March 18 article on the website of the Pew Research Center: India’s middle class shrinks during the new corona epidemic; China’s shrinks less so.
The economic crisis caused by the new epidemic is having a major impact on living standards in countries around the world, causing millions of people to lose their middle-class living standards and even to fall into poverty. But the economic impact of the new epidemic on India and China has been very different. Given that the combined population of India and China represents about 1/3 of the global population, each country has about 1.4 billion people. How these two countries respond to the epidemic, and how they recover from it, will have a significant impact on changes in the global primary income distribution.
While India fell into a severe recession in 2020, China was able to prevent a contraction. in January 2020, the World Bank’s growth forecasts for India and China in 2020 were almost identical, at 5.8% and 5.9%, respectively. But in January 2021, a year after the outbreak, the World Bank revised its growth forecast for both countries, with India contracting by 9.6 percent and China growing by 2 percent.
Pew’s latest analysis reports that as a result of the economic downturn (compared to how fast India might have grown without the epidemic), the number of middle-class Indians is estimated to have fallen by 32 million in 2020, accounting for 60 percent of the total decline in the global middle class (those earning between $10.01 and $20 per day). At the same time, India’s poor (those earning less than $2 per day) are estimated to have increased by 75 million, accounting for nearly 60% of the global increase in the number of poor. However, the change in living standards for the Chinese was much smaller than in India.
The population of each country can be divided into five major groups: poor, low-income, middle-income, upper-middle-income (income between $20.01 and $50.00 per day) and high-income (income of $50.00 or more per day).
A comparison of how living standards in India and China changed during the epidemic will be more apparent when compared to their respective living standards prior to the epidemic. Before the epidemic, an estimated 99 million people in India were in the global middle class in 2020, but one year after the epidemic, that number is estimated to be only 66 million, a reduction of 1/3. Meanwhile, India’s poor are already projected to reach 134 million, more than twice as many as before the recession (59 million). The poverty rate in India is likely to rise to 9.7% in 2020, up from 4.3 percent projected in January 2020, a sharp increase. The majority of Indians are in the global low-income group. Before the epidemic, India should have had 1.2 billion people in that group in 2020, representing 30 percent of the global low-income population. But as the epidemic has turned more Indians into (much) poorer earners, the estimated number of low-income Indians has fallen to 1.16 billion.
And about 10 million people in China are estimated to have lost their middle-class standard of living during this economic downturn, a small percentage compared to the 504 million people who belonged to the middle-class group before the epidemic. Similarly, China’s low-income group increased from 611 million to 641 million during the epidemic, a relatively small number in terms of numbers.
Importantly, China accounts for 37% of the global middle-income group by 2020. between 2011 and 2019, China’s middle-income population increased by 247 million people, showing a considerable increase. At the same time, the upper-middle-income population almost quadrupled, from 60 million to 234 million. In both cases, China accounted for the vast majority of the global increase. Thus, the limited impact of the epidemic on China is also a source of relief to the entire world.
(N.B. The original article under reference can be seen here.)