chart.
• In this economic disruption lasts for a small period wherein more than people’s incomes, it is their ability to spend is restricted.

V-shaped recovery

• V-shaped recovery: It is the next-best scenario after Z-shaped recovery in which the economy quickly recoups lost ground and gets back to the normal growth trend-line.
• In this, incomes and jobs are not permanently lost, and the economic growth recovers sharply and returns to the path it was following before the disruption.
• V-shaped recovery is characterized by a sharp economic decline followed by a quick and sustained recovery. This type of recession tends to be considered a best-case scenario.