While the economy has shown signs of recovery after contracting in the first two quarters of the 2020-21 financial year, experts say the road to complete recovery would be a long one
“I faced salary cuts, then worked without pay for a few months, and was finally forced to resign. I could not bear the costs of my daughter’s education and family’s expenses,” says Atanu Sarkar, a driver at a private firm who quit his job in June.
Sarkar, a Kolkata resident, stays in his ancestral home with wife and daughter. Since July, he has been working with a transport aggregator that provides bike rides to passengers.
As COVID-19 gripped the nation and brought businesses and activities to a complete halt, Sarkar — like hundreds and thousands of Indians without a fixed job and social security — increasingly found it hard to make ends meet.
Before the pandemic, Sarkar would earn Rs 385 a day on average. Now, he earns Rs 300-320 every day. “That’s not all, I have to pay the company its share of 20-22 percent of my total daily,” he says.
India’s unorganised sector, which constitutes over 80 percent of the country’s workforce and contributes around 50 percent of its GDP, has turned out to be a major casualty of the pandemic-induced lockdown and the resultant economic distress.
On 26 August, Prime Minister Narendra Modi’s government launched what is known as the e-Shram portal, India’s first-of-its-kind database of unorganised sector workers. It looks to register 380 million people, including domestic aides, migrant labourers and construction workers, among others. The goal is to ensure the effective delivery of welfare schemes and even insurance money in the event of accidents.
While experts welcome the initiative, they point out that structural issues need to be addressed for long-term results in the unorganised sector.
“The effort to register informal sector workers is welcome. But without addressing the underlying structural problems, short- and long-term gains will be limited. We have to boost manufacturing, create formal sector jobs and strengthen social safety nets if we are to reap our demographic dividend,” Parikshit Ghosh, a professor at The Delhi School of Economics, says.
Bornali Bhandari, a senior research fellow at New Delhi-based think tank National Council of Applied Economic Research (NCAER), says the e-Shram portal is “definitely a great move” and “a first step towards building a voluntary social registry system in India”.
“It will provide a national database for unorganised sector workers who account for almost 86 percent of our population. It can even pave the way for targeted basic income in the near future. But how far it caters to informal workers in the formal sector is something that needs to be observed.
“While (the portal is) no silver bullet, it lays the groundwork for significant scaling up of the social benefit system in India and should have a positive impact in the medium and long-run,” she says.
Struck by a virus
In January, the World Bank estimated that global economy contracted by 4.3 percent in 2020 as the deadly coronavirus stoked uncertainty, according to US-based think tank Pew Research Center.
A Pew analysis published in March found that the middle class in India was “estimated to have shrunk by 32 million in 2020 as a consequence of the downturn, compared with the number it may have reached absent the pandemic”.
“This accounts for 60 percent of the global retreat in the number of people in the middle-income tier (defined here as people with incomes of $10.01-$20 a day),” the report said.
The number of the poor (with incomes of $2 or less a day) in India is estimated to have increased by 75 million because of the COVID-19 recession. This, too, accounts for nearly 60 percent of the global increase in poverty.
An Azim Premji Unversity study published earlier this year says 20 percent of India’s poorest households did not earn any income in April-May 2020, even as a hard lockdown was imposed in the country. According to this study, individuals below the national minimal wage threshold (Rs 178 per day) increased by 230 million during the pandemic. Had the pandemic not occurred, 50 million would have been lifted above the minimum wage threshold instead.
The study shows job and income losses have hit hard the most vulnerable groups – poor, young, female and Scheduled Castes/Scheduled Tribes (SC/ST) workers.
“As a result, inequality has increased substantially. People have lost income to a much greater extent than jobs per se. The nature of employment has also shifted towards less paid and more insecure forms of work. Nearly 50 percent of permanent salaried workers moved into informal work during the course of the pandemic. Households in the poorest quartile had to borrow to the tune of nearly four months’ income,” Ghosh says.
The exodus of migrant workers from big cities to their villages during the 68-day hard lockdown that began last year in March had put the spotlight on the beginning of a mammoth job loss problem. Short of cash and supplies, tens of thousands of migrant labourers found themselves without employment. They set off on foot and traversed hundreds of kilometres to reach their villages, giving India some of its emblematic images of the pandemic.
Ghosh says the true damage to the economy is hard to gauge due to what he calls sketchy data.
“Employment statistics in India is notoriously sparse and sketchy. Data from the Centre for Monitoring Indian Economy (CMIE) shows that the unemployment rate has had a bumpy ride during 2020-21. From around 7 percent in early 2020, it shot up above 20 percent during the national lockdown; then came down with the reopening of activities; shot up above 10 percent again during the second wave; and it is now crawling back to pre-pandemic levels as infections subside. But these numbers hardly show the true economic distress caused by the pandemic,” he says.
A voice from the ground
The first wave of the pandemic triggered an unprecedented crisis with several small businesses downing shutters and organisations trimming their workforce across sectors. While the economy has shown signs of recovery after contracting in the first two quarters of the 2020-21 financial year, experts say the road to complete recovery would be a long one. In the first quarter of the ongoing 2021-22 fiscal, India’s GDP growth was 20.1 percent, suggesting the country was on right track.
Like many, Kailash Awtade is hoping that the turnaround would be swift. He once owned a small tour and travel company in Pune. With the pandemic confining people to their homes, the tourism industry took a big hit. So did Awtade’s company, which could not recover from the blow. He lost his only car after failing to pay the EMI, even as the pandemic jolted his social standing.
“Initially, I took to selling vegetables for a few months, but the competition took me by surprise. I have a wife and two children to care for and selling vegetables was not enough. Then I started selling masks (which he still does). But I face a lot of hassle from the police and commercial establishments if I approach their premises to sell masks.”