Covid-19 and lockdown: How household expenses bore the brunt

25 March 2021 | Covid-19, Economy, Employment, Income

Ankur Bhardwaj

Ankur Bhardwaj

Editor, Centre for Economic Data and Analysis

ankur.bhardwaj@ashoka.edu.in

CEDA-CMIE Bulletin No 3: March 2021

In February, we looked at the monthly household income and individual wage income data from CMIE’s Consumer Pyramids Household Survey. The data we analyzed in the CEDA-CMIE Bulletin 2, revealed the extent of damage the Covid-19 pandemic and the nationwide lockdown did to both household and individual wage incomes between April and September, 2020. This followed the first CEDA-CMIE Bulletin in which we looked at the impact the pandemic had on employment in the year 2020.

In this CEDA-CMIE Bulletin we take a look at the impact of the pandemic and lockdown on household expenses in rural and urban India in the same period.

Total household expenses and Covid-19

Figure 1 (below) shows the month-on-month (m-o-m) change in total monthly household income (Rs/month) in rural and urban India over a 19-month period from April 2019 to October 2020. The CMIE data reveals that monthly household expenses in rural India had been on a declining trend since November 2019 but they suffered the biggest crash in April 2020 with a decline of 27% over March 2020. In rural India, the household expenses started increasing from the month of May 2020 but had not yet reached pre-pandemic levels by October 2020. In urban India, monthly household expenses were on a declining trend since February 2020 but crashed by 35% in April 2020 before starting to rise for the rest of the year. Urban monthly household expenses had also not recovered to pre-pandemic levels by October 2020. Thus, we find that already declining household expenses suffered the biggest blow in April 2020, the first full month of nationwide Covid-19 lockdown

Figure 1: Month-on-Month (m-o-m) change in total monthly household
income (Rs/month) in rural and urban India from April 2019 to October 2020

2020 vs 2019 – Household income and expenses

Figure 2 (below) shows the percentage change in total household expenses and income (both rural and urban India) in the months of April to September 2020 over April to September 2021. This helps juxtapose the change in both household income and expenses in a pandemic year and a non-pandemic year. The first month of the nationwide lockdown, April, sees the sharpest decline in all figures. While monthly household income in urban India declined by 52% in April 2020 over April 2019, the monthly household expenses in urban India declined by 46%. The blow was relatively softer but still severe in rural India with a decline of 34% (income) and 42% (expenses). We find that every month from April to September saw a decline over the same period in the previous financial year.

As we have pointed out in our previous bulletins, employment data shows that it had started faltering from October 2020 onwards. That portends that both income and expenses in subsequent months of calendar year 2020 would have continued on the same trend.

Figure 2: Percentage change in total household expenses and income (both rural and urban India) in the months of April to September 2020 over April to September 2021

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