It's now very clear that, like elsewhere in developed world, the formal economy in India too has rebounded smartly from the huge economic shock. It's even more impressive that this has been achieved with minimal fiscal stimulus.
But it's with the informal economy that there was always doubts about its resilience to a shock of this nature. The Pew Research estimates that the Indian middle class has shrunk by a third, the number living below poverty line ($2 and below) has more than doubled to 134 million, and the poverty rate has risen to 9.7% in 2020, up from the January 2020 forecast of 4.3%.
The net result is a widening of the base of the income pyramid, wiping out decades of impressive progress.
Surveys of food insecurity during last year’s lockdown collated by Jean Dreze and Anmol Somanchi show that between 50 and 80% of households surveyed were eating less than before.
Employment in February 2021 compared to the average of 2019-20 shows a loss of 3 million jobs among business persons, a loss of 3.8 million jobs among salaried employees and 4.2 million among daily wage earners.
Finally, from an excellent data series by Pramit Bhattacharya in Mint on the impact of the pandemic. This on inter-state poverty trends and this on inter-country trends. India has contributed more than half of the global increase in poverty.This on the steep wage cuts by the small firms as they struggle to survey.
Bank loans against gold jewellery, India’s most traditional way of saving, jumped by 82% in the past fiscal year. A poll of white-collar workers by Grant Thornton, a consulting firm, found that 40% of employees had suffered a pay cut last year. Another survey, of 3,000 mostly informal workers in Delhi, the capital, found that male breadwinners had on average suffered a 39% fall in income in the past year. Of the more than 38,000 respondents to another survey—carried out online, meaning all were rich enough to enjoy internet access—more than three-quarters said they expected their incomes to fall in the current year.
The recovery in the formal sector will become unsustainable without more broad-based recovery.
Update 1 (10.08.2021)
More signs of labour market distress from the GoI's latest Periodic Labour Force Survey (PLFS),
It shows a sharp increase in employment in agriculture from 42.5 per cent of the total employment in 2018-19 to 45.6 per cent in 2019-20... Such a large shift of labour in favour of agriculture cannot be voluntary. It is a sign of distress in the labour market where non-agricultural sectors are unable to provide employment and labour is forced to shift to agriculture. The forced or at least involuntary nature of this migration is evident from the wages data provided by the PLFS. Salaried jobs provide wages of the order of Rs.16,780 per month. Self-employment provides wages of the order of Rs.10,454 per month. These translate into wage rates of Rs.558 per day and Rs.349 per day, respectively. In comparison casual labour which is the type of employment provided by agriculture yields much lower wages – of the order of Rs.291 per day. Labour would not voluntarily shift to this lowest wage-rate sector unless it had no better option. Agriculture provides a low wage safety net for labour during times of distress in India... PLFS estimates are for a 12-month period from July 2019 through June 2020...According to the PLFS, the losers are manufacturing, construction and transport, storage and communication. The share of manufacturing in total employment fell from 12.1 per cent to 11.2 per cent. Of all the specific sectors for which PLFS provides data, the manufacturing sector saw the biggest fall (0.9 percentage points). The next largest loser is construction (0.5 percentage points). And then it is transport, storage and communication (0.3 percentage points). These three account for a little over half of the increase in the share of employment in agriculture.
Update 2 (19.08.2021)
Gold loans have surged nearly 85 per cent over the past year, to Rs 60,464 crore… The outlier growth in gold loans compared to any other segment was also aided by the Reserve Bank of India’s (RBI’s) move to hike the loan-to-value (LTV) ratio for such loans from 75 per cent to 90 per cent… Take a look at the gold auctions. Mannapuram Finance had auctioned Rs 8 crore worth of the yellow metal in the first three quarters of FY21. This shot up to Rs 404 crore in the fourth quarter and further to Rs 1,500 crore in the June quarter.