As poverty, unemployment rise, India’s 'poor' fiscal response to Covid at 1.5 of GDP

By Kingshuk Sarkar* 
India’s labour market is characterized by incidences of very high level of informalization and precariousness. A study has revealed that the pandemic-induced lockdown led to further deterioration in quality of works and earnings.
The impact of last year’s nation-wide pandemic induced lockdown on the labour market, particularly on the informal sector workers have been very severe. The study by the researchers of Azim Premji University reveals that 100 million lost jobs during the nationwide April-May 2020 lockdown.
Most of them were back at work by June 2020, but even by the end of 2020, about 15 million workers did not find work. Incomes also fell. For an average household of four members, the monthly per capita income in Oct 2020 (I4,979) was still below its level in Jan 2020 (I5,989) .
As a result of the employment and income losses, the labour share of GDP fell by over 5 percentage points from 32.5% in the second quarter of 2019-20 to 27% in the second quarter of 2020-21. Of the decline in aggregate income, 90% was because of reduction in earnings and 10% was because of loss of employment. This implies that even though most workers returned to work but they suffered from loss in earnings.
The study further found that job losses were more severe in States where infection rates were high. Maharashtra, Kerala, Tamil Nadu, Uttar Pradesh, and Delhi, contributed disproportionately to job losses. Lockdown caused mobility restrictions which led to decreased economic activity. A 10% decline in mobility was associated with a 7.5% decline in income. Such correlation is important in estimating the impact of future lockdowns.
From gender perspective, job losses were more severe for women workers. According to this study, during the lockdown and in the months after, 61% of working men remained employed and 7% lost employment and did not return to work. For women, only 19% remained employed and 47% suffered a permanent job loss during the lockdown. This will further aggravate the trend of declining female labour force participation rate witnessed during the last two decades.
In recent times, India dropped by 28 positions to 140 out of 156 countries in the World Economic Forum’s (WEF) Global Gender Gap report. The report identifies the decrease in women’s participation in the labour force from 24.8 percent to 22. 3 percent.
Men, who lost wage employment, because of lockdown shifted to some form of self-employment for survival. However, sizable number of women permanently withdrew from the labour market as they had domestic responsibilities too. Women spent more hours at domestic works as the entire family got confined to home during lockdown.
According to the Azim Premji University study conducted in Karnataka and Rajasthan, the proportion of working women who spent more than 2 hours a day cooking went up from 20 per cent to almost 62 per cent in Karnataka and from 12 to 58 per cent in Rajasthan. Such findings confirm the fact burden of domestic work increased for women workers.
Quality of jobs also suffered after lockdown was withdrawn in a phased manner. Most workers returned to work as they had no options but they suffered a deterioration in terms of employment and conditions of service. Work became more precarious and informal. Proportion of non-standard employment increased.
Nearly half of formal salaried workers moved into informal work either as self-employed (30%), casual wage (10%) or informal salaried (9%) workers between late 2019 and late 2020. As a consequence of greater informalization of work, monthly earnings of workers fell on an average by 17% during the pandemic. Self-employed and informal salaried workers were the worst sufferers.
Overall because of wage cut and loss of earnings and deterioration in service conditions, 230 million workers experienced a wage cut that fell below the recommended national wage of Rs 375 per day. Anoop Satpathy Committee recommended such a wage taking into consideration all the relevant details. However, government is still to act on this.
Code on Wages 2019 sets up two advisory committees at the Central and State levels. This Code also proposed a zonal floor wage to be notified by the central government. No state minimum wage can be fixed below the zonal floor wage. However, floor wage is differentiated from minimum wage is not clear. Fixation of minimum wages still remains with the respective advisory boards.

Post-pandemic work looks severely disjointed and pathetically precarious. We need to act fast and act decisively

Study results show that because of the fall in wages there is an increase in the poverty rate by 15 percentage points in rural and nearly 20 percentage points in urban areas. Had the pandemic not occurred, poverty would have declined by 5 percentage points in rural areas and 1.5 percentage points in urban areas between 2019 and 2020 and 50 million would have been lifted above this line.
The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) provided some relief in rural areas along with food grains supplied through PDS. As per the official database, till November 2020, over 252 crore person-days of work was generated, an increase of 43 per cent compared to previous year.
Cash transfers, PM-KISAN payments and pension payments were some of the other support measures announced in 2020 as part of the Pradhan Mantri Garib Kalyan Yojana (PMGKY) and the Atmanirbhar Bharat packages to combat the effects of the pandemic on vulnerable households. Still, most of the workers suffered.
Circular migrants have suffered the most during Covid-19 induced lockdown. Azim Premji University Study reveals that 81% migrants lost employment in the lockdown compared to 64% non-migrants. 31% reported not being able to access rations compared to 15% non-migrants.
Presently the country is passing through the severe second wave and its impacts are still unfolding. Repercussions on the world of work this time around can be much more severe as economy is already in dire straits with depleted savings, mounting debt, and reduced fall back options.
States, which are in the forefront of the pandemic onslaught, are severely constrained in their finances. It is high time that Central government undertake additional spending to ease things. Till now, India’s fiscal response to Covid-19 crisis amounting to around 1.5-1.7% of GDP, has been very moderate.
Given the outcome of last year’s impact, as Azim Premji University Study reveals, central government should come up with much heightened fiscal response this time around. Post-pandemic work looks severely disjointed and pathetically precarious. We need to act fast and act decisively.
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*Independent researcher, works as a labour administrator with the Government of West Bengal, earlier served as faculty of the V V Giri National Labour Institute, Noida, and NIRD, Hyderabad