More than half the households in India have suffered a fall in their incomes during the lockdown, compared to a year ago, and a very large proportion has seen no increase.
India is nearly eight months into the lockdown, but the recovery in household incomes is very slow.
The Indian economy is recovering, listed companies are making huge profits, the employment rate is rising; but, the common people are still struggling with stagnant household incomes. More than half the households in India have suffered a fall in incomes during the lockdown, compared to a year ago, and a very large proportion has seen no increase, according to the Centre for Monitoring Indian Economy (CMIE). Now, India is nearly eight months into the lockdown with several relaxations in the movement of goods and delivery of services, and many fast frequency indicators have reported a smart recovery, but the recovery in household incomes is very slow.
Till March 2020, around 30-35 per cent of households reported an on-year improvement in their incomes, which fell to 27.4 per cent in March; 9.6 per cent in April; and 3.6 per cent in July. Later, when the recovery began, the proportions of people seeing an improvement in the household incomes marginally rose to 4.3 per cent in August; 4.9 per cent in September; and 5.4 per cent in October. These proportions are still far from the 30-35 per cent before the lockdown hit the fortunes of households.
Jobs are back but, income is not
The recovery in household income growth is almost negligible even as the unemployment rate has returned to its earlier levels and the absolute employment levels are close to their pre-lockdown levels. CMIE underlined that the jobs are back but, income is not. It concluded that people who have retained jobs have experienced pay cuts or those who lost their jobs have moved to lower-paying jobs.
This distress in household incomes can be best seen in the rise in the proportion of households that stated that their incomes were worse than they were a year ago. This proportion was around 9-10 per cent for the ten months preceding the lockdown, which rose to 13.7 per cent in March 2020; and then to 49.3 per cent in April.
From May through September 2020, well over half the households reported a fall in income compared to a year ago. This ratio was 49.8 per cent in October 2020, as the month saw a very small improvement in household incomes compared to the situation in September 2020. Meanwhile, the fall in real income for the vast majority of households could create a demand constraint for various growth momentum indicated by other indicators.