The spread of Covid-19 and the economic lockdown enacted in response by the Government of India have resulted in significant economic hardship. These effects are both substantial and widespread. Eighty-four percent of Indian households report decreases in income since the lockdown. A third of Indian households report not having enough resources to go on for more than a week before facing distress.
These headline statistics, which are drawn from our analysis of a nationally representative survey of Indian households conducted by the Centre for Monitoring Indian Economy (CMIE) between April 18 and April 30, 2020, should be a call to action for Indian policymakers as they try to best balance a public health crisis and an economic crisis.
Importantly, the data also reveal that the economic impact of the lockdown has not been equally distributed across people and places. About 85% of the households earning a monthly per-capita income of less than Rs 3,801 before the lockdown, corresponding to being in the lowest quintile of the per-capita income distribution, have experienced a fall in income. At the other end, only 66% of the households earning more than Rs 12,734 before the lockdown, corresponding to being in the highest quintile of the per-capita income distribution, have experienced a fall in income. While both numbers are exceptionally high, more than 90% of households with incomes in between this range have experienced a fall in income.
Smaller lockdown-induced income losses among those in the highest per-capita income quintile in India are consistent with what has been observed in other countries: higher-income earners are more likely to be employed in occupations that enable remote work and hence to be able to continue to earn a living despite the stay-at-home orders. The somewhat smaller impact among households in the lowest income quintile compared to second and third quintiles may reflect their greater representation of occupations that have continued despite the lockdown in that quintile (e.g. agriculture, food vendors). However, it might also reflect that India’s existing safety net and income support programmes do not adequately target households in these quintiles that have experienced dramatic job losses due to the lockdown.
While economic losses due to the lockdown are widespread among both rural and urban households, rural households have been hit the hardest, with 88% of them reporting a fall in income under the lockdown, compared to 75% of urban households. As seen in Figure 1, this difference is driven by the fact that higher income levels pre-lockdown are mainly protective for households living in urban areas. Again, we conjecture that this a reflection of occupation sorting and greater availability of remote work options among salaried workers in urban settings.
Our data further reveals substantial variation in income losses by state of residence (See map). The five most affected states are Tripura, Chhattisgarh, Bihar, Jharkhand and Haryana. Notably, economic impact by state does not strongly track the extent of the outbreak. Rather, we conjecture that income per-capita and occupational composition before the lockdown, lockdown severity, and effectiveness of the delivery of aid are likely contributors to this cross-state variation.
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In contrast to much of the variation described above, we do not find much evidence of differential impact of the lockdown based on households’ religion, with roughly similar share of Hindus and Muslims being negatively affected across income quintiles.
Given the widespread income losses documented above and the low baseline wealth of many Indian households, it should come as no surprise that a very large share of Indian households state that they will be unable to continue – even over relatively short periods – without additional assistance (Figure 2).
Across India, 34% of all households report being able to survive for no more than one week without additional assistance. Among households earning less than Rs 8,142 per month per-capita before the lockdown, nearly a third report being able to survive for no more than 7 days without additional assistance. Crucially, 14% of the sample is already out of funds and risks immediate and severe deprivation if they are unable to borrow or receive additional benefits.
These figures suggest that continued rapid distribution of in-kind or cash transfers is needed to prevent a sharp increase in malnutrition and severe deprivation. By promoting demand and fostering health, such transfers will also likely promote a more robust recovery as the country is able to reopen.
Click here to read their complete analysis.
Marianne Bertrand is Chris P Dialynas Distinguished Service Professor of Economics, University of Chicago Booth School of Business, and Faculty Director, Chicago Booth’s Rustandy Center for Social Sector Innovation and UChicago’s Poverty Lab.
Kaushik Krishnan is Chief Economist, Centre for Monitoring Indian Economy (CMIE).
Heather Schofield, is Assistant Professor, Perelman School of Medicine and The Wharton School.
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