A new research analysis conducted by Pew Research Center has revealed that the novel coronavirus pandemic has pushed millions of people out of middle class and low-income group, and into poverty, in India. However, India is not an exception.
South Asia, as a whole, is estimated to have experienced the most significant erosion in the middle class and a sharp rise in poverty due to the COVID-19 downturn. India's dream of emulating China's economic growth has taken a blow, as the neighbouring country could forestall a significant contraction, unlike India.
The difference a year has made
In January 2020, an economic forecast by the World Bank suggested India would have a real gross domestic product (GDP) of 5.8% in 2020. One year into the coronavirus pandemic, in January 2021, the World Bank revised those numbers and estimated a -9.6% growth in India, indicating a massive economic contraction. On the other hand, China was forecasted to have 5.9% growth in January 2020 and 2% growth one year later.
Rise in poverty and shrinking middle class
The Pew Research Cent analysis, released in March, found that the middle-class income group in India shrunk by 32 million in 2020 compared to the number estimated in the absence of the pandemic. That accounts for 60% of the people who were pushed out of the middle-income tier in the world.
As per the research, the population in every country is divided into five groups: poor (lives on $2 or less daily), low income ($2.01-$10), middle income ($10.01-$20), upper-middle-income ($20.01-$50) and high income (more than $50).
Meanwhile, 75 million more people in India moved into poverty because of the pandemic-induced recession, which accounts for close to 60% of the global increase in poverty (131 million people) due to the Covid pandemic. So much so that a spike in participation in rural employment programs were noticed, as millions of people lost jobs and moved to agricultural areas, setting a record high in 14 years.
Before the pandemic, 99 million people in India were expected to belong to the global middle class in 2020. However, after one year of pandemic, the number has reduced by a third, to 66 million people. Meanwhile, when 59 million people were expected to fall in the poor income group, the post-pandemic estimation now indicates 134 million people live in poverty in India – which is more than double. This has resulted in a 9.7% increase in poverty in 2020, which is 5.4% more than what was estimated before the pandemic.
Also, around 1.20 billion people in India were expected to be in the low-income tier in 2020, but the pandemic reduced the number to 1.6 billion people, which indicates that more Indians moved into poverty.
Comparison with China
In China, more people are in the global middle- and upper-middle-income tiers than in the poverty and the low-income tier, which is not the case for India. Moreover, only about 11 million in China moved out of the middle class during the pandemic.
Whereas, India's middle class saw a massive decrease of 33 million people, even though China was speculated to have 504 million people in the middle-class against India's 99 million, in the pre-pandemic projection. Similarly, China had a modest increase in poverty of one million people (3 million to 4 million) unlike India, where 75 million more people moved into poverty.
2011-2019 progress undone by pandemic
India reduced poverty sharply from 2011 to 2019. It is estimated that India decreased poverty from 340 million people in 2011 to 78 million people in 2019. The increase of 75 million people in the poor-income group during this pandemic undid several years of progress on this front. 32 million of India's middle-class income group was pushed back from in poverty back again. It comes after the addition of 57 million people in this income tier between 2011 and 2019.
While India's middle class and low-income tier shrunk during the pandemic, undoing years of progress, China managed to see smaller changes, keeping them quite ahead in the economic race.