Opinion

Lockdown is pushing up India’s poverty levels

G Chandrashekhar | Updated on June 15, 2020 Published on June 15, 2020

Income and job losses mean millions are joining the ranks of the poor. Govt must provide a safety net for those on the brink

The coronavirus pandemic and national lockdown since March 25 has unleashed an unprecedented medical, social and economic catastrophe. The whole country has been in a state of forced inactivity. Businesses are shuttered, jobs and incomes have been lost and a humanitarian crisis in the form of tens of millions undertaking reverse migration — moving from their places of work in cities to their native villages — has ensued.

This crisis has further exacerbated the already weak and falling economic growth over the last several quarters. Loss of income for the principal earner of the family means that his dependants too will be languishing without financial support.

Tens of millions of families in different regions of the country are facing the spectre of poverty.

The United Nations in a report published last year estimated the number of poor people in India at a humongous 364 million, which is 28 per cent of the population. Now, the crisis created by the combination of Covid-19 pandemic, national lockdown and job losses means that many more millions are joining the ranks of the poor.

A recent World Bank blog on ‘Impact of Covid-19 on global poverty’ has warned about more people being pushed into poverty. It is estimated that the pandemic will push at least 71 million people globally into poverty and the number can go up to 100 million in a worst-case scenario. The international poverty line is measured as income of at least $1.90 a day — that is, about ₹150 at the current exchange rate.

Challenging year

So, 2020 is going to be an extremely challenging year not only for governments and businesses but also for those on the borderline of poverty. To stay afloat (that is to stay barely above the poverty line), those on the borderline will have to find jobs and earn incomes.

So, fiscal, monetary and administrative policies have to be designed in a way that provides a safety net for those at the brink. Lifting people out of poverty ought to be on top of the government’s priority. It is not going to be easy though.

Economic growth and equitable distribution of growth benefits (growth with equity and inclusiveness) alone can help lift people out of poverty. India runs the risk of adding tens of millions to the ranks of the poor.

India’s per capita growth rate in real GDP is already low, and is likely to worsen.

Three countries — Nigeria, India and Congo — are home to more than a third of the world’s poor. India may see larger increase in the number of poor as a result of Covid-19.

Uncertainty ahead

By their very nature, poverty projections carry a lot of uncertainty; but the risk of more joining the ranks of the poor in 2020 is very real. What will happen in 2021 and beyond comes with even more uncertainty as growth in 2021 will depend on how effectively the pandemic is contained and how rapidly economic activity picks up momentum.

Governments and central bankers around the world have announced massive stimulus packages and ultra-loose monetary policies. However, these policies have to be implemented appropriately to maximise the desired outcomes. Structural imbalances that have developed in recent months mean the recovery is likely to be painfully slow.

According to World Bank, Covid-19 has triggered the deepest global recession in decades. The global economy is set to shrink by 5.2 per cent this year due to the pandemic. Per capita incomes are set to decline by 3.6 per cent which will tip millions of people into extreme poverty this year.

Political will

There will be contractions across a vast majority of emerging markets and developing economies. It will also do lasting damage to labour productivity and potential output.

The Indian economy too is sliding into negative territory. Do we have the political will, economic strength and social resilience to ride out the storm? Time alone will tell. While economic growth is critical, the humanitarian crisis engulfing the country deserves focussed attention.

As the World Bank points out, the immediate priorities are to alleviate human costs and attenuate the near-term economic losses.

The writer is a policy commentator and commodities market specialist

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Published on June 15, 2020
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