Relapse of pandemic creates problems for Indian middle class

NEW DELHI – Ram Babu left his village for the Indian capital New Delhi in 1980 to clean the cars. Soon he learned to drive and got a job as a tourist bus driver. Decades later, he started his own business, Madhubani Tours and Travels.

In March 2020, a strict national lockdown to fight the coronavirus pandemic froze economic activity overnight. Babu’s business collapsed and he brought his family back to their village.

“Since March of last year, we haven’t earned a single rupee,” he said. “My three buses have been standing still for over a year. We are completely broken.

India’s economy was on the verge of recovering from the first pandemic shock when a new wave of infections swept through the country, infecting millions, killing hundreds of thousands and forcing many to stay at home . Cases are dwindling now, but the outlook for many Indians is considerably worse as paid jobs disappear, incomes decline and inequality increases.

Decades of progress in reducing poverty are at risk, experts say, and getting growth back on track depends on the plight of the country’s sprawling middle class. It is a powerful and diverse group, ranging from wage earners to owners of small businesses like Babu: several million people struggle to keep their hard-earned earnings.

The outbreak of the pandemic triggered the worst downturn since the Great Depression of the 1930s, and as it gradually abates, many economies are rebounding. The World Bank forecasts global growth of 5.6% for 2021, the best since 1973.

India’s economy contracted 7.3% in the fiscal year that ended in March, worsening from a collapse that reduced growth to 4% from 8% in both years preceding the pandemic. Economists fear that there may not be a rebound similar to those seen in the United States and other major economies.

“The coronavirus is the latest in a series of blows to the Indian economy in recent years,” said Mahesh Vyas, director general of the Center for Monitoring the Indian Economy (CMIE). “But the shocks caused by the virus have had a very debilitating effect on the economy and I’m afraid it will last a long time.”

The economy was one of the fastest growing when Prime Minister Narendra Modi suddenly withdrew most of India’s currency from circulation in 2016, targeting corruption. A major tax reform whose flaws are still being ironed out followed. Modi’s flagship program, Make in India, to boost manufacturing has failed and unemployment has risen.

The poor suffer the most from the pandemic. But this is the first time in decades that India’s middle class has suffered such a big blow, Vyas said.

After 40 years of hard work, the owner of the travel agency Babu was making around $ 2,000 a month. Business was going so well that he took out a loan to buy his third tour bus.

In May 2020, he used one of these buses to bring his wife and three children back to the village of Bhugol in Bihar, one of India’s poorest states. He could no longer afford the rent on their modest one-bedroom apartment in New Delhi.

Estimates of the size of India’s middle class range from 200 million to 600 million, but all experts agree that its prosperity is crucial to revive the economy.

“These are the main consumers – if their consumption does not pick up, growth will continue to be slow and the economy will not recover,” said economist Arun Kumar.

An analysis by the Pew Research Center, published in March, estimates that 32 million Indians have been forced out of the middle class by the pandemic.

The report defines the middle class as people earning $ 10 to $ 20 a day. He estimated that the number of poor people in India – those with an income of $ 2 or less a day – has increased by 75 million as a result of the crisis.

To cushion the impact, the government provided $ 266 billion in additional spending in May 2020, including more than $ 40 billion to help small and medium-sized businesses through measures such as unsecured loans from banks. An additional $ 36 billion was pledged in November to help create jobs, boost consumer spending and support manufacturing, agriculture and exports.

But for many, the measures were not enough. No relief has yet been announced for the tourism sector, so Babu still pays business taxes on its buses.

Last year’s lockdown destroyed more than 120 million jobs, according to the CMIE. Many returned shortly after the lockdown ended in June, but the rebound was mostly in low-paying jobs in industries like agriculture and construction.

Economists worry about a longer-term decline in salaried jobs, of which 12.5 million remain lost, according to CMIE data, and the plight of small and medium-sized enterprises that are the backbone of the large informal economy from India.

Many people have had to settle for much more precarious jobs than before, according to the State of Working India 2021 report by researchers at Azim Premji University.

“What this indicates is that people in distress have to resort to any type of job, even if it pays significantly less than what they earned and comes with less protections,” said said Rosa Abraham, one of the report’s main authors. “It is clear that the recovery in employment that we are currently seeing is characterized to a large extent by much more informality.

This is true for Bijender and Kanika Gautam, owners of Ultra Bodies Fitness Studio on the outskirts of New Delhi.

Gyms were among the last types of venues allowed to reopen from the 2020 lockdown and have been closed again in recent outbreaks. The Gautams had thrived on the income of their 100 gym members, earning enough to rent their two-story space and pay for five trainers. Today, they rely on anything they can muster to offer fitness workouts online and are struggling to afford the rent and tuition for their two children.

“Before, we didn’t have to think twice about spending money when we went to the market with our kids or went out to eat,” Bijender said. “But now the situation is so bad that we are just trying to survive. We don’t know if we’ll be able to keep our business, ”he said.

On a larger scale, such large-scale setbacks can undermine confidence and future growth, CMIE’s Vyas said.

“You need that aspiration or that motivation to go to college, find a good job, save money to buy a house – you need that ambition to make your life better than your parents’. It’s what makes the economy thrive, and it’s a crucial thing that has taken a hard hit, ”he said.

Babu says he fears his life is now turning upside down. He had hoped that his youngest daughter, aged 13, could become a pilot. Now that he has had to remove her from his school in New Delhi, it seems impossible.

His dreams of buying a house in the city have been dashed by loans he can no longer repay, he said on a phone call from his village.

“I’m not used to living in the village now. Everything we own, everything we are, everything is in Delhi, ”he said. “I should have kept working as a driver, maybe I wouldn’t be in this mess.”


Associated Press reporters Rishabh R. Jain and Neha Mehrotra contributed to this report.

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