When T M G Kumar shut the doors of his garment factory in April, all 40 of his employees returned to their villages, for the second time in a year. He fears these workers, who were trained and skilled, would not return as Covid-19 had affected their livelihoods twice now. Adding to his worries is the Rs 20 lakh loan that he borrowed from a private money lender, which has now swollen to Rs 25 lakh. Work orders have continued to dry up over the last year, making his future uncertain and volatile.
Tales of distress cut across sections.
Hubballi-based Rashmi, a 50-year-old mother of two, had no time to mourn the loss of her husband to Covid-19. With no financial backup, she was forced to start hunting for a job after a gap of 18 years. While her efforts are yet to yield results, her friends have stepped in to support her. She doesn’t know how long she can sustain this way.
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Her husband used to sell home loans for LIC housing finance as an agent. “To my bad luck, there is no insurance or pension. There is no policy to get a job for affected family members,” Rashmi says.
The Covid-19 pandemic has left widespread misery in its wake. The State of Work in India 2021 report of Azim Premji University published earlier this month has documented the distress of people from diverse economic backgrounds.
Around 23 crore people have slipped below the poverty line, constituting a 15 to 20% increase in poverty since Covid-19 struck the country a little more than a year ago. An estimated 1.5 crore people have been left jobless; those with a job have found their income levels reduced — for an average household of four members, the monthly per capita income stood at Rs 4,979 in October, which is 16.8% lower compared to Rs 5,989 in January 2020.
India’s middle class shrank by 3.2 crore people, while a further 7.5 crore people were pushed below the poverty line in 2020 says a report by US-based Pew Research Centre.
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People from low-income families and those who have lost their sole breadwinners have been pushed into poverty. Though Karnataka announced some relief measures, vast sections of unorganised workers and industry have been left out.
Shankar, 45, was earning close to Rs 60,000 working as a driver with a travel agency in Bengaluru. That is until he lost his job along with among dozen others in March 2020 due to the pandemic.
Having returned to his village in Hassan, he now carries out multiple jobs from operating an excavator to working as a farm labourer and barely manages to earn half of what he used to.
His colleagues who have gone back to their native place are not as lucky as him. With no skills of operating an excavator like him, they have ended up as farm labourers, earning less than Rs 10,000 a month.
Signs of distress
From January to December 2020, as many as 1.27 crore people partially withdrew funds from the Employee Provident Fund accounts as compared to 54 lakh in 2019.
A report by Moneycontrol shows that an estimated 3.5 crore out of a total of 6 crore EPFO subscribers had withdrawn close to Rs 1.25 lakh crore since the pandemic began.
Between April 1, 2020, and May 21, 2021, at least 72 lakh workers had availed the non-refundable Covid-19 advance amounting to Rs 18,500 crore.
The demand for employment under the MGNREGA is also at an all-time high, with nearly a 40% increase in households looking for work when compared to 2019.
Data from the RBI indicates that loans against gold jewellery by Scheduled Commercial Banks saw an 81.5% increase in March when compared to last year.
Many have even lost their gold deposits over the last year as they could not repay their loans. An estimated Rs 412 crore worth of gold was auctioned by Manappuram Finance, a company that lends against gold deposits, during the fiscal that ended March 2021 as compared to Rs 116 crore in the previous year, according to a Bloomberg report.
MFI repayments hit
In early April, the rating agency CRISIL had warned of a slowdown in NBFC - MFI collections in the context of the lockdown in Maharashtra. The subsequent lockdown in Karnataka has also affected the NBFC-MFI sector.
The Shri Kshetra Dharmasthala Rural Development Project (SKDRDP), one of the biggest MFIs in the state with over 48 lakh active self-help group members, say their collection had stopped from May 3.
The SHG members have also been given a moratorium on loan payments until the end of the year (December 31) though the interest will continue to be levied.
L H Manjunath, the Executive Director of SKDRDP, says that this time around, Covid-19 has taken a toll on the health of SKDRDP’s clients, with 2,200 SHG members losing their lives to Covid; in urban and peri-urban areas around Bengaluru and Mysuru (including Ramanagara, Kolar, Tumakuru, and Chikkaballapur) the loss of tourism-related livelihoods is also affecting payments.
“The entire tourism industry is lost. Whether it is auto-rickshaw drivers, small hotels, eateries, buses all those people have been affected,” Manjunath adds.
MSMEs, Retail sector
Some sectors of the economy, such as retail, MSME, and hospitality, have been affected more than the others.
“Retail businesses are under tremendous financial strain due to the extended lockdown. The financial pressures are on various fronts such as salaries, rentals, electricity charges, and various taxes and licence fees among others. Easing the burden will require the support of various bodies driven by the governments,” says Kumar Rajagopalan, CEO of Retailers Association of India.
Circumstances are no different in the case of MSMEs.
Since last year, the pandemic and subsequent lockdowns have resulted in the closure of about 15%-20% of 8 lakh odd MSMEs in Karnataka.
“The MSMEs are crippled by large-scale supply chain disruption and loss of export orders,” observes KB Arasappa, President, Karnataka Small Scale Industries Association.
If the state government does not permit all micro and small scale industries to operate without any hindrance immediately, almost 40-50% of the units might permanently shut down due to accumulating business losses, Arasappa says.
“This will lead to job losses and loss of revenue to the state exchequer which will further weaken the government in combating Covid-19,” Arasappa adds.
Nowhere is this more evident than in Bengaluru’s S P Road (Sadar Patrappa Road, also colloquially called ‘Spare Parts’ Road), which is known for its electronic items. A cluster of shops along suffocating bylanes supplies hardware parts, agricultural pumps and machine tools to most of Karnataka.
Last year, this market area remained shut until mid-August, even after the rest of the city had opened up because it was categorised as a red zone.
In the second iteration of the lockdown, S P road stands desolate, the garbage heaps along narrow roads especially highlighted in the absence of its trademark crowds and wares spilling onto the streets. Businesses are in trouble, with far-reaching consequences.
Small business suffer
Junaid Ali’s family has been in S P Road for four generations, where he runs a sanitary appliances store. He says that though there has been no business, most business owners in the area have to continue paying rent, ranging from Rs 40,000 to Rs one lakh per month.
Junaid’s family runs a few other businesses nearby, in addition to renting out shops themselves. “We have let go of one month’s rent because we understand the situation,” he says.
Vipan, a manufacturer in Jalandhar, Punjab, who supplies these hardware items and machine tools to shops in S P Road, says that since his trade focuses on South India, the business has been affected by the lockdown in Karnataka.
He sells goods worth Rs 25 lakh on average every month. He lost some Rs 55 lakh during the lockdown last year.
“With Karnataka closed, there is no demand. The payments are not happening. It is a clear effect of the lockdown,” he says.
With zero support from the government, the local business owners are working with a local charitable organisation. Unlike the last time, they say there is more distress this time around.
“Many people don’t have money for three square meals a day but they don’t come forward because they feel ashamed,” says Tousif, whose family owns a hardware shop in the area.
“Since I was born here, I know what is happening. So even if people don’t ask, we ensure that a grocery kit reaches their home,” Tousif says.
Tousif and his team have given away more than 150 grocery bags on May 10 and they have planned to support another 150 families in the coming days.
“I think it is the middle class that is suffering the most. The rich aren’t affected much, and the poor are used to hardship,” Junaid says.