A new Pew Research Center analysis finds that the middle class in India is estimated to have shrunk by 32 million in 2020 and the number of people earning less than Rs 150 per day more than doubled, as a consequence of the economic downturn, compared with the number it may have reached absent the Covid pandemic. This accounts for 60 per cent of the global retreat in the number of people in the middle-income tier defined here as people with incomes of $10.01-$20 a day.
In comparison to the Chinese incomes, it relatively remained unshaken with just a 2% drop in the middle-class population, the research found.
Meanwhile, the number of people who are poor in India (with incomes of $2 or less a day) is estimated to have increased by 75 million because of the Covid-19 recession, accounting for nearly 60 per cent of the global increase in poverty.
The report uses World bank projections of economic growth to determine the impact of the Covid-19 pandemic on the incomes of Indians. The lockdown resulting from the coronavirus pandemic caused the shutting down of businesses, lost jobs, falling incomes and taking the Indian economy into a deep recession.
Perhaps not surprisingly, media reports in India point to a spike in participation in its rural employment programme - originally intended to combat poverty in agricultural areas - as the many who have lost jobs in the reeling economy seek work. The number now participating is setting record highs in the programme's 14-year history, Pew Research said.
Before the pandemic, it was anticipated that 99 million people in India would belong in the global middle class in 2020. A year into the pandemic, this number is estimated to have been 66 million, cut by a third.
Meanwhile, the number of poor in India is projected to have reached 134 million, more than double the 59 million expected before the recession. The poverty rate in India likely rose to 9.7 per cent in 2020, up sharply from the January 2020 forecast of 4.3 per cent. The report estimated an increase of around 6 crores to 13.4 crore poor people. Notably, there has also been a spike in MGNREGA members giving proof that the poor were struggling to find work.
Most people in India were in the global low-income tier in 2020, earning up to ₹150 to 700 per day. Some 1.20 billion people in India were expected to be in this tier in 2020 before the pandemic, accounting for 30 per cent of the world's low-income population. This number is projected to have dropped to 1.16 billion as the Covid-19 downturn pushed more people into poverty, suggests Pew’s projections. While the middle-income group has possibly contracted from almost 10 crores to just 6.6 crores, on the other hand, the richer population group that get over ₹1,500 a day also fell almost 30% to 1.8 crore people.
In contrast, China’s middle class will likely witness a tiny slip of just 1 crore and the number of poor people may have gone up to 10 lakh, as per the report.
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For both India and China, the drop in living standards in 2020 is a sharp departure from recent trends. From 2011 to 2019, the number of poor 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 revised figures - 75 million - claws back several years of progress on this front for India. The retreat of India's middle class in 2020 - by 32 million - also figures large in the context of the addition of 57 million to this income tier from 2011 to 2019.
Warning that the situation, in reality, could be worse than estimated. The report explains, “The methodology in this analysis assumes that incomes change at the same rate for all people. If the COVID-19 recession has worsened inequality, the increase in the number of poor is likely greater than estimated in this analysis, and the decrease in the number who are high income is likely less than estimated. The middle class may have shrunk by more than projected,” it added.