Economy

Additional 230 Million Indians Fell Below Poverty Line Due to the Pandemic: Study

The study, 'State of Working India 2021 – One year of Covid-19', by Azim Premji University has touched upon several aspects pertaining to the state of the Indian economy.

New Delhi: At a time when the second wave of the COVID-19 pandemic is ravaging India, a report prepared by the Centre for Sustainable Employment at Azim Premji University (APU) has highlighted how employment and income had not recovered to pre-pandemic levels even in late 2020 and the latest surge in cases would only add to the devastation and distress.

The report, titled “State of Working India 2021 – One year of Covid-19”, was released on Wednesday, May 5. It highlights how women lost more employment than men during the pandemic last year, how nearly half of formal salaried workers moved into informal work and how poorer households experienced far higher losses in income during the lockdown period.

Also read: What Changed and What Didn’t in One Year of a Pandemic and Lockdown

The damage to the economy due to the pandemic was enormous and the poor were hit the hardest. The report revealed that 230 million additional individuals fell below the national minimum wage poverty line.

It said, “This happened due to the income shocks.” To counter the loss of income, the report also noted how “the poorest households took the largest loans relative to their earnings” and it cautioned that since many of these loans were taken from private lenders at high interest rates, they have the financial status of borrowers at peril.

Representational image. A man rides his bicycle during a lockdown to limit the spread of the coronavirus disease (COVID-19) in Mumbai, India, April 23, 2021. Photo: Reuters/Niharika Kulkarni.

Learning from 2020 experience

The report brought to the fore the “unprecedented hardships for Indian households” faced during the pandemic. It also looked into the “severe supply and demand shock” that stemmed from the economic slowdown, which had been existing even before the pandemic, and how this, in turn, led to losses in employment and earnings, increase in informality and food insecurity, and a rise in poverty and inequality.

With India in the midst of the second Covid wave, the report said, it is “all the more imperative to learn from the experience of 2020. Who was impacted and how? What worked and what didn’t? Did the social safety net work for the most vulnerable households? What should be the way forward?”

Giving a brief introduction about the report during an online session, Arjun Jayadev of APU said despite what the politicians say, the endgame with respect to Covid appears nowhere in sight.

“We have seen around us a lot of noise but there is a lack of clarity about the impact of the lockdown. This report will help guide us a little bit for the future. It asks and answers a large number of questions and provides clear and insightful policy recommendations.”

Contribution of pre-COVID economic slowdown 

The report was presented by Amit Basole of APU. He spoke about how the report deals with the “pre-Covid context”. It notes that the country was experiencing the “longest economic slowdown since 1991” with weak employment generation, uneven development and a largely informal economy before the pandemic struck. These factors “set us up for very large structural vulnerabilities” and “that is why the impact was so huge on livelihood – especially in fields of petty trade, construction and transport”.

Also, Basole said, with little or no social protection available via employers and the safety net mostly rooted in domicile, the poorest were hit the hardest. These included the self-employed and casual workers, who constitute 45% of total urban employment.

The report revealed that “employment and income have not recovered to pre-pandemic levels even in late 2020.” It said both the ‘workforce participation rate’ and ‘average monthly income per capita’ remained below pre-Covid levels.

“The second wave is going to make things worse,” said Basole, adding that as of October-November 2020 nearly 20% of informal workers were still out of work.

The report also noted that there was a strong regional element to the crisis. Basole said Haryana, Delhi, Uttar Pradesh, Maharashtra, Kerala and Tamil Nadu had more than a proportionate loss of jobs.

High incidence of unemployment among women 

The report also revealed that “women were more likely to lose employment compared to men”. It discovered that there was no recovery of employment for 7% men whereas in women the rate was 46.6%.

Also, it found that while “men (were) more likely to move into informal employment, women (were) more likely to move out of the workforce. This was because men did have more fallback options (primarily because they had greater flexibility in relocating).

Also, it was pointed out in the question-answer round later that many women were stuck at home due to greater household requirements during the pandemic.

Also read: A Long Look at Exactly Why and How India Failed Its Migrant Workers

As Rosa Abraham of APU noted, “burden of household work and commitment at home has also increased for women”. Also, she said, irrespective of the kind of education they possessed, women were impacted more in terms of employment by the pandemic.

Underemployed and underpaid 

The report said nearly half of formal salaried workers moved into informal work during the pandemic. From the permanent salaried persons, it said, 47.6% remained in the category, 9.8% went into daily wage work or casual work, 34.1% became self-employed and 8.5% became temporarily salaried.

“So people came back to work, but they were no longer doing the kind of work they were doing earlier,” said Basole.

The study also found that there was a loss in monthly earnings for all types of workers. It said the fall was 13% for casual workers, 18% for self-employed, 17% for those with temporary salaries, 5% for permanent salaried and 17% overall. Also, the number of people who did not earn anything increased between February 2020 and the end of the year.

Migrants wait to board trains to their native places during COVID-induced lockdown to curb the recent spike in coronavirus cases, at NDLS Station in New Delhi, Tuesday, April 20, 2021. Photo: PTI

Borrowings and debt trap

During the lockdown period, the report said, nearly 230 million additional individuals fell below the national minimum wage poverty line. It said this happened due to the income shocks. To survive during the pandemic, the poorest households took the largest loans relative to their earnings.

So, the poorest 25% of households borrowed 3.8 times their median income, as against 1.4 times for the top 25%. This, the study cautioned, could lead to a possible debt trap for them.

Six months later, it also noted that food intake was still at lockdown levels for 20% of vulnerable households.

Inadequate policy response

The study looked at the reach of Pradhan Mantri Garib Kalyan Yojana via public distribution system (PDS) in Karnataka and Rajasthan to evaluate the policy response to the crisis. It noted that around 30% of PDS priority ration cardholders did not get the promised additional rations in these two states. There were exclusions in Jan Dhan cash transfers too.

The report also looked at state-level innovations and augmentations, but said there is very little data on how they performed.

Also read: Blunting the Economic Impact of the Second Wave of COVID-19 With a 3, 6, 9-Month Plan

It added that cash transfers were low and amounted to 12% of GDP per capita. Similarly, in the implementation of the Mahatma Gandhi National Rural Employment Guarantee Act scheme, it said, there was unmet demand but the programme budget was back to pre-pandemic levels.

Free rations and cash transfers

The report also made policy recommendations for improving the situation in the short term.

It demanded that there should be an extension of free rations beyond June 2021; there should be Rs 5,000 cash transfer for three months to vulnerable households; there should be expansion of NREGA entitlement to 150 days and expansion of the budget to Rs 1.75 lakh crore; and a pilot urban employment programme be launched in the worst-hit districts while focussing on women workers.

Also, the study suggested that there be an increase in central contribution in old age pension to at least Rs 500.

Acknowledging that this was a “once in a century crisis” in which severe pain is being inflicted on the poor, it stressed the “need to ensure pain is distributed according to capacity to bear it. So far pain borne by those who are least able”.

Abdication of responsibility by the Centre

During the panel discussion which followed the release of the report, Yamini Aiyar, director of Centre for Policy Research, said there was a need for the government to also put out its own surveys and analyses on the relief, fiscal support and long-term planning it provided and has in mind.

“One challenge is what level of government should be doing what kind of work. There was no maturity in delegation of authority and this has harmed us. The Central government invoked the Disaster Management Act and it took decisions through committees on issues in which states had greater experience and better infrastructure. All that the states needed was proper fiscal and monetary support.”

And now, when the country is going through a second wave and a major health crisis during the second wave, Aiyar said, “The Centre has abdicated all responsibility saying health is a state subject.”

She added that Kerala showed that a lot can be done by empowering local self-governance and building their capabilities. “Transparency of information, decentralisation and empowering local government can help in countering this wave but all these elements are missing right now.”

Vaccination programme

Visiting professor of economics at the University of Ranchi and social activist Jean Dreze added in the same vein that in the case of the ongoing vaccination programme too, the “abdication of the Central Government this time is worse.”

“The Centre has thrown the states under a bus. First it opened vaccination to those in the 18-45 year age group and then it allowed the manufacturers and the hospitals to charge their own rates. So the companies would prefer selling to the private sector. It would be tougher for the poorer states to pay. They also have to take care of food security and other issues,” he pointed out.

Psychological impact

Farzana Afridi, professor of economics at Indian Statistical Institute, Delhi, said, “relatively speaking the effects of the lockdown and the pandemic were felt more in the urban areas than the rural areas”.

She said the data also revealed that the young were more affected by employment loss and therefore demanded that an urban employment guarantee programme and some scheme that promote urban infrastructure be brought to address the issue.

Afridi said her work with poorer households has also revealed that when it came to their psychological well-being, the women of these households were worse off in terms of the impact the pandemic has had on them. “These job losses add to their woes,” she added.