User:RIshika Chadha

Impact of COVID on middle class family in India

When the novel coronavirus first emerged in the Chinese city of Wuhan last year, little did Indians imagine that the virus would hurt them so bad. Before the pandemic hit India, the country was already witnessing a surge in economic hardships — unemployment was at four-decade high, key indicators signaled a prolonged slowdown and companies were periodically laying off employees since mid-2019.All of the country’s existing economic problems accelerated sharply since April 2020 after the government announced a lockdown — the strictest in the world — on March 25. The pandemic came as a crushing blow to the dreams of millions of middle-class people in India and worsened India’s economic woes since early 2020.For decades, India’s vast middle-class population has been a key engine to drive the economy, contributing to the growth of several sectors. This correlation is the reason why the coronavirus pandemic has toppled the country’s growth trajectory.

Middle class incomes worst hit Key data sets on demand, employment and household incomes show how badly the virus-induced slowdown impacted India's middle class. Data from the Centre for Monitoring Indian Economy, a Mumbai-based think tank, showed that the incomes of India’s middle class have been worst hit by the pandemic — and it could worsen if the situation does not improve. While incomes of economically weaker sections suffered during the months of strict lockdown, middle income households took the biggest knock, added the report. The report went on to add that more than 50 per cent of households that earned more than Rs 5 lakh per annum in April-June 2019 reported a rise in household income. However, that has drastically changed in the corresponding period this year — only 15 per cent of such households have reported an increase in income. The trend continues to worsen dramatically with rising income levels. It drops to single digits for households with income over Rs 15 lakh per annual and then to zero for incomes between Rs 18 lakh and Rs 20 lakh per year. During the same period a year ago, more than 60 per cent households that earned more than Rs 10 lakh reported an increase in income. Simply put, income levels among middle class and upper middle-class groups have suffered the most due to the pandemic-induced economic slowdown. On an average, 33 per cent of households had reported an increase in income in the April-June 2019 quarter. But in the same quarter this year, only 6.7 per cent reported an increase. Every income group has suffered a big hit in terms of the proportion of households who report an increase in income. But, a greater proportion of relatively richer households have been hit by their incomes not growing,” said the report.

Unemployment poses greater challenge

Unemployment figures are also highest among the middle class, engaged in salaried jobs primarily in urban and semi-urban regions. A report recently highlighted that more than 1.8 crore salaried jobs — a whopping 22 per cent — were lost due to the ongoing economic crisis; nearly 50 lakh of them in July. A CMIE report from August 17 said, “Salaried jobs have taken the biggest sustained hit in the current Covid-19 induced lockdown. Salaried jobs were estimated at 86.1 million in 2019-20. This fell to 68.4 million in April 2020. By July 2020, their count had fallen further to 67.2 million,” it added. The fact that salaried unemployment has shown no signs of decline, it indicates that much of India’s middle class is facing an income crisis. Salaried jobs have traditionally been a favored option among India’s middle class due to higher job security and stable wages. While growth of salaried jobs saw stagnation in India since 2017-18, the coronavirus-induced economic disruption has led to a sharp drop in job numbers this year. It has directly impacted incomes of people employed in informal sectors and rural belts. With households incomes falling in urban areas, demand for key commodities and goods have seen a sharp decline in India. The lack of demand has put many companies in a precarious position leaving them no choice but to reduce the size of workforce and shut down plants. The lower income levels of India’s middle class have severely impacted cash flow into the informal sector, leaving demand in doldrums. Loss of these urban salaried jobs is therefore likely to have a particularly debilitating impact on the economy besides causing immediate hardship to middle class households,” CMIE said. According to data, salaried employment in sectors like tourism and hospitality have taken the hardest hit — not just in terms of jobs losses but also salary cuts.

Middle class key to India’s economic recovery

The middle-income group in India is one of the largest source employment and cash flow for economically weaker sections, making them an integral part of India’s recovery. In the present situation, nothing seems to be working in favor of the middle-income group, with hardly any help from the government besides the loan moratorium. Though, many argue that the middle class needs a lot more than just a moratorium if the country seeks faster revival of economy. A stronger middle class would boost demand or push spending. The economic package announced by the government focused on economically weaker sections of society. They needed urgent help. However, for a holistic recovery of Indian economy, the government needs to find ways to support the middle-income families, who now find themselves in a limbo.