Interventions For Dealing With A Loss Of Income

Of losses, risks, and interventions

By: Valerie Mendonca & Supriya Sharma

‘Unprecedented’, ‘terrifying’, ‘alarming’ are just some of the adjectives being used to describe the current crisis of Covid — 19. These are also the adjectives being used to describe the crisis that has befallen the millions of migrant workers in India. The pictures of thousands of migrant workers leaving for their native villages on foot and thronging the bus station at the Delhi-UP border are unforgettable.

Much has been debated about this crisis — how it could have been averted or handled better. The central and state governments have announced several measures such cash transfers or free food delivery to assuage the dire circumstances of the migrant workers. Many private groups are doing extensive work along the same lines too. Having been publishing the real life stories of this segment under the People of Bharat series for over 1.5 years, we have come to realise that the risks and challenges facing this segment are many, diverse, and spread across multiple time periods.

Some Statistics about the Low and Middle Income Segment in India

The Indian Labour Organization (ILO) has identified 81% of India’s population to be working for the informal/unorganised sector. According to the latest Census, 60% of Indians depend on agriculture for a living; with almost 30% of rural households being ‘landless’, they derive a major part of their income from manual/casual labour. A study of urban settings found that 12% of Indians are employed as casual labor and 40% in ‘salaried’ jobs — not necessarily covered with job/social security. Almost two-thirds of these workers have no written contracts or terms of employment which also includes domestic helpers. Thus, for a major population, the lockdown will create unemployment, signaling a time of nation-wide economic and social crisis.

The People of Bharat Series.

The People of Bharat is a series of blog posts published fortnightly under the Bharat Inclusion Initiative. We began this series in September 2018 and have published 32 stories detailing the lives of people from the low and middle income segments in India. Thus far, the ‘People of Bharat’ has covered migrant workers, self-employed and those working in the unorganised/informal sector. The stories present the hopes, dreams, and aspirations of the men and women woven together, while also detailing their financial and livelihood realities and struggles.

These stories, collected from all of India, have been key in helping us understand the financial aspirations of the segment: for most it is being able to educate their children, own a house, and build capital for emergencies or expanding their businesses. In this article, we distil these aspirations and financial lives from the various stories published thus far. Our goal is one — tease open and specify the potential effects of the lockdown and the impending economic crisis on the People of Bharat.

FULL OR PARTIAL LOSS OF INCOME

The daily wage earners

Govind Kumar, lives in a village on the outskirts of Lucknow city, Uttar Pradesh and irons laundry for a living. He earns Rs. 150–300 every day and uses most of his earnings to buy groceries on his way home. With a lockdown in place, he will not be able to work. For Govind, the lockdown will imply the loss of earnings and therefore a stress on purchasing daily groceries. On the other hand, Ajmal and his wife work as casual labourers– they travel to Panvel, Maharashtra from Jalgaon every season where they both work at a brick kiln. The kilns are now closed and workers would either be sent home or would have to live on the site under isolated conditions with no income. For Ajmal, a day without work means he is short of cash for buying groceries for that day. He would also need to dip into his savings if he is out of work for over a few days. His dreams of building his own house will have to be postponed. We have found that most daily wage earners keep away a part of their earnings. In absence of any income, these savings will have to be dipped into, which in turn would leave daily wage earners like Govind and Ajmal more exposed to financial shocks from any exigency. This, unambiguously, implies a further descent into poverty.

The monthly wage earners

For the people who are paid daily or monthly wages, the lockdown means ‘no pay for no work’. Seema, Gayatri and Raksha work as domestic helpers. Seema works as a cook in Ludhiana, Gayatri as a cleaner in a paying-guest accommodation in Delhi and Raksha as a house help in Ranchi. Though they earn a monthly wage for their services, they have no written contracts with their employers that could assure them of their incomes during the lockdown. The Prime Minister of India and countless social media messages urge the employers to not deduct wages of the househelps and other domestic service providers. However, there is no mechanism to enforce this. The employers could choose to pay them or not for the number of days they spent away from work. While we want to believe in the inherent and widespread goodness of people, we are also sceptical about how many of these middle-class households would continue to pay their house helps for chores they didn’t do. In the event of a prolonged lockdown, the loss of wages will continue to mount and add to the financial strain for the families of Seema, Gayatri, Raksha and many, many more.

The self-employed

The Small and Medium enterprises (SMEs) of India are hailed as the backbone of the economy, contributing up to 31% of GDP and accounting for 80% of the jobs in the country. While India Inc. can work from home, this option is not available to a vast majority of Indians who are engaged with the SME ecosystem. For the self-employed, a lockdown means shutting shop or business operations, or in case of essentials, slowing down of business. Probir runs a sweet shop in Kolkata with help from his brothers; he employs four people under him. In the lockdown, he will not only suffer from lack of business but will also suffer from losses if he wants to continue to pay his staff. Now that the sweet shops are classified as essential in West Bengal, there is some hope for Probir. Satrudhan, a mechanic, works at a rented shop in Ahmedabad which will remain shut. Meera runs a tiffin service in Mumbai which she delivers to the homes of people. In a lockdown, she would not be able to venture out to supply the tiffins, and if she is able to, she would have to expose herself to significant risk of infection. In a nutshell, for the self-employed, the loss of revenues is going to create a working capital issue in addition to reduced incomes. In this case, the strain would not only reflect on current incomes, but an extended lockdown/reduced commercial activity may also have dire implications on the survival of the business.

The salaried employees

Around half the people employed for a salary within the low and middle income segment in India are not covered under any benefits such as pension, gratuity and insurance. Chandrabhan works as an ATM guard in Ahmedabad. He migrated from a village and then moved his family to the city in hopes of making a steady income and giving his children better opportunities. He had started making payments towards life insurance but he could not when he was out of work and the insurance lapsed. Working at an ATM, the 55-year old Chandrabhan, may continue to draw his salary, but is also at a high risk of infection.

Nupur, a single mother, works at a stationery shop in Ranchi. Life at her in-laws became intolerable after the death of her husband — they forced her and her only daughter out of their home. Nupur is employed for a monthly salary but the terms of her employment are largely vocal. She is not covered under any social security benefits — has no pension, gratuity, formal investment plan or insurance. Her 15 year old daughter dreams of becoming a doctor and Nupur is saving money in various small instruments to be able to provide for her daughter’s dreams.

In the event of a prolonged lockdown, both Chandrabhan and Nupur would be at the mercy of the benign or malevolent streaks of their respective employers.

The farmers

The effects of a lockdown on the agricultural sector cannot be ignored. Selly and her family own the land near Udupi and are completely dependent on it for their living. In Selly’s village, the harvest comprises mainly of flowers, vegetables and coconuts which are collected on a daily basis. Due to the lockdown, collection may either not be possible or, at best, be constrained. While some produce like the coconuts could be stored for a long time, vegetables and flowers have a very short shelf life and would be destroyed, if not sold. Over a few weeks, this will impact the further produce, therefore impacting the income over the medium and long term.

BEYOND THE IMPACT ON INCOME

Risks to health

While a lockdown stipulates social distancing, some people would continue to work putting themselves at a higher risk of contracting or spreading the infection. Tulsiram sells vegetables which he buys from the local mandi in Ahmedabad every day. The mandi is closed but Tulsiram stands every morning outside the mandi at 3 am to procure vegetables from local farmers. He is aware that he is putting himself at a health risk, but ties a cloth across his face in lieu of a mask and carries on. Additionally, with a large number of migrants leaving cities in crowded buses, the risk of infections has increased manifold in villages and rural areas. India’s rural health infrastructure is severely inadequate and an outbreak in these areas could result in higher losses of lives, let alone the financial strain on the households.

Crumbling under Credit

Those from the low and middle income segments are vulnerable to changes in their incomes. We have come to learn that a delay in incomes increases the debt implications quickly for the household. Health-related emergencies often require people to borrow more, thereby adding to the credit stress. For instance, Murli gave up his job as a driver due to a slipped-disc medical condition. He now sells soda drinks in rural Telangana. His younger son was born with a few congenital defects, which require substantial medical expenditure every month. Sushma and her family work as sculptors moving from one geographic area to the next. Currently based at a village in Telengana, Sushma borrows money from her suppliers and vendors for raw material to mould statues, and lends to the sculptors. While this is not the festival season for statues, it potentially does not have salient implications for Sushma. The economic slowdown and the related reduction in the market for statues, is yet another story. Samil has taken a job as a poultry farm supervisor in a town in Telengana far from his native village as he needs to make payments towards a loan that he took in the past. A lockdown will force Murli, Sushma and Samil further into credit as they will have to borrow more in order to provide for health and other household expenses.

The three month moratorium on loans has been one of the many initiatives announced by the Government of India. While the jury is still out on the impact of this measure, such moratoriums are often not available to those borrowing in the informal sector. These are often extended basis the personal relationships and come at a high cost. Borrowers in the informal economy, will be under twofold pressure: loss of income and increased struggles/cost of borrowing.

Mounting financial and mental anxieties

Financial advisors in the US have advised people to stop saving for retirement temporarily and build a capital fund that will see them through 3–5 months till the event of lockdown sustains. Counselling services have offered free sessions to tackle mental health problems such as anxiety, stress or phobias. Unfortunately, the low and middle income segment in India has no access to any such services or guidelines. Reduced incomes will further exacerbate financial anxieties, which may then lead to other undesirable life choices.

Social Network Ties

For the People of Bharat, we have found families — immediate and extended — serving as support networks for emotional and financial needs. Many people leave their native villages and move to large cities in hopes of earning a better living. Rajindernath works for a logistics company in Hyderabad and had migrated from Uttar Pradesh in pursuit of employment. Karthik migrated from West Bengal to Gujarat and now works as a contractual employee for a housekeeping services company. Sasanth, a carpenter in Ahmedabad, hails from a village in West Bengal. All of them regularly send money back to their families residing in their native villages.

While some migrant workers have moved their immediate families to towns, almost all of them have a more active social system back in their native villages that they cannot ignore. These communities are the primary support system, and in a loose way, an insurance. We found instances that highlighted savings, lending, borrowing within the community as common transactions. This confidence in the community back at home and ambiguity about the ‘job’ in the city may be the reasons behind the recent mass exodus.

Migrating to urban areas is largely driven by a desire to enhance employment and income prospects. With an impending economic slowdown, fewer and lower paying jobs for migrant workers can be predicted. Workers may choose to stay back in villages, which may spike the rural unemployment ratio (and its associated challenges) as well as the overemployment in the agri-sector.

SOME SUGGESTED INTERVENTIONS

Food packages for the unemployed can certainly stop people from starving and help them survive a lockdown. But given the nature of the Covid-19, it seems a lockdown (or at least stringent social distancing) is here to stay for at least a few more months. This pushes us to think of strategies that can help people tide over the effects of the lockdown over both short and medium terms.

In the short term:

a. Continue supply of dry rations, cooked food, medical and hygiene products.

b. Institute fixed delivery mechanisms, to reduce food availability and delivery ambiguity for the beneficiary.

c. Strengthening supply chains for farmers, to ensure market access for fresh produce.

In the medium term

a. Digitisation of small and medium businesses, to ease their participation in the formal economy, which in turn may ease access to various resources, including formal credit.

b. Promoting SMEs and self-employment in rural India, to curtail and slow down urbanisation, while ensuring adequate income generating opportunities in rural areas.

c. Organising domestic workers, with a view to extend them better and more benign working arrangements and financial health.

d. Promote community driven models of savings, investment and insurance, which are not ad hoc, rather more organised and available within both rural and urban communities.

The outbreak of Covid-19 has brought the country to a standstill. While a lockdown buys us time to organise and deploy our health services/infrastructure, fears of a crashing economy will force us towards harder choices. For the People of Bharat, this is a dark hour! At present their very subsistence stands endangered while the future looks grim. The public and private sector being generous and committed to address some of the challenges mentioned above, is critical. India has always come together in times of a crisis. The People of Bharat are the ones that have kept the lives of the more privileged ones like us well-oiled. It’s time for us to think about creating sustainable solutions for this segment. This lockdown is a chance for us to take a pause and work towards this cause.

About the Author:

Valerie Mendonca is a Research Associate at CIIE.CO, India’s foremost entrepreneurship centre housed at IIM Ahmedabad. Her research interests are women, entrepreneurs, society and storytelling. She tweets @ValerieHood17.

Supriya Sharma is Partner — Insights at CIIE.CO, India’s foremost entrepreneurship centre housed at IIM Ahmedabad.

About Bharat Inclusion Initiative (BII):

Bharat Inclusion Initiative (BII) is an incubator platform at CIIE.CO that provides entrepreneurs the domain knowledge, training, financial support, mentorship, and market access they need to bring inclusive, for profit-business to life. BII’s core design is to promote technology-driven entrepreneurship towards the delivery of affordable services to the “Bharat Segment- the poorest 200 million households in India who survive on less than $5 per person a day” through programs, fellowships, and funding where possible.

The program focuses on solutions leveraging technology, especially the India Stack. It integrates financial inclusion research with entrepreneurship and training to transform these solutions into scalable, viable and high impact businesses. We are keen on partnering with entrepreneurs who are driven by building next-generation digital services for India. Reach out to us at bharatinclusion@ciieindia.org or ask your questions in the comments section below.

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