Financial woes of India brought by last year’s coronavirus pandemic have significantly pushed about 32 million Indians, or those earning between $10 and $20 a day, out of the middle class.
The setback has undone years of economic gains, a report showed. In addition to millions of Indians being pushed out of middle class, a significant amount of job losses pushed millions into poverty. The report was released by the US based Pew Research Centre.
The report suggested the middle class to have shrunk to 66 million, down a third from a pre-pandemic estimate of 99 million.
Pew Research Centre stated that “India is estimated to have seen a greater decrease in the middle class and a much sharper rise in poverty than China in the COVID-19 downturn,”.
The world bank had forecasted in January last year, that India and China would chase the same economic growth at 5.8% and 5.9% respectively in 2020. But adverse effects of stringent lockdowns in Indian economy had led WHO to revise its growth estimate, estimating a 9.6% of contraction for India and 2% growth for China, in January 2021.
The Pew Centre has additionally estimated the number of poor people, with incomes of $2 or less each day, to have gone up by 75 million, undoing India’s economic gains in the past.
The report also had added that nearly 57 million people had joined the middle-income group between 2011 and 2019, thus loss of 32 million poses a grave setback for India. The woes of India continue to be exacerbated as India faces fresh wave of infections in some industrial states like Maharashtra. This comes after a decline in cases until early this year, and its tally of 11.5 million cases is the highest after the US and Brazil.
The rising fuel prices in the economy too had contributed to India’s middle-class demise. A rise of nearly 10 percent in domestic fuel prices this year, job losses and salary cuts had significantly hurt millions of households, forcing a substantial amount of people into poverty.
According to Indian authorities, India was projected to contract by 8% this current fiscal, that will end this month. India and many other international organizations have made optimistic predictions for Indian economy for the coming fiscal, with Moody’s predicting a growth of 12.6% in the coming fiscal.
Taking a look back, the pandemic has severely affected not only the Indian economy but also the world economy. This can be seen, as in January 2020, when reports of corona virus were emerging, the world bank had forecasted the global economy to expand by 2.5% but in January 2021, the predictions seemed quite gloomy and disheartening. World bank estimated that the world economy contracted by 4.3%.
With every nation reeling under economic loss, India has recovered immensely considering its peers. Various forecast now predict Indian economy to outdo its neighboring nations. IMF has predicted India to be the only economy that will record a double-digit growth this coming fiscal. This bounds to account for something. With diminishing living standards and swelling of poverty class, India’s growth budget will now have to crawl back to its previous equilibrium, which might stall its growth but not stop it.