As Narendra Modi completes seven years at the helm, the economy renders any celebration — even by the fiercest of the loyal — impossible.
To India’s common man, who was witness to the horrors of partition, Emergency, political upheavals and numerous natural disasters, COVID has been extra cruel. While the virus doesn’t discriminate between the rich and the poor, access to healthcare is a far greater challenge for the latter.
Be it the mass movement of migrants to their hometowns last year, or the strict lockdowns snuffing out traders’ revenues for weeks at a stretch across both waves of COVID, or the mounting job loss and unemployment numbers estimated by studies, the pandemic will always be remembered for being crueller to ordinary Indians.
Fewer jobs, lesser pay
A report titled ‘State of Working: India 2021’, written by economists Amit Basole, Rosa Abraham and others of the Azim Premji University’s Centre for Sustainable Employment (CSE), looks at how COVID impacted employment in the country from March to October 2020. Per the report, the number of workers with an income less than the national floor-level minimum wage of ₹375 per day increased by 23 crore during that period.
This means, about 23 crore people have been pushed into poverty in just a year. In a media interview, Basole and Abraham also noted that women and younger workers were hit harder by the COVID-led economic slump. As poverty shot up, households were forced to borrow money from informal sources and trim their food consumption — with women bearing the brunt of the latter option — said the economists.
Another research, by US-based Pew Research Centre, said the middle class in India shrank by 3.2 crore people. Over 7.5 crore people were pushed below the poverty line due to COVID in 2020, it added.
Gold loan numbers area a stark indicator of poverty trends in India. RBI data reveal that gold loans extended by scheduled commercial banks spiked 81.5% in March 2021, against March 2020. Often, the gold was never reclaimed. A Bloomberg report said about ₹412 crore worth of gold was auctioned by Manappuram Finance in fiscal 2020-21, vis-à-vis Rs ₹116 crore in the fiscal — a rise of almost four times.
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While job losses and pay cuts are zooming, fresh employment is nowhere near taking off. Last week, the Centre for Monitoring Indian Economy (CMIE) said that in the weeks ended May 16 and May 23, unemployment rate had reached 14.5% and 14.7%, respectively, way higher than the 8.7% seen in the week ended May 8. “The unemployment rate has moved into double-digits. This is not normal for India,” it said.
The 30-day moving average employment rate as on May 23 fell 100 basis points, marking a loss of 10 million jobs, it further said. India will end May with a double-digit unemployment rate, falling employment rate and substantial loss of employment, the institution predicted.
Similarly, provisional data from the Employees’ Provident Fund Organisation (EPFO) indicated that in February, the number of freshers joining the formal workforce was the lowest in three months. Against more than 8.6 lakh in January 2021, just over 7.6 lakh new workers joined the workforce in February, it said. And this was before the onset of the second wave of COVID.
“It is the worst kind of systemic and moral failure that the most vulnerable always pay the greatest price for everything,” said the CSE report.
Giant woes for small traders
COVID has sounded the death knell for lakhs of small traders across the country. We will probably never get the true picture because most of these units belong to the informal sector, and data are scarce. Small businesses in specific pockets are sometimes mentored by local NGOs or district-level authorities, but nationwide numbers are sketchy at best.
Lockdowns present a huge challenge for these enterprises. While the bigger organisations manage to obtain permission to operate, the smaller ones face strict police action, observed a Bengaluru-based NGO worker. For one thing, they operate on small spaces and social distancing is next to impossible. For another, most do not get classified as ‘essential’, and hence getting permission to operate is difficult.
Also read: COVID lessons: RBI asks govt to have clear exit strategy, build fiscal buffers
Also, falling demand and rising raw material cost often make the businesses unviable. P Palani, who runs a small auto service outlet in Chennai, said that post demonetisation he closed shop for about six months and returned to his village.
Once things improved, he came back, only to find his business getting flattened by COVID in 2020. He did not even try to put it back on its feet after the first wave came down, he said. Now, his family is fully dependent on his son, who has just started working for a small firm.
Many in the sector have also suffered health setbacks due to COVID. Entire families have fallen sick, leading to a big drain on resources. Also, in these set-ups, the entire family is typically involved in the business. So, if one person tests positive, the entire family is quarantined, and the business takes a huge hit, said the Bengaluru-based NGO worker.
Crunch time for MSMEs
Micro, small and medium enterprises (MSMEs), who form the backbone of a robust economy, are no less a victim of the COVID-led economic upheaval. While these enterprises enjoy a certain degree of nimbleness due to their small size that gives them an edge, they lack the financial muscle enjoyed by the bigger players. This means their ability to absorb the shock of the pandemic is severely compromised.
A Dun & Bradstreet survey of over 250 small businesses revealed that over 82% were impacted by COVID. About 70% expected complete recovery to take 12 months. Per data supplied by the MSME Ministry, India has about 6.33 crore MSMEs. This means COVID has adversely impacted over 5 crore of them.
The D&B survey, titled ‘Small Businesses in India and the Way Ahead’, found that 60% of the companies wished for greater governmental support. Their three biggest stated challenges were: lack of market access (42%), productivity improvement (37%), and access to finance (37%).
A survey by the All India Manufacturers’ Organisation said 35% of MSMEs had to shut shop last year due to COVID. The Centre does not have data in this regard, either for the first wave, or the second.
The Centre has announced steps to help bolster the MSME sector. On Sunday, it extended the ₹3 lakh-crore Emergency Credit Line Guarantee Scheme (ECLGS 4.0) to September 30, 2021, from June 30, 2021. Under a ₹29.87 lakh crore, three-part Atmanirbhar Bharat stimulus package announced last year, it sought to improve ease of doing business for MSMEs, among other measures.
Earlier this month, the Reserve Bank of India came out with a slew of measures to ease the pandemic pain. Many of these were focused on the MSME sector, such as funding assistance, liquidity support for small finance banks for on-lending, a loan restructuring facility, and easier credit for MSME entrepreneurs.
But these are grossly inadequate, experts point out. Much larger measures are the need of the hour. Bringing down the GST on key raw materials, at least temporarily, would help, it is felt. Expediting payments by PSUs, who are key end-customers of MSMEs, would largely ease their liquidity issues.
Also, the Centre needs to hasten the vaccination drive on a war-footing. This would not only help MSME units start working again with full strength but also hopefully bring the pandemic to an end.
“We find that additional government support is urgently needed now for two reasons — compensating for the losses sustained during the first year and anticipating the impact of the second wave,” said the CSE report.