Loss of income ground up assessment of recovery support to households
OPINION I The Indian Express
This column offers a 'people view' — household-level data — of Indian households to feed into the ongoing macro-level discussion about the right level of financial support needed to help citizens get to their feet following the loss of income caused by the lockdown, and where it should be deployed.
Presented here is a ground-up calculation based on what categories of jobs and job arrangements mainly contribute to the income of households, and what that actual income level is.
Macro-level discussions are based on a broadbrush understanding of occupation — large swathes of informality, agriculture dependence and migrants. We base our assessment on a more specific map of occupation and income level by town class for urban, and district development level for rural areas.
The data comes from our pan-Indian study, the ICE 360 database, 2016 and 2018, on how Indian households earn, spend, save, live, and access public goods.
Occupations & vulnerability
In the accompanying table, occupation categories are described and arranged in decreasing order of vulnerability based on the nature of work and income level; the table shows how large, how dominant, and how vulnerable or "at risk" each occupation category is, separately for urban and rural India.
Breakdown by occupation, Most vulnerable first
We measure vulnerability by what percentage of households in each category fall into the bottom 40% of income earners, separately for urban/rural.
We chose 40% to define the vulnerable instead of the conventional definition of the bottom 20% because our work shows that this entire group has very little cushion between income and expenditure even in good times; it's always touch-and-go for them.
The poorest 20% don't manage to meet even their routine expenditure required for day-to-day living, while the 20% above them have a slim margin in good times often destroyed by health or social emergencies or inflation.
Row 1 of the table shows the most vulnerable group by far of 91 million households, dependent on casual labour, a quarter of all urban Indian and a third of all rural Indian households, largely low-income.
Two months of income support at the lower end of the group's earning level of Rs 10,000 in tier 3 and tier 4 towns, and Rs 8,500 in the less developed districts of rural, adds up to Rs 1.62 lakh crore – 0.85% of GDP.
The next most vulnerable are petty trader (hawkers, street vendors) households (row 2 of table), for whom one month's income support can also fund inventory, which they can start rotating.
This group earns about as much or as little as casual labour with no U-R difference and will require Rs 10,500 crore.
Next are the individual service provider households (row 3 of table) who are reasonably well off. Many have the skills for which pent-up demand already exists (beauticians and electricians for instance).
There is, however, a 30% segment within this occupation category that classifies as low-income, earns only slightly more than labour or petty traders, and needs support. One month of income support to them needs Rs 5,000 crore.
The support bill
The total support bill of Rs 1.78 lakh crore for this core vulnerable group of 10.6 crore households is about 0.92% of GDP. This group is only about one-fourth of the Jan Dhan household base of 38.3 crore. There is another large group of 45 million salaried work-dependent households, mostly in the informal sector (row 4 of the table), but attached to an employer of sorts.
If the Prime Minister could repeat his plea to the employers of this group to please share and pay full salaries through the lockdown period, it would secure this group – the "India 2" that shapes our cities, and is a big enabler of "India 1".
Most of them are fairly well off in large towns and rural areas, but with a small lower income segment equally distributed between small town urban and less developed rural. One month's income support to this segment at the casual labour rate amounts to Rs 8,250 crore.
In our assessment, all told, the total one-time income support bill, assuming the lifting of the lockdown as planned, amounts to about Rs 1.86 lakh crore, or about 1% of GDP.
What of small shop and micro business owners (row 5 of the table), who are hurting with no revenue, and who have fixed expenses?
They are better aided through business concessions or directed small ticket 'working capital' lending at rates far lower than what NBFCs would charge for unsecured lending. As rows 6 and 7 of the table show, the secure formally employed salaried group are very small relative to the others and financially well off, more secure, and have a savings cushion. Yet, they get a larger than warranted share of concern as all the talk of job losses and layoffs shows! Perhaps a change in our vocabulary to replace the word 'jobs' with 'livelihoods' would help us be more in tune with the reality of India.