Rolling back the induced livelihood shock

Sumit Mazumdar and Indranil, The Hindu, 7 July 2020

For most regions across the country, the long lockdown has just got over. As the “unlocking” begins, it is becoming increasingly apparent how the Indian state had chosen its sides and revealed its elitist bias during one of the most stringently enforced lockdowns worldwide. Several news reports and surveys on the plight of India’s less-privileged workforce during the lockdown have highlighted the massive scale of falling incomes and loss of means of livelihood. Many have been pushed into various depths of poverty depending on how vulnerable their occupations were. Quantifying the likely scale of the poverty impacts of the lockdown, we use most recent workforce survey data on India to estimate what the lockdown-induced livelihood shock might have meant economically for different categories of workers. We suggest some potential policy measures to prevent the shocks from further snowballing into chronic poverty.

Pre-shock conundrum

India’s poverty line has been a matter of contention for long for its unrealistically low thresholds leading to conservative poverty numbers. Irregular updating of official poverty lines and unavailability of data on consumption expenditure from National Sample Surveys in recent years have added to the ambiguity around poverty estimation in India. According to the household consumption expenditure reported in the Periodic Labour Force Survey (PLFS), 2017-18 (which replaces the employment-unemployment surveys of the National Sample Survey Office) and applying State-specific poverty lines (used by the erstwhile Planning Commission in 2011 based on the Tendulkar Committee recommendations, adjusted with current price indices), about 42% or around 56 crore people were ‘officially’ poor before the lockdown was announced. Highlighting how closely packed people are towards the lower half of the consumption expenditure distribution, another 20 crore people were within a narrow band 20% above the poverty line. In most parts of the country, this amounts to a few hundred rupees over the poverty line threshold. A modest dip in earnings — and hence a fall in consumption spending — would push a majority of them into the vortex of poverty and hunger. Sucking up large or entire chunks of the modest incomes, the lockdown gave a shove.

Our estimates from the PLFS data extrapolated for the year 2020 suggest that about an additional 40 crore people were pushed below the poverty line due to the lockdown. Around 12 crore of this lockdown-induced newly poor are in urban areas and another 28 crore people in rural areas. Those who were already poor are going to suffer a further worsening in their quality of life, a phenomenon known as poverty deepening. Before the lockdown, around 16% of the population had per capita consumption expenditure of about a third of the poverty line, managing their daily expenses with ₹30 per day or less. After the lockdown this could swell to more than 62 crore (47%) people pushed to such extreme poverty. A shock of such a scale to an overwhelming majority of Indians is unprecedented in the nation’s living memory.

Inadequate state responses

At such a juncture, formal responses of the state have been mostly inadequate and poorly conceived. The second economic stimulus package announced by the Finance Minister exposes the class nature of the current political dispensation more than ever. A token increase of National Rural Employment Guarantee Act (NREGA) wage by ₹20 (₹182 to ₹202) seems like a joke in the light of the overall magnitude of the crisis. Undoubtedly, a revamped, expanded NREGA needs to be made the fulcrum of the rural recharge. The demand for work is anticipated to increase by 25% with reverse migration-fuelled increase in rural labour supply.

Universalisation of the Public Distribution System has been widely talked about but needs better equity focus in implementation. Recent experience of expanding food coupons to non-ration card holders in Delhi suggests that such measures are likely to exclude marginalised communities including Dalits and Muslims at the lowest strata of the work hierarchy.

At the local level, this would mean identification of the most vulnerable and including them into the programme before expanding it to the relatively better-off. The exclusion errors of IT-based attempts to coverage have huge social costs in the form of accentuated hunger.

Stabilising urban economy

Massive reverse migration flows out of the urban informal sector will force grinding halts and hiccups for the economy limping back towards normalcy in the post-lockdown scenarios. Given the magnitude of the destabilisation, an urban employment guarantee programme becomes a dire necessity to stabilise the urban economy. A ‘direct’ employment programme implemented through municipal corporations could be introduced to guarantee 20 days of work.

This can be used to develop key social infrastructure in urban areas including slum development, drinking water supply, toilet construction, parks and common areas, urban afforestation and social forestry. Such facelift public works programmes can make a major difference in both the condition of public utilities and absorbing the spurt in demand for work in district towns and smaller cities in the traditional outmigration hotspots across the country. The wages could be fixed with 30% premium over prevalent MNREGA benchmark average wage in the State.

An ‘indirect’ branch of this programme can be used to encourage a revival of small and medium enterprises (SMEs) in the most prominent clusters. This could include employer-contractor facilitated programmes to provide wage subsidy of an equivalent amount as in the direct programme to employers of urban SMEs, other business establishments and construction sector projects.

The neo-liberal growth that we have experienced since the 1990s has been largely through breaking the back of the labouring class. The economy grew by paying less and less to workers and allowing surplus to accumulate in the hands of the owners of the means of production, with the expectation that this would be reinvested. The state worked systematically to let this model flourish. A series of policies made the labouring class increasingly vulnerable, weakening their collective bargaining power, pushing them away from their native towns out of desperation, forcing them to accept any wage that is offered to them, making them live in conditions which take away their sense of dignity, and curtailing any social security benefit that could help them survive in times of difficulties. If we do not alter the course of economic progress and reorient development programmes, the implications could be severe with increasing hunger-related deaths and destitution, leading to social unrest and crime.

Sumit Mazumdar is Research Fellow, Centre for Health Economics, University of York, U.K. Indranil is Associate Professor, School of Government and Public Policy, O.P. Jindal Global University, Sonipat, Haryana