Covid-19 and the resilience of our household economy

20 Aug 2020

The study noted that 79% households reported a fall in income with 29% of them left with literally no source of income.

Opinion: Prabir Kumar Ghosh and Sumit Kumar

For restructuring the Indian economy we need to strengthen the household economy. The National Council of Applied Economic Research and the Nossal Institute for Global Health University of Melbourne conducted a study called ‘Social Economic and Health Impact of COVID-19 in the States of Uttar Pradesh and Odisha’ during June 9-18—the unlock 1 period. It covered 2100 households from four districts two each from Uttar Pradesh and Odisha and assessed the situation on three parameters: before during and after the lockdown from economic social and psychological perspectives.

The economic shock as a consequence of multiple lockdowns is deep and wide. The study noted that 79% households reported a fall in income with 29% of them left with literally no source of income. The job market also underwent a concomitant swing in the form of 11% of the households shifting their occupations.

The economic situation was further aggravated by the emergence of supply shortages and in-migration. About 16% households faced supply shortages of essential items like food vegetables milk eggs and cooking fuel. Surprisingly about 11% households could not even access medicines during this pandemic. The monthly remittances suffered a severe blow as 11% of the households reported in-migration. The households caught between dwindling incomes and emerging supply shortages adopted a diversified coping mechanism to meet expenditures on essential items. While 53% households acknowledged receiving government assistance 41% of them borrowed money. In addition 20% of the households even reduced the consumption of essential items.

A closer look at the data establishes the existence of three undercurrents: spatiality casual employment and the place of agricultural sector in the economy.

Given the diversity of our country the transmission of Covid-19 and its repercussions have wide spatial variations across almost all the variables between Uttar Pradesh and Odisha. The proportion of households reporting reduction or even total loss of income and shift in occupation is lower in Odisha as compared to Uttar Pradesh. The proportion of households reporting reduction in income was 81% in Odisha and 76% in Uttar Pradesh. Also UP households faced supply shortages of food items and vegetables while for those in Odisha accessing cooking fuel eggs meat fish and medicine was the prominent concern.

Among all the major occupation groups the households in casual employment account for the highest proportion with respect to reduction or loss of income shift in occupation (18%) and accumulation of debt (71%). Agricultural households have managed the economic shock better being second to households with regular salary.

In addition during the unlock 1 period as a sign of economic revival as many as 72% of the households returned to work. The high proportion of casual workers among these households does indicate the possibility of distress-driven resumption of economic activities. Also 55% of the households expect either improvement or no change in their perception about their financial situation in the next 12 months but 33% of the households sense a likely deterioration in their financial situation.

Despite these odds these people have a high degree of trust and confidence in the government. While 95% of the households supported the lockdown strategy 92% exuded confidence in the government’s ability to tackle the crisis. The government continues to be the most reliable brand for the people especially the poor.

Management of these undercurrents involves actions on three fronts. First the benefits transfer system must be revamped to incorporate increased coverage and seamless accessibility through integration of portability—as 47% of the households still report non-receipt of any government assistance. Second effective and institutionalised decentralisation of the governance ecosystem cannot be delayed. Last to address the menace of casualisation of employment India must learn to generate enough good-quality jobs. These steps would embolden household economy and feed into the larger structural transformation of the Indian economy.

P K Ghosh is fellow and Sumit Kumar is consultant NCAER


Published in: The Financial Express, August 20, 2020