The recent pandemic has significantly impacted the socio-economic landscape in India, pushing many out of their economic classes and increasing poverty ratios. A study conducted by the Pew Research Center revealed that about 32 million Indians were pushed out of the middle income bracket due to the repercussions of the COVID-19 crisis. This information raises important questions about the country’s economic health, the living conditions of the population, and future prospects for improvement.
Indian Socio-Economic Shifts
The poverty rate in India reportedly soared to 9.7% in 2020, from a forecasted 4.3% early in January 2020, according to the Pew Research Centre. This drastic increase occurred as a result of the pandemic’s impact on the country’s economy. Before the pandemic, poverty had been on a steady decline in India with the poor populace decreasing from 340 million in 2011 to an estimated 78 million in 2019. In contrast, last year, this number rose by 75 million.
The middle class also experienced a significant shrinkage due to the pandemic, with estimates revealing a reduction of approximately 32 million people in this category, taking the total from nearly 100 million down to 66 million.
Meanwhile, the low-income group, which forms the majority of India’s population, witnessed a contraction from approximately 1.19 billion to 1.16 billion, thus pushing nearly 35 million individuals below the poverty line.
The affluent class also bore the brunt of the pandemic with a 30% decrease, reducing the population of this economic bracket to 18 million.
The Sino-Indian Comparison
China, like India, has a substantial population of around 1.4 billion people. However, despite its similarly large population, China observed a lesser impact on poverty due to the pandemic. It managed to maintain virtually unchanged poverty levels, primarily due to its economic progress in 2020.
Comparatively, India’s economy was estimated to contract by 8% in the financial year 2020, whereas China’s economy expanded by 2.3%.
Global Economic Affects of the Pandemic
The pandemic’s influence wasn’t just restricted to India, it also affected the global poverty rate which increased to 10.4% after years of steady decline. The number of people considered ‘globally poor’ also escalated from a pre-pandemic estimate of 672 million to 803 million.
Between 2011 and 2019, globally, the middle class population grew to 1.34 billion from 899 million. However, this growth got curtailed due to the pandemic. More notably, South Asia saw the most significant reduction in middle-income class population and the largest increase in poverty.
Reasons and Effects
The soaring global poverty and reduction in the middle income group is attributed to declining economic activities caused by pandemic lockdowns leading to shut businesses, lost jobs and reduced incomes.
Countries like India and China account for over a third of the global population. Consequently, how these countries handle the pandemic and their recovery strategies will significantly impact the global distribution of income.
Reversing the Trend: Indian Mitigation Strategies
To mitigate and reverse the trend of increasing poverty and shrinking middle class as a result of the pandemic, India has instituted several measures including the Pradhan Mantri Garib Kalyan Yojana, Reserve Bank of India’s Covid-19 Economic Relief Package and the Atmanirbhar Bharat Abhiyan (Self-reliant India). These initiatives aim to provide relief to the economically underserved and stimulate economic activity and growth.