The Indian middle class has always been a striking featureof the nation’s social system.
These individuals and families are not wealthy enough to be abovethe daily travails of putting food on the table and not poor enough to beeligible or feel comfortable enough to receive the regular government aid.
So, what happened to the middle class in the pandemic?
They have reduced and have been forced to move into anothersocial stratification.
A new report by Pew Research Center analysis finds that themiddle class in India is estimated to have shrunk by 32 million in 2020 and thenumber of people earning less than Rs 150 per day more than doubled, as aconsequence of the economic downturn, compared with the number it may havereached absent the Covid pandemic. Thisaccounts for 60 per cent of the global retreat in the number of people in themiddle-income tier defined here as people with incomes of $10.01-$20 a day.
In comparison to the Chinese incomes, it relatively remainedunshaken with just a 2% drop in the middle-class population, the researchfound.
Meanwhile, the number of people who are poor in India (withincomes of $2 or less a day) is estimated to have increased by 75 millionbecause of the Covid-19 recession, accounting for nearly 60 per cent of theglobal increase in poverty.
The report uses World bank projections of economic growth todetermine the impact of the Covid-19 pandemic on the incomes of Indians. Thelockdown resulting from the coronavirus pandemic caused the shutting down ofbusinesses, lost jobs, falling incomes and taking the Indian economy into adeep recession.
Perhaps not surprisingly, media reports in India point to aspike in participation in its rural employment programme - originally intendedto combat poverty in agricultural areas - as the many who have lost jobs in thereeling economy seek work. The number now participating is setting record highsin the programme's 14-year history, Pew Research said.
Before the pandemic, it was anticipated that 99 millionpeople in India would belong in the global middle class in 2020. A year intothe pandemic, this number is estimated to have been 66 million, cut by a third.
Meanwhile, the number of poor in India is projected to havereached 134 million, more than double the 59 million expected before therecession. The poverty rate in India likely rose to 9.7 per cent in 2020, upsharply from the January 2020 forecast of 4.3 per cent. The report estimated anincrease of around 6 crores to 13.4 crore poor people. Notably, there has alsobeen a spike in MGNREGA members giving proof that the poor were struggling tofind work.
Most people in India were in the global low-income tier in2020, earning up to ₹150 to 700 per day. Some 1.20 billion people in India wereexpected to be in this tier in 2020 before the pandemic, accounting for 30 percent of the world's low-income population. This number is projected to havedropped to 1.16 billion as the Covid-19 downturn pushed more people intopoverty, suggests Pew’s projections. While the middle-income group has possiblycontracted from almost 10 crores to just 6.6 crores, on the other hand, thericher population group that get over ₹1,500 a day also fell almost 30% to 1.8crore people.
In contrast, China’s middle class will likely witness a tinyslip of just 1 crore and the number of poor people may have gone up to 10 lakh,as per the report.
For both India and China, the drop in living standards in2020 is a sharp departure from recent trends. From 2011 to 2019, the number ofpoor in India is estimated to have decreased from 340 million to 78 million.The projected rise in poverty in 2020 when comparing pre-pandemic and revisedfigures - 75 million - claws back several years of progress on this front forIndia. The retreat of India's middle class in 2020 - by 32 million - alsofigures large in the context of the addition of 57 million to this income tierfrom 2011 to 2019.
Warning that the situation, in reality, could be worse thanestimated. The report explains, “The methodology in this analysis assumes thatincomes change at the same rate for all people. If the COVID-19 recession hasworsened inequality, the increase in the number of poor is likely greater thanestimated in this analysis, and the decrease in the number who are high incomeis likely less than estimated. The middle class may have shrunk by more thanprojected,” it added.