Poverty after Covid-19

News: Recently, a new research conducted by Pew Research Center has found that the coronavirus pandemic has pushed about 32 million Indians out of the middle class and increased poverty in the country. The report is based on an analysis of World Bank data. Pew Research Center is a nonpartisan fact tank that informs the public about the issues, attitudes and trends shaping the world.

Indian Scenario:

  • The poverty rate in India likely rose to 9.7% in 2020, up sharply from the January 2020 forecast of 4.3%.
  • From 2011 to 2019, the number of poor in India was estimated to have reduced to 78 million from 340 million.
  • In 2020, the number increased by 75 million. Poor are People with incomes of USD 2 or less a day.
  • Increase in India accounts for nearly 60% of the global increase in poverty.
  • Record increase in Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) participants as proof that the poor were struggling to find work.
  • The middle class in India is estimated to have shrunk by 3.2 crore in 2020.
  • Middle Class: Includes people with incomes of approximately Rs. 700-1,500 or USD 10-20 per day.
  • The middle income group is likely to have decreased from almost 10 crore to just 6.6 crore.
  • The vast majority of India’s population fall into the low income group.
  • This group shrank from 119.7 crore to 116.2 crore per day, with about 3.5 crore dropping below the poverty line. Low Income Group includes people earning about Rs.150 to 700 per day.
  • The richer population also fell almost 30% to 1.8 crore people. Rich Includes the people who earn more than Rs.1,500 a day.
  • Like India, China has a large population of around 1.4 billion people. But the pandemic’s effect on poverty was much smaller in China. It was the only major economy to grow in 2020 and that has helped poverty levels to remain “virtually unchanged”.
  • In January 2021, the International Monetary Fund in its World Economic Outlook Report, estimated India’s economy to contract 8% in the Financial Year (FY) 2020 while China’s economy was expected to expand by 2.3% in 2020.
  • China’s middle class is likely to see a miniscule dip of just one crore, while the number of poor people may have gone up by 10 lakh.

Global Scenario:

  • The global poverty rate also increased to 10.4% last year after witnessing a steady decline over the years.
  • It was previously expected that the poverty rate would decrease to 8.7% in 2020.
  • The number of ‘global poor’ are estimated to have increased to 803 million in 2020, which is a significant increase from 672 million, the pre-pandemic prediction.
  • From 2011 to 2019, the middle-class population globally had increased to 1.34 billion from 899 million. Further, it was expected to increase by 54 million annually on average.
  • South Asia saw the greatest reduction in the number of middle class and the largest ‘expansion’ in poverty in 2020. This could be attributed to South Asia experiencing sharp decrease in economic growth during the pandemic.

Factors:

  • The lockdown triggered by the pandemic resulted in shut businesses, lost jobs and falling incomes, plunging the Indian economy into a deep recession.
  • Sharp rise in global poverty was owing to the fact that many under the low-income tier prior to the pandemic were living on the margin of poverty.

Impact:

  • India and China also account for more than a third of the global population, with about 1.4 billion people each, the course of the pandemic in these two countries and how each recovers will have a substantial effect on changes in the distribution of income at the global level.
  • It claws back several years of progress on the economic front.
  • At least 271 million people were lifted out of multi-dimensional poverty between 2005-06 and 2016-17, claimed India’s Voluntary National Review (VNR) of Sustainable Development Goals (SDG).