Which economic fault-lines did the pandemic expose? How can India bounce back?

Pervez’s truck and Nasir’s machine

It was the third week of June 2021. As local lockdowns / restrictions were being lifted, we were meeting people in the industrial periphery of the national capital – at Bawana, Narela and Tronica City – and trying to understand how things were shaping up. This is when we came across Pervez Ahmed of Bhagalpur. He was waiting with his small truck in front of a plastic factory at Bawana. His cousin, Nasir, was cleaning the windscreen.

At first sight, neither Pervez nor Nasir looked like regular truck drivers and cleaners. In September 2020, 35-year-old Nasir had finally sold off his computerised embroidery machine as scrap. Nasir’s father was a weaver of renowned Banarasi silk sarees. He himself has a diploma in engineering. With a bank loan, he had purchased a computerised embroidery machine in the hope that in and around his native Nagwa–Sundarpur, he would be able to find enough work.

Like it is with so many other small businesses, both demonetisation and GST were big blows for him. Demands for traditional Benarasi sarees had been deteriorating but a few designers specialising in wedding dresses provided job-work to him. Since the lockdown, however, they had all brought down their shutters as there was no big fat Indian weddings in 2020. Nasir had no option but to sell his machine. The loan still remains unpaid, but the pressure of daily life is more crushing than anything else.

From late 2020, they started carrying goods between Patna and Varanasi again but in April 2021, Nasir contracted Covid and soon the entire family was affected. Pervez, in fact, had a close shave and Nasir’s father is still undergoing treatment. Covid, thus, took away their health and savings both.

It was difficult to say whether Pervez was any better off than Nasir or not. In his early 50s, Pervez had been able to establish a small transport company with two trucks. His trucks used to ply between Varanasi/Patna and Delhi. But a new environmental legislation mandated that all old vehicles had to go off the road by April 2020. Business was not very promising in any case, so Pervez sold off those long-distance trucks just before the 2020 lockdown. He then took a small truck on a monthly contract and drove it himself.

From the owner of a small transport company, Pervez was reduced to being a driver and from a job giver, Nasir became a job seeker. Though Nasir was mostly quiet and probably quite bitter too, Pervez turned out to be a kind and sensitive person. When we met for the second time, he invited us to his locality. At the intersection of middle-class Delhi–UP border, next to a dirty canal and an enormous garbage pile up, an NGO was distributing food. Pervez told us that one day, that NGO had hired his truck and after getting to know them, he had requested them to provide food in his locality too.

His neighbours mostly earned their living by providing services to nearby middle-class colonies of Noida or Delhi. Some of them worked as drivers or maids and have mostly lost jobs but most of them were self-employed. Pervez told us that many of them did not even have ration cards or had a chronic patient at home – handicaps, which proved to be enormously costly during lockdowns. Many of them also did not have any place to go back to. Pervez introduced us to Nathu, who ran a vegetable cart, and Anil, who sold cheap utensils from his makeshift shop, and Sukhlal, who ironed clothes for a living, and the painter, Maqbool – today they make up more than half (52%) of the Indian workforce.

This kind of self-employment is the darkest corner of the Indian employment scenario. NSSO’s Periodic Labour Force Survey (2017-2018) was the first official exercise to collect data about these self-employed people. It concluded that only 4% of the self-employed are able to provide jobs to others. These are the SMEs we have discussed earlier. About 70% of the self-employed run their enterprises on their own labour or the unpaid labour of their family members. This survey also says that of the self-employed, 80% earn less than Rs 15,000 a month.

Rs 500-a-day economy

Budhiya typically used to work at stand-alone houses and government quarters. By the time Sheetal and Jagat came to Delhi, they mostly found jobs in large, under-construction housing projects. Once residents moved into such apartment complexes, they retained the services of 2-3 plumbers for 24×7 maintenance work. In new, middle-class residential areas, increasing trade, transport and other services created a lot of job opportunities. But urban life was expensive and the continuous inflow of people kept the wages low, just around the government-mandated minimum rates (Rs 100-300 per day from 2005 to 2019).

The daily average income of Sheetal and Jagat was in the range of Rs 200-500. Most of it was spent immediately on rent, food, transport, phone and other daily necessities. Without the income contribution of their wives, their financial condition would not have been better than Budhiya’s.

As slowdown gradually spread through, lakhs of people like Sheetal and Jagat were caught in this quagmire of “limited opportunities-unlimited hands”. The high growth years provided them with jobs but did not allow them to save much as wages did not rise in tandem with living expenses. International Labour Organisation’s (ILO) India Wage Report (2018) says, between 1993 and 2014, India’s GDP expanded four-fold but the inflation-adjusted wage rates rose only two-fold.

Even adjusting for occasional highs, people like Sheetal and Jagat could never earn more than ₹15,000 monthly. Most people in Pervez’s neighbourhood would be lucky to earn even ₹15,000 during the best of their months. Sundar, the tribal boy from Malkangiri, worked for Zomato and Uber for 8-10 hours braving extreme Delhi weathers and treacherous roads for a paltry income of ₹300-400 per day.

This was the vicious cycle of ₹500-a-day economy. This was the new subsistence economy – enough to survive in a city but not enough to protect them from rude shocks of life. A number of recent studies/surveys have shown how the most of India failed to move beyond this ₹500-a-day economy.

It may be mentioned that the Seventh Pay Commission had fixed ₹18,000 as basic pay (plus Dearness Allowance or indexation to inflation and other benefits) as the minimum entry-level salary for the lowest rung of government jobs in 2016. A committee constituted by the Ministry of Labour and Employment (January 2019) recommended ₹375 per day as the national minimum wage necessary to meet basic household needs.

Yet, the two main central government employment programmes – MGNREGA and the recently announced Garib Kalyan Rojgar Abhiyan – provide for much less than Rs 375 per day. Lockdown resulted in 12 crore people losing their jobs or livelihoods. It was an unprecedented shock for the Indian workforce. Gradually, most of them could get back to work but not the same type of work. As a salaried person lost his job, he tried gig work or small business. Similarly, from micro businesses/hawking, people shifted to daily wage labour. Between March 2020 and March 2021, total number of employed Indians came down by 54 lakh. This is the absolute loss of jobs/livelihoods but it hides much bigger tragedy. During this period, more than 90 lakh people again shifted to farming as they had no other option. This is nothing but disguised unemployment.

From April to May 2020, the job situation did improve but not as much as the economy. No wonder, from labour reform, the initiative had shifted at the state level to reserve the existing jobs for locals.

But the gains were quickly washed away during the second wave. In May 2021 alone, more than 2.5 crore people lost jobs/livelihoods as localised lockdowns covered almost the entire country. In April-May 2021, unemployment rate hit a high of 14.7% (double digit unemployment is unusual for India but now we have seen it twice in two years) and labour participation rate declined to below 40% (global average is around 57% and it goes on to show that people have lost hope of employment and they are not even trying for jobs).

Not only the fall in absolute numbers but the decline in the quality of employment is perhaps more worrisome. From the beginning of the pandemic to May 2021, India has witnessed a cumulative loss of more than 1.25 crore salaried jobs. Most large corporates cut jobs (even though their profits soared) and most of the job losses (62%) have happened in rural India even though just 42% salaried jobs are in rural India.

Pandemic proved to be a disaster for women employment in India. In 2019–2020, women accounted for just 10.7% of the workforce but in April 2020, they suffered 13.9% of the job losses. By November 2020, 49% job losses were borne by women. They also suffered more during the second wave in 2021 and as a result, in April 2021, unemployment rate among women jumped to more than three times that of men and more women are falling out of the labour force. A Deloitte report also points out that from health to work-life balance and employment opportunities, pandemic has affected Indian women much more than the global average.

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The complete absence of social security and the inability to build even emergency savings forced the migrant workers to return to their villages. Rural economy, however, did not have much opportunity for them and the moment the lockdown was lifted they were eager to return to cities and seek work as deliverymen, security guards and e-rickshaw drivers.

As long as the economy is stuck in the slow lane, job creation would remain low. And that is not all—a number of manufacturing companies are planning to shift to robotic manufacturing.

We have seen that Sheetal and Jagat would have been much better protected if they had salaried jobs with proper contracts. For the next three years, the proportion of daily wage and non-contractual jobs is likely to go up even more.

Even if the farm sector and some SMEs provide some jobs, the wage rate would still remain deeply depressed given the high number of job seekers.

When the Tide Turns

Alvin Toffler wrote, ‘The future always comes too fast and in the wrong order.’ Demographic dividend has been the basis of the India growth story for decades; now, it is most likely to be over by the 2030s. The first signs of a greying population (a rise in aged population due to higher life expectancy and decreasing fertility rate) are already visible in the southern states and in Punjab, Himachal Pradesh, West Bengal and Maharashtra. If outsiders do not come in, then by 2030, Tamil Nadu’s population growth rate will be in the negative and Andhra’s will be around zero. From 2021 to 2031, India’s working population will go up annually by 97 lakhs but in the next decade, this will start declining at the rate of 42 lakhs every year.

Countries which have made the successful transition to high income economies managed to at least double the per

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capita income during the years of demographic dividend. With an income of ₹500 a day, Odisha’s Sheetal and Jagat, UP’s Govind and Nasir and Bihar’s Pervez could neither save for their retirement nor could they invest much in the education of their next generation. Now that many of them would be forced to start their struggle all over again, it is not only India’s present but even its future that is in trouble due to this terrible shock.

The greying of the Indian population started exactly at the moment when the economy crashed and unemployment rose to a record high.

In 1991, 50% of India’s population was below the official poverty line. Since then, economic liberalisation steadily lifted millions out of poverty, something four decades of socialism could not achieve. At the end of 2019, the percentage of the population below the official poverty line was around 20%. This was one of the most important gains of the reform process. But in 2020 alone, millions have slid back into poverty. To find out who these new poor are and why poverty is increasing in India, we need to travel to Dharoli village at the UP–Bihar border, where our old friend, Govind, is waiting with his father, Bechelal, for us.

Excerpted with permission from Countdown: Can India Rebound from the Meltdown of the Century?, Anshuman Tiwari and Anindya Sengupta, Bloomsbury India.