Covid-19 and lockdown: Impact on household and individual wage income

24 February 2021 | Covid-19, Economy, Income

Ankur Bhardwaj

Ankur Bhardwaj

Editor, Centre for Economic Data and Analysis

ankur.bhardwaj@ashoka.edu.in

CEDA-CMIE Bulletin No. 2: February 2021

Earlier this month, CMIE released the monthly household income and individual wage income for the month of September 2020. India entered the first complete lockdown from March 25, 2020. As all economic activity came to a complete halt, the first half of FY2020-21 bore the brunt of the pandemic. In the first CEDA-CMIE Bulletin (January 2021), we tried to understand the impact the pandemic had on employment. With this data release from CMIE’s Consumer Pyramids Household Survey, we can try and understand the impact Covid-19 pandemic and the lockdown had on household incomes and individual wages.

In this bulletin, we take a look at changes in monthly household income and individual wages in the pre-pandemic and pandemic periods. We also compare the changes in H1FY21 with H1FY20. We look at a rural-urban split and see if it offers more insights.

Total household income and impact of Covid-19

Figure 1 (below) shows the month-on-month change in total household income (Rs/month) in rural and urban India over an 18-month period from April 2019 to September 2020. Starting November 2019, total household incomes in rural and urban India were on a declining trend even before the pandemic and lockdown hit but the steepest decline came in the month of April 2020 (the first full month of lockdown) with a decline of 19% and 41% in rural and urban India respectively. Despite some improvement in household incomes in the subsequent months till September 2020, they were still lower than March 2020 levels.

Total wage income and impact of Covid-19

Figure 2 (below) captures the m-o-m change in total wage income in rural and urban India between April 2019 to September 2020. While this also shows the same broad trend as seen with total household income, we find that rural wage income declined nearly as sharply (by 41%) as urban wage income (by 44%) in the month of April 2020. Despite improvement since May 2020, individual wage incomes continue to be depressed vis-à-vis pre-pandemic levels.

2020 vs 2019

Figure 3 (below) shows the percentage change in total household income and individual wage income (in both rural and urban India) in the months of April to September 2020 over April to September 2019. This shows the severity of decline in both figures in rural and urban India in H1FY 2020-21 vs H1 FY 2019-20. Total household income (urban) and individual wage income (rural and urban) in April 2020, were less than half of April 2019 figures. Total household income (rural) was down by 34% in the same month. The chart shows that this decline was weaker in subsequent months, till September 2020 but had not recovered yet. We have income data from CMIE’s CPHS only till September 2020, but we do have data related to employment till December 2020, as analyzed in the CEDA-CMIE Bulletin for January 2021. According to that data, we saw that while employment recovery had been steady till September 2020, it started to falter October 2020 onwards. It can be assumed that income recovery may have faltered between October-December 2020 as well.

 

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