Covid-19 pushes India's middle class towards poverty

Shuttered shops are seen in Mumbai after the state government imposed a lockdown, on April 15, 2021.
Shuttered shops are seen in Mumbai after the state government imposed a lockdown, on April 15, 2021.PHOTO: AFP

NOIDA (NYTIMES) - Mr Ashish Anand had dreams of becoming a fashion designer. A former flight attendant, he borrowed from relatives and poured his US$5,000 (S$6,700) life savings into opening a clothing shop on the outskirts of Delhi selling custom-designed suits, shirts and pants.

The shop, called the Right Fit, opened in February 2020, just weeks before the coronavirus struck India. Prime Minister Narendra Modi abruptly enacted one of the world's toughest nationwide lockdowns to stop it. Unable to pay the rent, Mr Anand closed the Right Fit two months later.

Now Mr Anand, his wife and his two children are among millions of people in India in danger of sliding out of the middle class and into poverty. They depend on handouts from his aging in-laws. Khichdi, or watery lentils cooked with rice, has replaced eggs and chicken at the dinner table. Sometimes, he said, the children go to bed hungry.

"I have nothing left in my pocket," said Mr Anand, 38. "How can I not give food to my children?"

Now a second wave of Covid-19 has struck India, and the middle-class dreams of tens of millions of people face even greater peril. Already, about 32 million people in India were driven into poverty by the pandemic last year, according to the Pew Research Centre, accounting for a majority of the 54 million who slipped out of the middle class worldwide.

The pandemic is undoing decades of progress for a country that, in fits and starts, has brought hundreds of millions of people out of poverty. Already, deep structural problems and the sometimes impetuous nature of many of Mr Modi's policies had been hindering growth. A shrinking middle class would deal lasting damage.

"It's very bad news in every possible way," said Dr Jayati Ghosh, a development economist and professor at the University of Massachusetts Amherst. "It has set back our growth trajectory hugely and created much greater inequality."

The second wave presents difficult choices for India and Mr Modi. India on Friday (April 16) reported more than 216,000 new infections, another record. Lockdowns are back in some states.

With work scarce, migrant workers are packing into trains and buses home, as they did last year. The country's vaccination campaign has been slow, though the government has picked up the pace.

Yet Mr Modi appears unwilling to repeat last year's draconian lockdown, which left more than 100 million Indians jobless and which many economists blame for worsening the pandemic's problems.

His government has also been reluctant to increase spending substantially like the United States and some other places, instead releasing a budget that would raise spending on infrastructure and in other areas but that also emphasises cutting debt.

The Modi government has defended its handling of the pandemic, saying vaccinations are making progress and that signs point to an economic resurgence.

People sitting in the observation area after getting their Covid-19 vaccination shots, in Mumbai, India, on April 16, 2021. PHOTO: EPA-EFE

Economists are forecasting a rebound in the coming year, though the sudden rise in infections and India's slow vaccination rate - less than 9 per cent of the population has been inoculated - could undermine those predictions.

The heady growth forecasts feel far away for Ms Nikita Jagad, who was out of work for over eight months.

Ms Jagad, a 49-year-old resident of Mumbai, stopped going out with her friends, eating at restaurants and even taking bus rides, unless the trip was for a job interview. Sometimes, she said, she shut herself inside her bathroom so her 71-year-old mother wouldn't hear her crying.

Last week, Ms Jagad got a new job as a manager at a company that provides housekeeping services for airlines. It pays less than US$400 a month, roughly half her previous salary. It could also be short-lived: The state of Maharashtra, home to Mumbai, announced lockdown-like measures this week to stop the spreading second wave.

If she loses her new job, Ms Jagad is still the only support for her mother. "If something happens to her," she said, "I don't have the money to even admit her in the hospital."

India's middle class may not be as wealthy as its peers in the United States and elsewhere, but it makes up an increasingly potent economic force. While definitions vary, Pew Research defines middle-class and upper-middle-class households as living on about US$10 to US$50 a day.

The kind of income could give an Indian family an apartment in a nice neighbourhood, a car or a scooter, and the opportunities to send their children to a private school.

Roughly 66 million people in India meet that definition, compared with about 99 million just before the pandemic last year, according to Pew Research estimates. These increasingly affluent Indian families have drawn foreign companies like Walmart, Amazon, Facebook, Nissan and others to invest heavily in a country of aspirational consumers.

India's middle class is central to more than the economy. It fits into India's broader ambitions to rival China, which has grown faster and more consistently, as a regional superpower.

To get there, the Indian government may need to address the people the coronavirus has left behind. Household incomes and overall consumption have weakened, even though the sales of some goods have increased recently because of pent-up demand.

Many of the hardest hit come from India's merchant class - the shopkeepers, stall operators or other small entrepreneurs who often live off the books of a major company.

"India is not even discussing poverty or inequality or lack of employment or fall in incomes and consumption," said Mr Mahesh Vyas, the chief executive of the Centre for Monitoring of the Indian Economy. "This needs to change first and foremost," he said.

Most Indians are "tired" and "discouraged" by the lack of jobs, said Mr Vyas, especially low-skilled workers.

"Unless this problem is addressed," he said, "this will be a millstone that will hold back India's sustained growth."