During the COVID-19 pandemic, India’s middle class has shrunk while China’s middle class has changed little. Millions of people lost their livelihoods and even fell into poverty. However, the economic impact of the new crown epidemic on India and China is quite different. Given that the combined population of China and India account for about one-third of the global population, the two countries each have about 1.4 billion people. The process of these two countries’ response to the epidemic and their recovery from the epidemic will have a major impact on changes in the global primary income distribution.
When India fell into a severe economic recession in 2020, China was able to prevent economic contraction. In January 2020, the World Bank’s 2020 economic growth forecasts for India and China are almost the same, at 5.8% and 5.9% respectively. However, in January 2021, one year after the outbreak, the World Bank revised its expectations for economic growth in both countries. India shrank by 9.6% and China grew by 2%.
Pew’s latest analysis report pointed out that due to the economic downturn (compared to the possible growth rate of India if there is no epidemic), the number of middle-class people in India is estimated to be reduced by 32 million in 2020, accounting for the global middle-class group (daily income between 10.01 and 20 US dollars Time) to reduce the total by 60%. At the same time, the poor in India (with a daily income of less than US$2) have increased by an estimated 75 million, accounting for nearly 60% of the increase in the number of poor people worldwide. However, the changes in the living standards of the Chinese are much smaller than that in India.
The population of each country can be divided into five major groups: poor, low-income, middle-income, upper-middle income (with a daily income of between US$20.01 and US$50), and high-income (with a daily income of more than US$50).
Compared with their living standards before the epidemic, the comparison of how the living standards of India and China have changed during the epidemic will be more obvious. Before the epidemic, it is estimated that 99 million people in India will belong to the global middle class in 2020, but one year after the epidemic, this number is estimated to be only 66 million, a decrease of 1/3. At the same time, India’s poor are estimated to have reached 134 million, more than twice the number before the recession (59 million). India’s poverty rate is likely to rise to 9.7% in 2020, a sharp increase from the 4.3% predicted in January 2020. Most Indians belong to the global low-income group. Before the outbreak, in 2020 India should have 1.2 billion people belonging to this group, accounting for 30% of the global low-income population. But because the epidemic has turned more Indians into (less-income) poor, it is estimated that the number of low-income people in India has decreased to 1.16 billion.
In this round of economic downturn, it is estimated that about 10 million people in China have lost their middle-class activities. Compared with the 504 million people who belonged to the middle-class group before the epidemic, this figure accounts for only a small percentage. Similarly, during the epidemic, China’s low-income groups increased from 611 million to 641 million, which is relatively small in number.
Importantly, before 2020, China will account for 37% of the global middle class. From 2011 to 2019, China’s middle-income population increased by 247 million people, a considerable increase. At the same time, the upper-middle income population has almost quadrupled, from 60 million to 234 million. In both aspects, China accounts for the vast majority of the increase in the number of people in the world. Therefore, the limited impact of the epidemic on China has also relieved the whole world.