India falls further behind China in poverty-eradication

Pandemic pushes 75 million Indians into poverty: Pew Centre

Business

April 2, 2021

/ By / New Delhi

India falls further behind China in poverty-eradication

The number of poor in India has grown to 134 million, more than double the 59 million in 2020 (MIG photos/Aman Kanojiya)

Recent report by Pew Centre shows due to the impact of the coronavirus pandemic, India contributed to over 60 pc of rise in poverty across the world and the country has fallen much further behind its neighbour and rival China.

The alarm had been sounded long ago, yet the data emerging from Pew Research Centre’s report on the impact of the coronavirus pandemic on global poverty is shocking for the depth of the impact and the concentration in two large economies – India and China.

But between the two countries, the pandemic has hit India’s poor much more than those in China. The middle class in India, always much smaller than China, has been shrunk by 32 million people since the onset of the pandemic. This is about 60 pc of the total number of people across the world who have been pushed from middle class, from average daily incomes of USD 10-20, into poverty, which is defined as people earning less than USD 2 per day.

In India, the number of people who are poor has also risen by 75 million or about 60 pc of the global growth in poverty. The Pew Centre report points out that there has been a sharp jump in the rural employment guarantee scheme of the government, MGNREGS, as hundreds of millions of migrant workers lost their jobs in industries and urban areas and had to go back to their homes in villages. A report by Ministry of Rural Development of Government India says that from April 1, 2020 up to the last week of March 2021, the total number of people who had availed of MGNREGS had risen to a record 111.7 million, a heady growth of about 42 pc over the previous year.

Under the scheme, every rural household is guaranteed at least 100 days of paid employment if its adult members can do unskilled manual labour. The scheme was launched about 15 years ago amidst strong opposition and ridicule by the Bharatiya Janata Party but which has been praised as one of the strongest safety nets for the poorest in India and has since been implemented by many other countries to alleviate poverty.

With the poor, especially rural poor reeling under the impact of the pandemic, the scheme came as a saviour to millions of households. Government data says that the last fiscal year also saw a record number of rural households that completed 100-day employment. The number grew by 69 pc from 4.06 million to 6.9 million. And the average days of employment provided per household too went up from 48.4 days in 2019-20 to 51.51 days in 2020-21. Acknowledging the growth in MGNREGS numbers Pew Research Centre says that the spurt in the rural wage scheme was an outcome of the deep recession that India had plunged into, with a drop of 9.6 pc in the national GDP in 2020.

Pew Centre says that the size of Indian middle class was always much smaller than that of China

Gap with China widens

For the past several years India and its leaders have been competing with China across several domains, notably economic. Thus for a few years when Indian economy was supposed to be the fastest growing major economy in the world, it was widely tom-tommed by the Prime Minister Narendra Modi and all his ministers.

But since 2019, after a series of blunders by Modi and his bumbling finance minister Nirmala Sitharaman, China has reclaimed the top spot. The pandemic has ensured that India falls further behind China as the northern neighbour was the only major country to have actually grown in the year 2020.

Pew Centre says that the pandemic’s impact was much more modest in China than in India. It says that the largest impact in China was the estimated addition of 30 million people to the low-income tier, those earning between USD 2-10 a day. It says that the number of people in middle income and upper income remained practically the same. The report says that the contrast in how living standards have evolved in India and China amid the pandemic is starker in the context of where they stood prior to the pandemic.

Before the pandemic, India was said to have 99 million people belonging to middle class and now that number has fallen to 66 million, or about 33 pc lower. At the same time, the number of poor in India has grown to 134 million, more than double the 59 million in 2020 and hence the poverty rate in India likely shot up to 9.7 pc from 4.3 pc a year ago.

Pew Centre says that the size of Indian middle class was always much smaller than that of China. It says that even before pandemic, of the 3.6 billion people across the world that lived in the global low-income tier, roughly about 30 pc or 1.2 billion were in India. In China, about 504 million people were middle class and only about three million were poor before pandemic and there has been very marginal change in both these numbers. China accounted for 37 pc of the world’s middle-income population.

Pew Centre says that the pandemic cost India at least a decade of economic progress. For instance, India’s middle class grew by 57 million from 2011 to 2019 but fell by 32 million in just one year. Similarly, India had managed to cut the number of poor people from 340 million in 2011 to 78 million in 2019 and nearly doubled in 2020 when 75 million more Indians slid into poverty.

Missing government

One of the key reasons behind the catastrophic impact of the pandemic in India is a largely clueless government that struggled to deal with the mess made by its own half-baked measures that were meant to curb the spread of the pandemic. While initially living in denial about the pandemic for the first three months, Modi then imposed one of the harshest and longest lockdowns in the government that turned upside down the lives of over 1.3 billion people. The lockdown and absence of any established and effective social security net is one of the key reasons behind the stark numbers presented by Pew Centre.

And despite adequate early warnings about the severe impact that his measures had on the poor and lower middle class Indians, Modi failed to come up with measures to alleviate their sufferings and cushion the impact of the unprecedented economic shock due to his policies. Instead, all his ‘economic revival’ packages were aimed at boosting supply side of the economy even when dozens of leading economists had been crying hoarse about helping the demand side by increasing direct money transfers to the poor.

Subsequently, the government’s sole focus has been on carrying out aggressive privatisation by selling off State’s assets to a handful of his cronies or economic measures that selectively help large industry while ignoring the small and medium sized enterprises that employ 80 pc of the workforce and also account for 80 pc of the economic output. Little wonder then that India also saw the sharpest rise in inequality in the year 2020 and its performance in dozens of global reports on various social and human development indicators such as malnutrition or education collapsed.

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