3.2 Crore People Pushed Out of the Middle Class in India – Has India’s “5 Trillion Dollar Economy” Dream Been Shattered?

Pandemics drag economies down and bury them into the ground if governments do not act promptly: this is a truth known to world economics. The COVID-19 pandemic that befell in 2019 has proven this to the T. According to a report that came out on the 19^th of March, 2021, a whopping 3.2 crore people were pushed out of the middle-class economic bracket in India. This means that while 3.2 crore people were pushed into poverty, the employment that had been built over a decade and a half has also been wiped out.

The number of Indians in the middle class, or those earning between Rs. 500 and Rs. 1500 a day, shrank by about 3.2 crores, compared with the number that could have been reached in the absence of a pandemic, the United States-based Pew Research Centre said. A year into the pandemic, the numbers of those in the middle class has shrunk to 6.6 crores, down a third from a pre-pandemic estimate of 9.9 crores, it added. “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 Pew Research Centre said, citing the World Bank’s forecasts of economic growth.

Nearly 5.7 crore people had joined the middle-income group between 2011 and 2019, it added. In January last year, the World Bank forecast almost the same level of economic growth for India and China, at 5.8 percent and 5.9 percent respectively, in 2020. But nearly a year into the pandemic, the World Bank revised its forecast this January, to a contraction of 9.6 percent for India and growth of 2 percent for China.

India faces a second wave of infections in some industrial states, after a decline in cases until early this year, and its tally of 1.15 crore cases is the highest after the US and Brazil. Prime Minister Narendra Modi’s government projects a contraction of 8 percent in the current financial year, which ends this month, before economic growth picks up to about 10 percent in the next financial year. The Pew centre estimated the number of poor people, with incomes of Rs. 150 or less each day, has gone up by 7.5 crores as the recession brought by the virus clawed back years of progress. A rise of nearly 10 percent in domestic fuel prices this year, job losses and salary cuts have further hurt millions of households, forcing many people to seek jobs overseas.

First Shrink in the Global Middle Class in Decades

Meanwhile, the global middle class shrank for the first time in decades last year because of the Covid-19 pandemic, with almost two-thirds of households in developing economies reporting they suffered a loss in income, according to two new estimates based on World Bank data. In the study published Thursday, researchers at Pew Research Center found that the ranks of the global middle class – those earning $10-$50 per day – fell by 90 million people to almost 2.5 billion last year. That helped swell the ranks of the poor, or those living on less than $2 a day, by 131 million, Pew estimated.

The Pew data on the middle class actually understates the impact because an estimated 62 million high-income people, or those earning $50 or more per day, dropped into the middle tier as a result of the pandemic, said Rakesh Kochhar, the study’s author. That meant the number of people who went into the crisis as members of the global middle class and fell out actually topped 150 million last year, according to Pew’s estimates — more than the population of France and Germany combined. “In modern history it is hard to come up with examples where you saw such a sharp downturn in global economic growth,” Kochhar said in an interview.