Covid-19: The economic costs
It pushed people from a more productive urban economy to a less productive rural sector
The Indian economy experienced an unprecedented contraction of 24.4% in the quarter ending June 2020 due to the 68-day-long lockdown that was imposed on March 24 to curb the spread of Covid-19. That employment suffered during this period is a given. The urban unemployment rate increased from 8.9% in Apriljune 2019 to 20.9% in the same period in 2020, as per the Periodic Labour Force Survey (PLFS) for the April-june 2020 period released in March. But since the quarterly PLFS numbers do not include rural areas, they did not reveal the entire employment story. The annual PLFS report for July 2019-June 2020, released last week, gives a better idea of the lockdown’s impact on employment, and corroborates anecdotal accounts of reverse migration to rural areas in distress. Urban jobs fell by 11.05 million between April-june 2019 and April-june 2020, while rural jobs increased by 14.67 million in the same period. The share of employment in agriculture increased in 2019-20. This is unprecedented. Real wages fell for most workers, the highest for the self-employed category during April-june 2020 period. Average number of hours worked fell across categories.
In short, the labour market faced a multi-pronged squeeze. It is easy to miss these nuances if one looks at the headline employment numbers for 2019-20. They show an improvement in labour force participation rate and a decline in the unemployment rate, creating a misleading picture of labour markets. The latest PLFS findings have brought to the fore the fact that vulnerabilities in Indian labour markets might not reflect themselves in the most commonly tracked statistic — the unemployment rate. In a country which has little in terms of social security, staying unemployed is not an option. The pandemic pushed people from the more productive urban economy to the less productive rural sector. This is also reflected in the per worker output in agriculture in real terms, which went down from ₹1.18 lakh in 2018-19 to ₹1.02 lakh in 2019-20 (Julyjune period). A rise in demand for work under the Mahatma Gandhi National Rural Employment Guarantee Scheme also tells the same story.
PLFS numbers after the April-june 2020 period are not available. Even quarterly reports will not have information on rural labour markets. But PLFS numbers suggest what to expect. Restoring growth is not going to be enough to revive the econom. Covid19 distributive consequences are equally adverse. That the Centre has not offered much in terms of direct fiscal support and its tax burden has become more regressive will only worsen the situation.