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Home » Economy » World’s biggest lockdown to push 12 million Indians into extreme poverty: Reports

World’s biggest lockdown to push 12 million Indians into extreme poverty: Reports

A World Bank report found India had been making significant progress and was close to losing its status as the country with the most poor citizens.

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World’s biggest lockdown to push 12 million Indians into extreme poverty: Reports

Some 122 million Indians were forced out of jobs last month alone, according to estimates from the CMIE. Daily wage workers and those employed by small businesses have taken the worst achievement. These include hawkers, roadside vendors, workers employed in the construction industry and many who eke out a living by pushing handcarts and rickshaws.

For Prime Minister Narendra Modi, who came to power in 2014 promising to lift India’s poorest citizens out of poverty, the fallout from the lockdown brings with it significant political risk.

He won an even larger second term majority last year on the strength of his government’s popular social programs that directly targeted the poor, such as the provision of cooking gas cylinders, power and public housing. The breadth and depth of this renewed economic pain will only increase the pressure on his government as it works to steer the country’s economy back on track.

“Much of the Indian government’s efforts to mitigate poverty over the years could be negated in a matter of just a few months,” said Ashwajit Singh, managing director of IPE Global, a development sector consultancy that advises several multinational aid agencies. Noting that he did not expect unemployment rates to improve this year, Singh said: “More people could die from hunger than the virus.”

Singh points to a United Nations University study estimating 104 million Indians could fall below the World Bank-determined poverty line of $3.2 a day for lower-middle-income countries. This will take the proportion of people living in poverty from 60% — or 812 million currently, to 68% or 920 million — a situation last seen in the country more than a decade ago, Singh said.

A World Bank report found India had been making significant progress and was close to losing its status as the country with the most poor citizens. The impact of Modi’s lockdown risks reversing those gains.

The World Bank and the CMIE estimates were published in late April and early May respectively. Since then the situation in India has only become grimmer, with harrowing images of people making desperate attempts to reach their villages, on crowded buses, the flatbeds of trucks and even on foot or on bicycles dominating media coverage.

The Rustandy Center for Social Sector Innovation at the University of Chicago Booth School of Business analyzed the unemployment data from the CMIE, collected through surveys covering about 5,800 homes across 27 Indian states in April.

Researchers found rural areas were the hardest hit, and the economic misery was the result of the lockdown, rather than the spread of infections in the hinterland. More than 80% of Indian households had experienced a drop income and many won’t survive much longer without aid, they wrote in a report.

The government has promised cheap credit to farmers, direct transfer of money to the poor and eased access to food security programs — but these help people who have some documentation, which many of the poorest don’t. With millions of impoverished Indians now in transit across the country, the food security situation is dire — news reports are emerging of people foraging through piles of rotting fruit or eating leaves.

India’s economy was already growing at its slowest pace in over a decade when the virus struck. The lockdown, which came into effect on March 25, has hammered it, stalling business activity and putting a lid on consumption, pushing the economy to what may be its first full-year contraction in more than four decades.

It’s dire enough to warrant the country exiting its lockdown, as it has been doing incrementally since May 4, even as its infections are surging. India is now Asia’s virus hotspot with infections well over 1,50,000.

Modi, who has come under criticism for the pain inflicted on India’s poor, has said his government will spend $265 billion or about 10% of its GDP to help Asia’s third-largest economy weather the pandemic’s fallout. But experts say only a part of it is direct fiscal stimulus, and probably smaller than the total damage done to the economy during the lockdown period.

“What is especially worrying is the government’s response,” said Reetika Khera, an economics professor at the Indian Institute of Technology in Delhi. “The epidemic will magnify existing — and already high — inequalities in India.”

Still, the economic measures aren’t going to kick in for some time and industry will likely struggle to restart because of the flight of labour from India’s industrial hubs.

“There are no factories or industries here, there are just hills,” said Surendra Hadia Damor, who had walked nearly 100 kilometers from Ahmedabad, Gujarat before a voluntary organization drove him to his village in Rajasthan. “We can survive for a month or two and then try and find a job nearby — we will see what happens.”

And as the harsh Indian summer unfolds more pain lies in store in the villages now dealing with returning migrant workers.

40-day lockdown to inflict $320bn loss on Indian economy: Report