Today, the nation encounters bigger challenges as the catastrophic pandemic threatens achieved progress in poverty eradication while deepening existing inequalities and uncovering the fragility of the systems. A new study by the Pew Research Center estimates that the middle class may have shrunk by 30% and ranks of the poor risen by 7.5 crore. The pandemic-led lockdown measures resulted in shut businesses and lost jobs sinking the Indian economy. However, the brunt of jobs and income loss has been disproportionately borne by the lower-income population.
India accounts for nearly 60% of the global increase in poverty in 2020. The Pew analysis shows that the poverty rate in India likely rose to 9.7% in 2020. From 2011 to 2019, the estimated number of poor people were to drop from 340 million to 78 million. Had there been no pandemic, the number would have further fallen to 59 million last year. But now the analysis projects an upward trend touching 134 million people. Moreover, the poor working-class were forced to migrate on foot back home having lost all sources of likelihood.
The middle-class section – earning Rs 700-1,500 daily – also took a hit as it is estimated to have shrunk by 3.2 crore in 2020. India’s major population comes under the low-income group – people earning about Rs 150 to 700 per day. This group shrank from 119.7 crore to 116.2 crore per day, with about 3.5 crore plunging below the poverty line. The richer section also became prey to the pandemic-led recession falling almost 30% to 1.8 crore people. State reservation of jobs in India for the localised people adds to structural bottlenecks which further amplifies the numbers.
China complements India in terms of population size. However, the pandemic’s effect on poverty was much smaller in China. In January 2021, the International Monetary Fund estimated India’s economy to contract 8% in 2020-21 while China’s economy was expected to expand by 2.3% in 2020. Even the global poverty rate increased to 10.4% last year. Consequently, the intense rise in global poverty can be attributed to the fact that many under the low-income tier before the pandemic were living on the margin of poverty.
India has been slipping on hunger, poverty and income inequality indicators. The Global Hunger Index 2020 report ranked India at 94 (of 107 it mapped for the 2020 report). The significant and increasing divergence between the income gap of the rich and the poor sections appears to be the prime cause for inequality differences. With India and China together accounting for more than a third of the global population, the recovery of each will have a substantial effect on shifts in the distribution of income at the global level.
Some of the major initiatives which India has taken to combat the effects of the pandemic include Pradhan Mantri Garib Kalyan Yojana and Atmanirbhar Bharat Abhiyan. Yet, India should be doing more to realise results in real terms. Lacking the necessary financial resources, the state’s response has not matched up to the challenge. Fundamental emphasis should be laid upon recovery of the economy rather than indulging in frivolous issues concerning religion and the caste system. Policies should be designed to create a competitive startup ecosystem where small business firms can realise sustained growth.
It’s time. India should consider fixing a universal basic income in the post-Covid period through a combination of cash transfers, expansion of MGNREGA, and introduction of an urban employment guarantee scheme. It must focus to steadily improve the Human Development Index score. India has been ranked 139 out of 149 countries in the UN World Happiness Report 2021. It should strive to improve GDP per person and healthy life expectancy.
Milton Friedman puts forth his belief in low taxes: “I am in favour of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.” Debates should be addressed and be prominent around income and property taxes. The UN has also suggested introducing a wealth tax to finance the stimulus package.
India, in the long run, should invest and build efficient and equitable health, education, infrastructure and water resources. Capitalisation via skill-building and profitable resource expansion looks like the road ahead. India should be concerned about the loss in the economic momentum and make poverty eradication the prime agenda of discussion. Forthwith, developing a vaccine for poverty is what is required for India to walk on the path of economic prosperity.
Views expressed above are the author’s own.
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