Middle class incomes were worst hit by India’s harsh coronavirus lockdown

With outsized representation in powerful segments of society like the media and the bureaucracy, it is rare for India’s middle classes to be at the receiving end of government policy. However, India’s coronavirus lockdown – the harshest in the world – seems to have temporarily upended that arrangement in one sphere: income growth.

Survey work by the economic research firm Centre for Monitoring Indian Economy has found that all Indians suffered a significant loss in income growth during the lockdown months of April-June 2020. However, the worst hit were middle class and upper middle class Indians.

Broken incomes

The metric that CMIE is using in this study is the proportion of households who report a rise in incomes over the previous year. The study takes into account the proportion of households who report a rise in income during the lockdown months of April-June 2020 to the data from a year ago (April-June 2019).

For respondents who earned less than Rs 4,000 per month – or Rs 48,000 annually – not a single one said that their incomes had gone up during the lockdown months. For people earning less than 6,000 per month, only 1% reported an income increase. However, the same figure for April-June 2019 was 14% – implying a fall of 13 percentage points.

Battered middle class

This gap keeps on increasing as incomes increase. In April-June 2019, more than half the households earning more than Rs 5 lakh per year had witnessed an increase in their incomes compared to the previous year. During the 2020 lockdown, that figure dropped to less than 15%.

At the Rs 10 lakh per annum mark, there is a sharp drop in households reporting income rise during lockdown. In the Rs 18 lakh-Rs 24 lakh per annum bracket, not a single household reported income growth during the lockdown. This fall is dramatic. The figure for 2019 was 65% for Rs 18 lakh-Rs 20 lakh households and 67.6% for Rs 20 lakh-Rs 24 lakh households.

Across the board

Things turn better now for India’s elites. Half of the households that earned more than Rs 36 lakh per year reported income increase even during lockdown. However, even for them, the lockdown did hurt – even if it didn’t hurt as much as for other Indians. The corresponding figure for 2019 was 70.9%.

However, the CMIE flags that the sample size of rich respondents is small, hence this data should be considered with caution.

Across all income groups, the proportion of respondents reporting an increase in income fell from 33% to 6.7%.

The CMIE collects this data as part its Consumer Pyramids Household Survey with more than two lakh households sampled.

This CMIE data backs up data from the Employee Provident Fund Organisation which has had more than 13% of its investors withdraw their funds. The EPFO is a Union-government run pension corpus with mostly white-collar investors.

Note that while well-off Indians have suffered more lost income due to lockdown, before that they benefited disproportionately compared to poor Indians. The larger a family’s income, the more probable that it could have reported an increase in its income.

To add to this is the fact that while more rich Indians would have suffered losses in income, they are better able to weather such shocks. On the other hand, for poor Indians, even small shocks in income could be disastrous for basic needs such as food or shelter.