Annual income of Indian poor households reduced by 53%

NEW DELHI: In an unusual pattern since economic liberalisation, the yearly income of the lowest 20 per cent of Indian households, which had been steadily increasing since 1995, plummeted by 53 per cent in the epidemic year 2020-21 compared to 2015-16. The richest 20 per cent of the population saw their annual household income increase by 39 per cent during the same five-year period, demonstrating the stark discrepancy between the COVID-19’s economic impact on the bottom and top of the pyramid.

The current round of the ICE360 Survey 2021, performed by People’s Research on India’s Consumer Economy (PRICE), a Mumbai-based think-tank, reveals a dramatic K-shaped recovery. The study covered 200,000 households in the first round and 42,000 families in the second phase, which took place between April and October 2021. It was dispersed across 100 districts, encompassing 120 towns and 800 villages.

While the epidemic halted economic activity for at least two quarters in 2020-21, resulting in a 7.3 per cent decline in GDP, the poll showed that the pandemic disproportionately affected the urban poor, eroding their household income.

The poll divides the population into five income groups and finds that while the poorest 20 pe cent (first quintile) saw the greatest erosion of 53 per cent, the second lowest quintile (lower middle category) saw a 32 per cent decrease in their household income over the same time period. While the rate of erosion for individuals in the middle-income bracket fell to 9 per cent, the top two quintiles – upper middle and richest saw their family income rise by 7 per cent and 39 per cent, respectively.

“We need a K-shaped policy that addresses the two ends of the spectrum and a lot more thinking on how to build the bridge between the two,” said Rajesh Shukla, MD and CEO, PRICE, as the Minister of Finance finalises her budget proposals for 2022-23 to give shape to the roadmap for the country’s economic revival.