India’s middle class sees gains wiped out or hang by a thread

New Delhi, India – Last January, Aarti Prakash expanded her decade-old catering business by renting a kitchen in Chhatarpur, a commercial neighborhood in India’s capital New Delhi.

The 41-year-old mother of two used nearly all of her savings – 400,000 rupees ($5,372). She was excited to take her business to the next level. She specialised in Italian cuisine, perfecting it at home by learning to make fresh mozzarella and pasta, which was a hit with her clients. Catering orders for parties and functions had been placed months in advance.

But just two months later, India went into an abrupt nationwide lockdown as the threat of COVID-19 loomed around the world. As India was engulfed in its first COVID-19 wave, Prakash watched her business evaporate overnight. Orders were cancelled, she was forced to throw out her entire food stock, and she could no longer afford to rent the kitchen.

For the next few months, she and her family barely scraped by on meagre savings of 10,000 rupees ($134), and loans from family and friends. She withdrew her 15-year-old son from private school because she could no longer afford the fees. The financial stress also took a toll on her husband, who she says developed depression and diabetes after his garment business collapsed.

“All my dreams have fallen apart,” Prakash told Al Jazeera.

 

A year on, she is still struggling to make ends meet: “We’ve had so many losses, we are in a crisis,” she said.

She’s not alone. Millions of Indians who form the backbone of the country’s burgeoning middle class have seen their living standards plummet along with the economy’s fortunes.

India’s middle class shrunk by about 32 million people in 2020, accounting for 60 percent of people pushed out of the middle-income tier globally, according to the Pew Research Center.

This spring, a second, devastating wave of COVID-19 swept India – wiping out 22.7 million jobs in May and April, reports the Centre for Monitoring Indian Economy (CMIE). Though the job market started to rebound in June, the 7.8 million jobs created last month clawed back only a third of this spring’s losses.

In June, the government unveiled a slew of measures worth 6.28 trillion rupees ($84.3bn) to help India’s COVID-19 ravaged economy. But the bulk of that largess is in the form of loan guarantees and credit lines to hard-hit sectors like tourism and healthcare, rather than direct payments to struggling households.

“The government is not putting money in the hands of people who lost incomes and jobs,” said economist Arun Kumar. “You don’t spend when you’re not secure.”

And millions are struggling, have lost part or all of their income – and in many cases, also the means to earn a living. Medical bills have only compounded the financial hardships for many.

India is now staring at “the prospect of slower growth, rising poverty and a shrinking middle class” for the first time in a generation, observed Pratap Bhanu Mehta, the former president of the Centre for Policy Research, in a column for The Indian Express.

Middle-class dreams fall apart

The Pew Research Center defines India’s middle class as those earning between $10 and $20 a day. They are a diverse group, ranging from a taxi driver in Kochi to a trader in Ahmedabad.

Prior to COVID-19, the cohort’s strength was reflected by rising consumer spending. The McKinsey Global Institute even predicted that India would become the world’s fifth-largest consumer market by 2025.

“Middle class means rising above subsistence, but really it means moving out of poverty,” Jayati Ghosh, a development economist and professor at the University of Massachusetts Amherst, told Al Jazeera.

New members of the middle class, especially those from mid-sized and smaller cities, forged a common trajectory towards upward mobility by pursuing higher education and salaried jobs, with the hope that each generation would be better off than the one before it.

That was the path carved by 33-year-old Avinash Kotni, who works in the IT sector in Bangalore. Kotni’s father and uncle are small business owners who took over the family restaurant started by their father in the 1960s in the small eastern town of Cuttack, Odisha. They pushed their children to pursue engineering and a job in the white-collar workforce to escape the insecurity that comes with owning a small business.

But not all salaried jobs proved secure when COVID-19 first struck India. The economy haemorrhaged some 10 million of them, according to CMIE. And the precariousness of owning a small business was laid bare by lockdowns.

Kotni’s family restaurant barely functioned, operating on take-out and deliveries a few hours a day. Half the staff was laid off. Banks were demanding repayments on loans taken out by Kotni’s father a few years earlier for capital expenditures, further stretching his financial situation.

Kotni moved back home to work remotely and gave away his savings to help his family, but the fate of his father’s restaurant is still uncertain – as it is for thousands of other small businesses in India.

Data solutions provider Dun & Bradstreet conducted a survey of small businesses across seven major cities in India in the final quarter of last year and found that more than 82 percent of them reported having been negatively impacted by the pandemic. Some 70 percent said it would take them almost a year to recapture pre-pandemic levels of demands.

The impact on the country’s middle class is obvious, says Ghosh. “You cannot have a middle class in India without small and medium enterprises.”

Last year, the government offered $266bn in relief packages and $40bn in loan guarantees to help small businesses get back on their feet. But the amount is not nearly enough to counter the economic blowback of COVID-19, and many are hesitant to take on more debt.

“No one talks about the huge loss suffered by small business owners,” said Kotni.

His own plans for the future have been hamstrung: “I’d been saving to buy a car since 2018, but now I don’t have the money,” he said.

Please help me to get any work. It's so hard to survive due to lockdown. Since lockdown, I have not been able to even get any labour work in the unorganised sector. Merely sustenance seems too hard in this time. I'm ready to work as daily wage labour also. Please amplify 🙏 pic.twitter.com/ptk280LS5D

— Vikash (@VikashSanchi) May 30, 2021

Indian youths feel abandoned

Kotni’s experience is emblematic of many Indian middle-class youths who have seen their familys’ hard-won gains wiped out or left hanging by a thread.

Those between the ages of 18 and 34, who form nearly half the country’s population, now bear the brunt of the economic fallout of pandemic disruptions.

As of March – before the second deadly COVID-19 wave struck the country – of the nearly 40 million people who were jobless but willing to work, some 38 million were between the ages of 15 and 29, according to CMIE.

Youths who grew up thinking higher education and private-sector jobs were a golden ticket into the middle class are now navigating a dramatically altered social mobility landscape.

Last year, 24-year-old Vikash received high marks in his final dissertation for his master’s degree at Ambedkar University Delhi, a reputable institution. He was the first in his family to go to university after watching his parents work as labourers in the northern state of Haryana. “They had very little power,” said Sanchi, “so I tried to take a risk in my life and do something different.”

Vikash graduated on the cusp of the pandemic, and despite showing promising potential, was turned down for jobs because he lacked work experience. “Unless I get an opportunity, how can I have the experience?” he asked.

Desperate for work, Vikash posted an appeal on Twitter. “It’s so hard to survive due to lockdown,” he posted alongside a picture of himself lifting a gunny sack. “I’m ready to work as daily wage labour. I can work as a driver also.”

Vikash’s tweet resonated around the country as those who feel similarly abandoned by the job market reassess their prospects.

“They are barely going to have subsistence,” said Ghosh. “I fear we will have a lost generation.”