Rise in middle class vulnerability, Pg8

Key Highlights:

• India's poverty rate has decreased significantly, with the share of Indians below the World Bank's lower middle-income poverty line falling from over 50% a decade ago to roughly 30% in recent estimates.
• A World Bank policy paper suggests evaluating welfare by assessing the distance of people from a reasonable standard of living, rather than just counting those below a poverty line.
• Fewer than 10% of Indian workers hold formal jobs with social security, while the majority operate in the informal sector with limited productivity and uncertain earnings.
• Youth unemployment is around 45%, and the unemployment rate among graduates is nearly 29%, indicating that education is not always leading to upward mobility.

Detailed Insights:

• India's economic growth has not translated into significant mobility for a large portion of the population, leading to a growing "vulnerable middle" class.
• Stagnant real wages for salaried workers, despite improved productivity, indicate a fractured link between economic growth and income for many.
• Between 2016 and 2021, the manufacturing sector lost approximately 24 million jobs, pushing many workers back into agriculture, which has lower average earnings.
• Household financial savings have decreased to about 5% of GDP, while household debt has increased, with credit being used more for basic consumption rather than investment.
• India's child wasting rate is the highest globally at 18.7%, and about 35.5% of children under five are stunted, indicating constrained future mobility.
• The central economic challenge is shifting from reducing poverty to preventing those who move above the poverty line from being trapped just beyond it.
• Addressing this challenge requires expanding productive employment, strengthening the connection between productivity and wages, and ensuring that economic gains are not confined to a narrow segment of the economy.

Key Concepts Involved:

• Poverty Line: A threshold of income or consumption used to distinguish between those living in poverty and those who are not.
• Vulnerable Middle: A socioeconomic group that has moved above the poverty line but remains susceptible to economic shocks and lacks stable economic security.
• Economic Mobility: The ability of individuals or families to improve their economic standing over time, often measured by changes in income or wealth.