Social Cost of Covid-19 Surge in the New Poor

Context: World Bank’s projected rise in “new poor”, will result as the new social cost of the pandemic induced economic crisis.

New Poor: This is a cohort which was either not born poor or include those who had somehow managed to exit extreme poverty.

• The World Bank study classifies the poor according to those living on $1.90 per day (extreme poverty), $3.20 per day and $5.50 per day.

World Bank’s Projection of Poverty

• Contraction in global growth: between 5-8% in 2020. the brunt of which will be borne by the informal economy
• The increase in the “new poor": could range between 71-100 million (Earlier estimates: 40-60 million).

• India

• Before the Pandemic: One in two people in India are vulnerable to poverty.

• Recent prediction: the spurt in ‘new poor’ will range from 32-42 million. (Overwhelming proportion in South Asia)

Reasons for Increase in New Poor

• Nationwide lockdown: to reduce social contact and create the space for administrations to scale up existing medical care facilities.

• But it has unleashed economic devastation and a surge in joblessness.

• Heavy dependency on informal economy (unpredictable irregular income) for livelihood which is vulnerable to any disruption.

• 9/10 people in the workforce hold informal jobs

• Insufficient social safety nets for rural India.

• Migrants: loss of their income stream will hurt them directly

• But, the stoppage of remittances will dent household incomes in their home state

Conclusion: Poverty alleviation should be based on redefining the public policy to focus on preventing people from falling into poverty.