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5 lessons from India’s first wave that can protect livelihoods in the second wave

New report shows first wave pushed 23 crore Indians into poverty, led to permanent job loss for many women, and made one-sixth salaried health workers quit.

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A misleading impression is gaining ground in India’s policy circles. The impact of the second wave of Covid-19 on the economy is not going to be as severe as the first one, says the Reserve Bank of India ‘State of the Economy’ report. This follows Finance Minister Nirmala Sitharaman’s assurance to the industry that “2021 shall not be about Covid, in spite of the second wave”.

There is a grain of truth in this. The restrictions on economic activity this time cannot possibly hit the economy as badly as the ill-planned, hurriedly announced and shoddily executed national lockdown during the first wave.  Therefore, some of the macro economic indicators won’t dip as low as they did last year. Some of these may show even buoyancy.

Yet this argument distracts and deludes. It distracts our attention from the widespread destruction of human capital, severe loss of livelihood, sharp fall in family incomes and deterioration in the quality of life for the vast majority of our population. It deludes us into thinking that not much needs to be done for economic revival, that there is no need for an economic package for the vast majority of our poor citizens.

We need a different approach this time. We need economics that puts people at its centre. We need an economic policy that prioritises the well-being of millions of families battered by the second wave of Covid. We need to learn from the experience of handling the first wave.

Also read: Labourers are backbone of a capitalist economy. India can’t leave them unattended in Covid


What the first wave did

A recently released report shows us the way. ‘State of Working India 2021: One year of Covid-19’, a report released by the Centre for Sustainable Employment at the Azim Premji University packs some robust lessons that we can use in handling the second wave. A team of economists, led by Professor Amit Basole, has mined through data from the regular Consumer Pyramid Survey of the Centre for Monitoring Indian Economy (CMIE) and other studies to provide a glimpse of how the first wave affected lives and livelihood. I picked five lessons from this timely and well-written report that is relevant to how we approach the second wave.

First, rumours of economic recovery are premature. Just as we should have been cautious in celebrating our victory over the coronavirus, we need to take claims of V-shaped recovery with a fistful of salt. Employment and income did bounce back somewhat by the end of last year. But of the 10 crore workers rendered unemployed by the last lockdown, 1.5 crore were still out of job in December 2020 (Figure 1). Even after the ‘recovery’, the average per capita monthly income at the end of the year was about a thousand rupees lower than at the beginning of the year, a drop of 17 per cent.

The challenge of recovery in 2021 faces a triple whammy: the de-acceleration of the economy prior to the first wave, the impact of the first national lockdown and now the second wave. This lesson needs to be kept in mind as CMIE data once again shows double-digit unemployment this month.

Azim Premji University 'State of Working India 2021' report
Azim Premji University ‘State of Working India 2021’ report

Second, informal economy continues to be the real Indian economy. While much of our discussion on economy focuses on the formal, organised sector – corporates, IT, big industry – it was the informal sector – daily wage labourers, hawker-vendors, petty business, farming – that came to our rescue during the crisis. The 2020 lockdown forced nearly half of regular salaried workers to move into self-employment, irregular salaried jobs or casual wage labour. Shockingly, at a time when the country should have been adding health workers, nearly one-sixth of the salaried workers in the health sector had to quit. Informal business and farming offered employment during this crisis. Any economic stimulus or package for the second wave must keep this sector at the centre.

Third, obsession with supply-side economics must give way to focus on demand. Most of the claims about economic recovery are based on figures of GST collection, freight movement, electricity generation and production of some goods. But an economic recovery would need consumers for these goods. That is where the real challenge lies. Let alone consumer goods, lockdown affected food consumption in 90 per cent families; two-third of these families had not gone back to their earlier level of food intake by the end of 2020. Similarly, 84 per cent of families that borrowed during 2020 did it in order to meet their basic needs of food, medicines and other daily necessities. This is bound to constrain any recovery from the impact of the second wave. The CMIE has recently reported a consistent fall in consumer sentiment for the fifth week.

Fourth, recovery must begin from below. The pandemic, like any other natural or human-made calamity, affects the poorest first. We know the story from one end, of the rise of corporate and super-rich income during the pandemic. The Azim Premji University report presents the story from the other end: The bottom 10 per cent families lost their entire income for the month of April and May last year, while the loss for the top 10 per cent families was just about one-fifth of their earlier income (Figure 6).

Azim Premji University ‘State of Working India 2021’ report

Also read: Tens of millions have plunged into poverty as Covid ravages India

Instead of lifting about 50 lakh people out of poverty, as was the norm in previous years, the year 2020 added about 23 crores to the number of poor in our country. It is likely to be aggravated this year due to the devastating impact of the second wave. The Economist estimates that India has already lost 10 lakh lives this year. The number is likely to multiply manifold as the pandemic rages through rural India. As millions of families cope with the loss of an earning member, loss of workdays due to illness, the steep cost of hospitalisation and other medical expenses, many more families are likely to fall below poverty line. The report reminds us that free ration continues to be the most impactful way of helping these families cope with the crisis.

Fifth, women and youth must be the focus of policy. The most shocking fact in this report is how gendered was the impact of the lockdown. Nearly half of working women (47 per cent) lost their job during 2020 and could not come back to it, compared to just 9 per cent of men. The share of women in India’s workforce was already going down and this could be the worst push. Similarly, about one-third of the young workers, below 24 years, lost their livelihood and could not regain it (Figure 3).

Azim Premji University ‘State of Working India 2021’ report

If these five lessons do not inform the government’s response this year, we should be prepared that the second wave would do to livelihoods what it has already done to lives.

Yogendra Yadav is the national president of Swaraj India. Views are personal.

(Edited by Neera Majumdar)

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