In a world where we tend to polarize the rich and poor for the sake of political debate, the middle class often stands as an anomaly. Overlooked in research and judgements, the middle class has its own struggles that many times stay within their families. However, the problem begins when the middle class is also overlooked by policymakers. In their pursuit to create an equal yet developed society by uplifting the poor and benefiting off of the rich, the middle class that forms 28 per cent of India’s total population is often forgotten by those that call the shots at the top level. The middle class has often complained about the lack of schemes aimed at their betterment, and these complaints reached a fever pitch during the Covid-19 pandemic.
According to a Pew Research Center report, the Indian middle class shrank by 32 million people in 2020 due to the severe recession caused by the pandemic. This is a massive number and in fact, the Indian middle class lost more people during the pandemic than any other country in the world. China, comparatively, fared far better – with the number of people in the middle-class tier decreasing by only 10 million, while the poverty level remained virtually unchanged in 2020. Things look even bleaker when you factor in that according to the same research, India contributed the largest share – about 60 per cent – of the total global decline in the middle class during the pandemic. All of this points to the fact that the Indian middle class had to face a lot of hardships due to the pandemic. While excuses can be made that India’s vast population was to be blamed for this crisis, a comparison with China, which has a similar population to India, shows that they clearly handled their middle class better.
The rise of Covid-19 was devastating for India, which became the epicentre of the pandemic and an example of the ungodly capabilities of this minuscule predator. While the pandemic is usually seen as a health crisis, we must not forget that it was also an economic crisis. The global economy came to a standstill as widespread lockdowns and travel restrictions were placed. This had a profound impact on most enterprises, as a growing recession forced them to lay off a large number of employees. India was one of the worst affected countries by this. The number of people enrolled in MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) rose to an all-time high of 4.4 crore in June 2020, and remained at 2.6 crores in March 2021, compared to, on average, less than 2 crores before the pandemic – indicating large scale loss of jobs.
This severely hurt household economies of the middle class that were heavily reliant on their monthly salary to make ends meet and fulfil their requirements. According to an analysis on the NSSO and the All-India Debt and Investment Survey data, 50% of Indians have a maximum of 1500 rupees of savings and can last only one to two weeks in a no income situation. The economic situation was also made worse by lockdowns – which meant that families that were employed under the informal sector or relied on weekly or day to day wages were asked to stock up on commodities that they did not have the capacity to afford all at once with their limited savings. All these factors contributed heavily to the sharp decline in the average income of middle-class families during the pandemic.
With the pressure piling on middle-class families and a lack of an effective response from the centre in dealing with the immediate fallout from the disaster, the common population of the country began losing patience with the government. Throughout the pandemic, there were calls for increased subsidies, tax rebates and relief packages for those who had lost their jobs. The central government faced a lot of blame for the worsening economic situation of the middle class, and many believed that they could have done a lot more to lighten the burden on the people caused by the pandemic.
Examples from other countries like Germany highlight this – wherein the economy deftly manoeuvred through the first stage of the pandemic thanks to an unprecedented €750 Billion aid package that sought to prevent insolvencies, mass layoffs and a rise in poverty. It is essential that the Indian government takes all steps possible to improve conditions for the middle class – the backbone of the Indian economy. According to research conducted by OXFAM, unless the government takes prompt action, those that have fallen into poverty will not recover for more than a decade.
The last decade has shown the Indian government’s ability to lift its people out of poverty and into the middle class. From 2011 to 2019, the number of poor in India was estimated to have reduced to 78 million from 340 million. However, the pandemic reversed this trend and caused a major setback in India’s drive to create a larger and more prosperous middle class. In 2020 alone, the number of poor increased by 75 million which ruins several years of progress on this front for India. Moreover, the second wave has also been relentless in its assault on the bank accounts of the Indian middle class.
Unemployment, the single biggest cause of concern for people in the middle class through this pandemic, skyrocketed further in 2021. The centre for monitoring the Indian economy in May estimated that over 1 crore Indians have been rendered jobless because of the second wave of the pandemic and the unemployment rate had touched a 12-month high of nearly 12 per cent. 2020 and 2021 saw large-scale demands from the youth for the Prime Minister and the government to provide more jobs. The unprecedented loss of jobs led to a massive decline in income that pushed many middle-class families into poverty. If these families are not given support soon, then they might fall deeper and lose their way back into the middle class.
That being said, there are some positive signs for the future. In terms of the health situation, after a nightmarish second wave, the country has now begun recovering quite well. Very recently, India crossed the 1 billion vaccination doses mark. In an economic sense, the market is returning to a better place as more and more industries and services open up. As such, cash flow in the economy has been revived. Furthermore, the government has also taken multiple steps to empower MSMEs in the new Indian economic sphere. These small enterprises will create multiple job opportunities in the long term, and will also help the economy as a whole. The government has also launched policies to encourage banks to provide credit, which will help provide short term relief to the middle class.
There is no doubt that it will take a long time before the Indian middle class recovers completely from the negative impact of the pandemic. A struggling Indian economy leaves little hope in the hearts of most Indian citizens in need of support. However, India is certainly on the road to recovery. As the country opens up piece by piece, every sector of the Nation continues to function in tandem with the other to ensure an improvement in the overall health of the Indian economy.
Further positive signs can be found from the fact that the pandemic has caused many MNCs to relocate from China and find alternate markets to invest in. Many believe that India can make great use of this opportunity and provide a cheap workforce, massive consumer base and favourable trade policies to foreign investors to attract them. If the government can utilize these investments in the right way, and prioritize its middle class in its relief measures, then India can look forward to a much more prosperous workforce in the near future
References:
India today – news reports, websites and videos
The Print – articles and figures
The Times of India – reader’s blog