Poverty in India might have doubled due to the Covid-19 pandemic while the middle class being shrunk by a third

Last updated on March 25th, 2021 at 09:19 am

An analysis by the Pew Research Center has established that 2020’s Covid-19 pandemic driven recession may have reduced India’s middle class by a third while the poor people number in country, that is the people who earn less than INR 150 per day, might have doubled up. 

The study also established in comparison that Chinese middle class population shrunk by just 2% and the average incomes of Chinese population remained largely unaffected. 

The study by Pew Research Centre was released on Thursday and uses economic growth projections made by World Bank to establish impact of pandemic on populations’ incomes. The lockdown as result of coronavirus pandemic led to job losses, reduced incomes, closed down businesses and a plunge in Indian economy. 

The report defined middle class people in India having incomes of around of INR 700-1500 per day. Report said, “The middle class in India is estimated to have shrunk by 3.2 crore in 2020 as a consequence of the downturn, compared with the number it may have reached absent the pandemic.”

“Meanwhile, the number of people who are poor in India (with incomes of $2 or less a day) is estimated to have increased by 7.5 crore because of the Covid-19 recession. This accounts for nearly 60% of the global increase in poverty,” the report added. 

The massive spike in number of people participating in MGNREGA simply indicates the large number of poor people that are struggling to find work, the report added. A large majority of India’s population falls into the low income category, earning approximately INR 150 to 700 per day. Pew’s projections insinuate that this group shrank from 119.7 crore to 116.2 crore per day, with 3.5 crore people dropping further below the poverty line.

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Pew’s study further implied middle income group might have decreased from around 10 crore to just 6.6 crore. Richer population earning more than INR 1,500 a day also fell by 30% to 1.8 crore people.

Pew further warned that situation might actually be even worse than estimated. “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.