Covid-19: Lakhs of people pushed back into poverty, despair

When TMG Kumar closed the doors of its garment factory in April, its 40 employees returned to their villages, for the second time in a year. He is concerned that these workers, who were trained and skilled, will not return because Covid-19 has affected their livelihoods twice now. The Rs 20 lakh loan he borrowed from a private lender, which has now swelled to Rs 25 lakh, adds to his concerns. Labor orders have continued to dry up over the past year, making its future uncertain and volatile.

Stories of distress cross sections.

Hubballi-based Rashmi, 50, mother of two, has not had time to mourn the loss of her husband to Covid-19. Without financial support, she was forced to start looking for a job after an 18-year hiatus. Although her efforts have yet to yield results, her friends have stepped in to support her. She doesn’t know how long she will be able to hold out like this.

Read more: The second wave of the Covid-19 surprised us, India was not ready: the Minister of Finance Nirmala Sitharaman

Her husband used to sell mortgage loans to finance LICs housing as an agent. “To my bad luck, there is no insurance or pension. There is no policy to find employment for affected family members, ”says Rashmi.

The Covid-19 pandemic has left widespread misery in its wake. Azim Premji University’s State of Work in India 2021 report released earlier this month documented the plight of people from various economic backgrounds.

About 23 million people have slipped below the poverty line, which is a 15-20% increase in poverty since Covid-19 hit the country just over a year ago. An estimated 1.5 million people have been left unemployed; those with a job found their income level reduced – for an average household of four members the monthly per capita income was Rs 4,979 in October, down 16.8% from Rs 5,989 in January 2020 .

India’s middle class shrank by 3.2 crore, while an additional 7.5 crore was pushed below the poverty line in 2020 says a report from the US-based Pew Research Center.

Also Read: India Could Have 20 Times More Covid-19 Cases, 4.5 Times More Deaths Than Official Figures: Study

People from low-income families and those who have lost their sole breadwinner have been pushed into poverty. Although Karnataka announced relief measures, large sections of unorganized workers and industry were left behind.

Shankar, 45, earned nearly Rs 60,000 as a driver in a travel agency in Bangalore. That is until he loses his job with a dozen others in March 2020 due to the pandemic.

Back in his village of Hassan, he now performs multiple tasks ranging from operating an excavator to working as a farm worker and barely manages to earn half of what he previously earned.

His colleagues who have returned to their country of origin are not as lucky as he is. Having no skills to operate an excavator like him, they ended up as farm laborers, earning less than 10,000 rupees per month.

Signs of distress

From January to December 2020, up to 1.27 crore people partially withdrew funds from Employee Provident Fund accounts, up from 54 lakh in 2019.

A report through Money control shows that an estimate of 3.5 crore out of a total of 6 crore EPFO ​​subscribers had withdrawn nearly Rs 1.25 lakh crore since the start of the pandemic.

Between April 1, 2020 and May 21, 2021, at least 72 lakh workers had taken advantage of the Covid-19 non-refundable advance in the amount of Rs 18,500 crore.

The demand for employment under MGNREGA is also at an all time high, with an increase of almost 40% in the number of households looking for work compared to 2019.

RBI data indicates that loans against gold jewelry by listed commercial banks increased 81.5% in March from a year ago.

Many even lost their gold deposits in the past year because they could not repay their loans. An estimated value of Rs 412 crore of gold was auctioned off by Manappuram Finance, a company that lends against gold deposits, during the fiscal year that ended in March 2021, against Rs 116 crore l year before, according to a Bloomberg report.

Reimbursements from affected MFIs

In early April, the rating agency CRISIL warned of a slowdown in NBFC – MFI collections as part of the lockout in Maharashtra. The ensuing lockdown in Karnataka also affected the NBFC-MFI sector.

The Shri Kshetra Dharmasthala Rural Development Project (SKDRDP), one of the state’s largest MFIs with more than 48 lakh of active self-help group members, said their collection stopped as of 3 may.

SHG members have also benefited from a moratorium on loan repayments until the end of the year (December 31), although interest will continue to be charged.

SKDRDP executive director LH Manjunath says this time around, Covid-19 has taken a toll on the health of SKDRDP clients, with 2,200 SHG members losing their lives due to Covid; in urban and peri-urban areas around Bengaluru and Mysuru (including Ramanagara, Kolar, Tumakuru, and Chikkaballapur), loss of tourism-related livelihoods also affects payments.

“The whole tourism industry is lost. Whether they are rickshaw drivers, small hotels, restaurants, buses, all of these people have been affected, ”adds Manjunath.

MSME, retail sector

Certain sectors of the economy, such as retail trade, MSMEs and hospitality, have been more affected than others.

“Retail businesses are under enormous financial strain as a result of the extended foreclosure. Financial pressures are on various fronts such as wages, rents, electricity charges and various taxes and license fees, among others. Alleviating the burden will require the support of various government-led bodies, ”says Kumar Rajagopalan, CEO of the Retailers Association of India.

The circumstances are no different in the case of MSMEs.

Since last year, the pandemic and subsequent lockdowns have resulted in the closure of around 15% to 20% of 8 lakh odd MSMEs in Karnataka.

“MSMEs are crippled by large-scale supply chain disruption and loss of export orders,” observes KB Arasappa, president of the Karnataka Small Scale Industries Association.

If the state government does not allow all micro and small industries to operate immediately without any hindrance, nearly 40 to 50 percent of units could shut down permanently due to the build-up of business losses, Arasappa says.


“This will lead to job losses and loss of revenue for the public treasury, further weakening the government in the fight against Covid-19,” Arasappa adds.

Nowhere is this more evident than on Bengaluru’s SP Road (Sadar Patrappa Road, also colloquially known as “Spare Parts” Road), known for its electronics. A cluster of shops along stuffy lanes provide hardware, agricultural pumps, and machine tools to most of Karnataka.

Last year, this market area remained closed until mid-August, even after the rest of the city opened as it was classified as a red zone.

In the second iteration of the lockdown, the SP road is desolate, the garbage piles along narrow roads especially highlighted in the absence of its crowds and merchandise spilling into the streets. Businesses are in trouble, with serious consequences.

Small businesses are hurting

Junaid Ali’s family has been at SP Road for four generations, where he runs a sanitary ware store. He says that although there has been no business, most business owners in the area still have to pay rent, ranging from Rs 40,000 to Rs a lakh per month.

Junaid’s family runs a few other businesses nearby, in addition to renting out shops themselves. “We gave up a month’s rent because we understand the situation,” he says.

Vipan, a manufacturer from Jalandhar, Punjab, who supplies these hardware and machine tools to stores on SP Road, says that since his business has focused on southern India, the company has been affected by the lockdown of Karnataka.

He sells goods worth Rs 25 lakh on average every month. He lost some Rs 55 lakh in the lockdown last year.

“With the closure of Karnataka, there is no demand. Payments don’t happen. It’s a clear effect of the lockdown, ”he says.

Without any government support, local business owners work with a local charity. Unlike last time, they say there is more distress this time around.

“A lot of people don’t have the money for three meals a day, but they don’t come forward because they are ashamed,” says Tousif, whose family owns a hardware store in the area.

“Since I was born here, I know what’s going on. So even if people don’t ask, we make sure a grocery kit arrives at their house, ”Tousif says.

Tousif and his team donated more than 150 bags of groceries on May 10, and they plan to support another 150 families in the coming days.

“I think the middle class is suffering the most. The rich are not affected much and the poor are used to hardship, ”says Junaid.


Measures to mitigate the crisis

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Jennifer Amaro

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