The annual income of the poorest 20% of Indian households, constantly rising since 1995, nose-dived 53% in the pandemic year 2020-21 from their levels in 2015-16. The richest 20%, in the same five-year period, saw their annual household income grow 39%. This reflects the pandemic’s sharp contrasting economic impact on the bottom of the pyramid and the top.
This has been highlighted by the latest round of ICE360 Survey 2021, conducted by a Mumbai-based think tank – People’s Research on India’s Consumer Economy. The survey, which was conducted between April and October 2021 spread over 120 towns and 800 villages across 100 districts, covered 200,000 households in the first round and 42,000 households in the second round.
The survey highlighted that the pandemic brought economic activity to a standstill for at least two quarters in 2020-21. This resulted in a 7.3% contraction in GDP in 2020-21. The pandemic hit the urban poor the most and eroded their household income. The survey shows that while the poorest 20% witnessed the biggest erosion of 53%. The second-lowest quintile, that is the lower middle category, recorded a decline in their household income of 32% in the same period. The survey said that while the quantum of erosion reduced to 9% for those in the middle-income category, the top two quintile – upper-middle (20%) and richest (20%) – had their household income rise by 7% and 39%, respectively.
It pointed out that the richest 20% of households have, on average, added more income per household and more pooled income as a group in the past five years than in any five-year period earlier since liberalization. But the opposite has happened for the poorest 20% of households. They have never seen a decrease in household income since 1995. however, in 2021, they suffered a knockout because of COVID-19 pandemic. They earned half as much as they did in 2016.
Rajesh Shukla, MD and CEO, PRICE, said as the Finance Minister is finalizing her Budget proposals for 2022-23 to give shape to a roadmap for economic revival of the country, a K-shaped policy is needed to address the two ends of the spectrum. Rama Bijapurkar, Founder of PRICE and one of the authors of the survey, said the country is back to a tale of two Indias. “The good news is that we have built a far more efficient welfare state for the disbursal of benefit be it DBT or vaccination for all.”
Shukla said the data reflects that casual labor, petty trader, household workers among others in Tier 1 and Tier 2 cities got hit most by the pandemic. “During the survey, we also noticed that while in rural areas people in the lower-middle-income category have moved to a middle-income category, in the urban areas the shift has been downwards from Q3 to Q2.”
The survey highlighted that rise in the poverty level of the urban poor has pulled down the household income of the entire category down.