Covid Pushed Nearly 23 Crore Indians Into Poverty, Estimates This Study

Research by the Azim Premji University shows that covid-19 pushed 23 crore wage earners below the national minimum wage threshold.

A cyclist rides past flood waters and an abandoned sugar mill in Marhaura, Bihar. Photographer: Prashanth Vishwanathan/Bloomberg
A cyclist rides past flood waters and an abandoned sugar mill in Marhaura, Bihar. Photographer: Prashanth Vishwanathan/Bloomberg

The first wave of the Covid-19 crisis pushed nearly 23 crore Indians into poverty, estimates a study by the Azim Premji University. This, as the labour market was slow to recover from the hit to the economy last year, leading to a disproportionate impact on the poor.

In April and May 2020, the poorest 20% of households lost their entire incomes, said the State of Working India report for 2021 by the Azim Premji University, published on Wednesday. This loss, coming on the back of already low incomes, pushed 23 crore individuals below the threshold of Rs 375 per day, which is the level of national minimum wage recommended by the Anoop Satpathy Committee.

The number of individuals who lie below the national minimum wage threshold increased by 23 crore during the pandemic. This amounts to an increase in the poverty rate by 15 percentage points in rural and nearly 20 percentage points in urban areas.
State of Working India 2021, Azim Premji University
Covid Pushed Nearly 23 Crore Indians Into Poverty, Estimates This Study

Had the pandemic not occurred, poverty would have declined by 5 percentage points in rural areas and 1.5 percentage points in urban areas between 2019 and 2020, helping lift 5 crore people above the minimum wage threshold.

The report specifies that it has used the Satpathy committee recommended minimum wage as the threshold since the official poverty line as set by the Suresh Tendulkar committee may be outdated now.

The survey by APU was conducted in three rounds with last round of the survey concluding in December 2020. Findings presented here must be regarded as provisional, according to the report, as neither the short-term impact nor the longer-term effects are fully clear amid the second wave.

However, even preliminary findings by researchers at APU place the number of Indian pushed into poverty at a far higher level than other recent research. A Pew Research Centre Analysis had estimated that the Covid-19 recession led to nearly 7.5 crore Indians being pushed into poverty, accounting for nearly 60% of the global increase in poverty. The think tank benchmarked income to $2 or less a day.

Covid Pushed Nearly 23 Crore Indians Into Poverty, Estimates This Study

The Poor Got Poorer

On average, the bottom 10 percentiles or the bottom-most decile, experienced a 27% drop in incomes. The impact declines to 23% for the 40 to 50 percentiles and further drops to 22% for the top 10 percentiles, according to the report’s findings.

“The difference of a few percentage points between the poor and the relatively well-off may not appear too significant, but it’s worth remembering that for an average household of four members in the bottom decile, the proportionate loss of 27% translates, in absolute terms, to a decline of Rs 15,700, or just over two months’ income. And this loss is on a very low base to begin with, thus implying a severe reduction in welfare during the Covid period,” the report explained.

Households have coped by reducing food intake, borrowing, and selling assets, according to APU’s findings. Government relief has helped avoid the most severe forms of distress, but the reach of support measures is incomplete, leaving out some of the most vulnerable workers and households.

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.
State of Working India 2021, Azim Premji University

Incomplete Labour Market Recovery

The survey also found that the bounce back in employment and incomes, which began in June 2020, remains incomplete.

About 100 million Indians lost jobs during the nationwide April-May 2020 lockdown. Even by the end of 2020, about 15 million workers remained out of work.

Job losses were higher for states with a higher average Covid case load. Mobility restrictions, such as those caused by lockdowns, predictably led to income losses due to decreased economic activity.

We find that a 10% decline in mobility was associated with a 7.5% decline in income.  With the coming of the second wave in April 2021and with renewed restrictions on mobility, it remains to be seen how the recovery progresses and also whether there are likely to be more permanent changes in labour demand over the longer term.  
State of Working India 2021, Azim Premji University
Covid Pushed Nearly 23 Crore Indians Into Poverty, Estimates This Study

Informal Employment Increased

In line with the findings of other research work, the APU study found that there was a large increase in informal employment because of the Covid-19 crisis.

Salaried workers moved into self-employment and daily wage work, while agriculture and trade emerged as fallback sectors. After the lockdown, workers came back into more precarious and informal forms of employment, the report said.

Nearly half of formal salaried workers have moved into informal work, with 30% as self-employed, 10% as casual wage workers, and 9% as informal salaried workers, between late 2019 and late 2020.

Not surprisingly, education was crucial factor determining the extent of job loss. Those with higher levels of education, particularly graduates and above, were significantly less likely to lose employment as a result of the lockdown.

Migrants, Women, Younger Workers Worst Hit

Women and younger workers were disproportionately affected and many couldn’t return to work even by the end of the year.

“During the lockdown, and in the months after, 61% of working men remained employed and 7% lost employment and did not return to work. For women, only 19% remained employed and 47% suffered a permanent job loss during the lockdown, not returning to work even by the end of 2020,” the report said.

Circular migrants have borne the harshest impact of the Covid-19 shock.

Class, caste, ethnic or linguistic identity, and lack of stable residence as well as political voice render casual wage migrants in industries such as construction, the most precarious and hard to reach with social protection policies. The university’s Covid-19 Livelihoods Phone Survey had shown that 81% migrants lost employment in the lockdown, compared to 64% non-migrants. About 31% of migrant workers reported not being able to access rations compared to 15% non-migrants.