The author: Marianne Bertrand, Kaushik Krishnan, Heather Schofield | New Delhi.
Published : 13. May 2020 4:30:19
Eighty-four percent of Indian households report a decrease in income since the blockade. A third of Indian households report that they cannot afford to live more than a week before a disaster. (photo file)
The expansion of Kovida-19 and the economic blockade imposed by the Indian Government in response to it have led to considerable economic problems. These effects are both significant and widespread. Eighty-four percent of Indian households report a drop in income after the blockade. A third of Indian households report that they cannot afford to live more than a week before a disaster.
These statistics, which are based on our analysis of the National Representation Survey of Indian Households, covering the period from 18 to 30 years, have been published in the United States. The study, carried out by the Indian Economic Observatory (IMEC) on 4 April 2020, is expected to be a call for action for Indian policymakers trying to find the best balance between public health and the economic crisis.
It is important to note that the data also show that the economic impact of the embargo is not evenly spread over people and places. About 85 percent of households that received a monthly income per capita of less than Rs. 3,801 before the blockade, which is in the lower quintile of the per capita income distribution, experienced a drop in income. On the other hand, only 66% of households earning more than Rs.12,734 before the blockade, the upper quintile of per capita income distribution, experienced a drop in income. Although both indicators are exceptionally high, more than 90% of households in this income bracket have experienced a fall in income.
The low location-based loss of income among the people with the highest per capita income in India is in line with what has been observed in other countries: Workers on higher incomes are more likely to work in occupations that enable them to work in remote areas and thus continue to earn a living, despite the fact that home visits are made. A slightly smaller impact on households in the lowest income quintile compared to the second and third quintiles may reflect their wider professional representation, which remains despite the blockage in this quintile (e.g. agriculture, food vendors). However, it may also reflect the fact that existing social protection and income support programmes in India do not sufficiently target households in these quintiles, who have suffered serious job losses as a result of the closures.
Although economic losses as a result of the embargo are widespread among both rural and urban households, rural households are most affected: 88 percent of rural households report a loss of income as a result of the embargo, compared to 75 percent of urban households. As Figure 1 shows, this difference is due to the fact that higher incomes provide protection against the blockade, especially households in urban areas. Here, too, we assume that this reflects the range of professions and the greater availability of teleworking opportunities for workers in urban areas.
Monthly per capita income (as of 20 February); data source : KFHS CMIP
In addition, our data show considerable differences in the loss of income as a result of the residence status (see card). The five most affected states are Tripura, Chhattisgarh, Bihar, Jharkhand and Haryana. It should be noted that the economic impact of the State does not clearly indicate the scale of the epidemic. We assume that the differences in per capita income and occupational composition before the blockade, the severity of the blockade and the effectiveness of the assistance are most likely due to this interstate variation.
Contrary to most of the variations described above, we found little evidence of different effects of household blockages, with roughly the same proportion of Hindus and Muslims negatively affected by income quintiles.
Given the widespread loss of income discussed above and the low basic wellbeing of many Indian households, it is not surprising that a very large proportion of Indian households report that they cannot continue their activities without additional support – even for a relatively short period of time (Figure 2).
Across India, 34% of all households report that they can live for up to a week without extra help. Among the households earning less than Rs.8,142 per month per capita before the blockade, almost a third family could not live for more than 7 days without additional support. The decisive factor is that 14 percent of the sample is no longer financed and runs the risk of losing his rights if he is unable to take out a loan or receive an additional payment.
These figures suggest that a faster distribution of remittances in kind or cash is necessary to avoid an increase in malnutrition and severe deprivation. By stimulating demand and improving health, these transfers should also contribute to a more active recovery as the country reopens.
Marianne Bertrand is professor emeritus of economics at the University of Chicago’s Booth School of Business, Chris P. Dialinas, and director of the Chicago Rustandy Center for Social Sector Innovation and the UChicago Poverty Lab.
Click here to read his full analysis.
Kaushik Krishnan is chief economist at the Centre for Economic Monitoring of India (CMIE). Heather Scofield is a university lecturer at the Perelman School of Medicine and the Wharton School.
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