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Repercussions Of Covid-19 On Employment In India: The Case Of Informal Labor Market

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Covid-19 has created chaos across the globe with India being no different from other nations. The repercussions have been massive on the job sector with over 11 million jobs lost in the urban sector and 8 million in the rural sector. The most affected and vulnerable are the informal labourers who have been further marginalized due to this pandemic. This paper examines the repercussions of Covid-19 on employment in India, specifically in the informal labour market. On analysis of the Covid-19 scenario it was found that Social Solidarity Economy at the local level in India is very weak. Secondary data were used to analyse the above-mentioned issues. The findings highlight the need for strengthening the policy measures that safeguard labourers working in the informal sector. This can be achieved by fortifying the Social Solidarity Economy along with a vibrant link between Local Self-Government Institutions.


The COVID-19 pandemic has affected millions of lives in India and across the World. More than 2.7 billion workers (81 per cent of the World’s workforce) have been affected (ILO Monitor, 2020). To minimize the contagion of the virus, lockdown was observed in India from 21st March to 31st May. In India over 11 million jobs were lost in the urban sector and 8 million jobs were lost in the rural sector (CMIE, 2020). The ones most affected are the daily wagers, casual labourers and the internal migrants who are already living in distressed conditions and have been marginalized to the edge, often becoming unemployed overnight. Due to the pandemic there are lockdowns and lay-offs in the establishments and conditions of work have become quite precarious. The workers especially those in the informal sector are affected seriously as there are no statutory labour protective systems prevalent in the informal sector. We argue that the Local Self-Government (LSG) institutions along with the civil-society organisation and other social solidarity economy enterprises (SSE) need to be strengthened to address any such disasters in the future. Therefore, the present study is addressed with the following objectives.

Employment in Informal Sector of India: Pre-Covid-19 Scenario

When we study the pre-covid-19 scenario of the employment in India, we see that it is far from satisfactory since 2016; as the twin policies of demonetisation (2016) and GST (2017) had already shaken the market (Dev and Sengupta, 2020; Rathore and Khanna, 2020) which was still in a face of recovery when it was further hit by the Covid-19 pandemic. The pandemic has not only increased the health concerns of individuals, but of firms and job market as well. Over the years casualization and in formalization has increased in India’s job sector. Since 1999-00 there has been gradual increase witnessed in informal jobs in India. Despite an increase in the economic growth (of over 7 percent) India could not generate enough employment opportunities and was moving towards jobless growth. There was a gradual decline in employment generation in India during the period 2013-14 to 2015-16, the largest since the time of independence (EPW Engage, 2018; Labour Bureau of India, 2018). Amongst the South-Asian countries in formalization is highest in India (ILO, 2018), more than 90 per cent people (Table 1) are engaged in unorganised sector (GoI, 2020); many work in informal sector jobs such as agriculture and MSMEs; two-thirds not even getting a national minimum wages or benefits (GoI, 2019) the pandemic seems to be scariest of all the setbacks.

India has the highest number of job seekers in the world but the job creation has been in a declining stage with the number of jobs created falling by 6.91 percent as compared to the year 2018 when 1.20 million jobs created had gone down to 1.12 million jobs created in the year 2019 (GoI, 2019a). Lacking good job opportunities force people to work in the informal sector with low wages without any social security benefits. Many educated are also taking up jobs in informal sector as educated unemployment in India is as much as 11 percent (PLFS, 2018-19). 31 percent of educated workers are working in the tertiary sector and are in informal employment (ILO, 2018).

The increasing in formalization in the economy has created a fuss amongst employees as they were denied of their basic rights and conditions (Fig1) as around 70 percent of informal sector employees do not have any written contracts, 54 percent does not have access to paid leave, 52 percent of people have no social security benefits available to them (UNDP, 2009/2013). These are the most vulnerable and poorest section of people who are working in poor conditions and deprived of any social securities. They must work for long working hours as the labour laws are timid (Deshingkar et. al. 2008: Srivastava and Sasikumar, 2003). They have no choice but to work in susceptible conditions with meagre pay.

India is one of the fastest growing economy in the world, having employment dominance in agriculture sector (Fig 2), with 473 million workforce, which is soon going to be 600 million (Skill India report 2018), with an employment rate of 3.5 per cent since the year 2016-17 is expected to be stagnant in the year 2018-19 (Dasgupta, 2018; Goyal and Jose, 2019). A shortage of 4-5 million jobs every year is observed (Chapman and Saran, 2018).

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43.86 per cent of labour force employed in agriculture sector followed by service and industry with 31.45 per cent and 24.69 per cent respectively, in the year 2018. Informal labourers are predominant in the MSME sector which employed over 110 million workers and accounts for about 1/3rd of the country’s GDP (Rathore and Khanna, 2020). And in recent times a drop of 11.5 percent employment in the agriculture sector was seen followed by a drop of 13.4 per cent in service sector and 5.7 per cent in the manufacturing sector (Centre for Sustainable Employment, 2019). There is a clear indication of employment pitfall, before the Covid-19 made an entry, with high in formalisation and employment dependence on agriculture and unorganised sector jobs such as beedi-rolling, papad making, tailoring and other self-employed jobs (GoI, 2020). The informal- unorganised sector workers already suffer from periodic shocks, seasonal shocks, and cash flow crisis and now they must face one more blow in the form of backlash of Covid-19.

Informal Sector Employment in India: The Repercussions of Covid-19

The spread of pandemic covid-19 has affected one and all and with this pace of infection, countries are struggling to maintain economies in terms of production, supply, and employment. The measures of social distancing and lockdowns has badly affected the pace of economic growth and with an increase in the number of cases reported it has become more challenging for governments to handle the crisis. About 400 million people working in informal economy lost their jobs due to this and are facing calamitous consequences (PTI, 2020). Post the lockdown period (March-May) the number of cases has shot up subsequently with rise in unemployment rate (Fig 3) at its peak from 8.75 per cent in March to 23.48 per cent in May (CMIE, 2020) which has now declined post the unlock period with 7.43 per cent in July.

The pandemic has made millions of lives vulnerable and job market miserable as on the one hand there is a need to mitigate the spread of infection and on the other there is an economy to maintain which is facing a crunch. There is crisis of food, accommodation, health, business, and employment. India with an unvaried labour income distribution with top docile earning almost half of the total income along with a maximum share of people being self-employed as compared to many developing countries (ILO, 2018) and the lack of social security norms and any other protection or inclusiveness in the society has made their conditions worrisome.

As much as 121.5 million jobs was lost in the month of March-April 2020 which has now seen a decline (recruited again) by 11 million in the month of August 2020. Amongst the informal labourers 18.9 million salaried jobs were lost till August 10 , 2020, and about 6.8 million daily wagers has suffered in and after lockdown due to shut downs of construction sites hotels, food services, manufacturing, the sectors most affected (ILO Monitor, 2020). Many rush back (Migrants) to their native villages being hopeless and homeless. Internal migrants (around 454 million) are mainly employed in informal sectors which lack job security and labour laws are hardly followed. They lack social security measures and housing facilities mainly living in slums. Unemployed and without food, removed from their houses after failing to pay rents many informal labours leave from cities deciding to move back to their native places (with no transport some had decided to go by foot carrying luggage, some by whatever vehicles they had), a massive movement of labourers had been seen post the announcement of lockdown (NDTV, 2020). If we talk about India it is not the havoc of the pandemic, which created a fuss, but the hand to mouth jobs that force them (informal labours) to return home. They have no fear of the virus, but a fear to die out of hunger.

Pre-emptive Strategies to Address Systemic Deficiencies in Disaster Management at Local Level

It is important to think about how far India is prepared to face such human crises when pandemic or natural calamities occur. India’s proneness to multiple disasters caused many factors to have been elaborated by the National Disaster Management Plan (GoI, 2019) and accordingly detailed the strategies to tackle the issues. Among others, it stresses the importance of local capabilities and initiatives in disaster management. Unfortunately, lack of strong local level institutions was a black spot when the pandemic occurred as many states were unable to address the issues confronted by the people, especially the marginalised groups. The deficiencies were met in the case of (i) LSG institutions’ incapability to co-ordinate the local level DRR (Disaster Risk Reduction) activities (ii) the incapability of public health infrastructure to address the demands of the situation, (iii) weak PDS (Public Distribution System) that can serve the weaker sections, (iv) non-availability of social security measures in DRR to protect the downtrodden sections of the society or mitigate the severity of the impact. We need to involve local communities and strengthen the Social Solidarity, which is the collaboration with NGOs and civil society organisations, RWAs, Municipal bodies, Panchayati Raj Institutions, Anganwadis, Gramsabhas, Medical professionals and other local networks. This pandemic has again exposed the ground reality of social security and inclusiveness which bypassed the millions of the deprived sections in the country. With no social security norms, lack of preparedness towards natural calamities including risks and disasters, the downtrodden people cannot be better-off. Policy changes must be introduced to a wide range of post-disaster activities that addresses the concerns of lower income communities in the country.

Conclusion and way forward

The analysis has highlighted that the employment sector of India was already suffering before the Pandemic and the pandemic had worsened and exposed the leniency and informality in the economy in terms of food security, shelter, or income. There is an annual demand of around 12 million new jobs every year in India and a shortage of around 4 million jobs every year. And the pandemic has deteriorated it further by increase in job losses of almost 18 million salaried and 7 million daily wagers has suffered losses. India’s 2/3rd labour force is employed in casual labour market and are most susceptible to this pandemic. As discussed Indian economy mainly drives on informal sector which lacks social security benefits and effective enforcement of schemes. In this context the following recommendations are made:

  • i. A need to strengthen the Social Solidarity Economy at the local level so that the collective spirit of the community would protect them and DRR will be more effective. The role of Local Self-Governments is paramount.
  • ii. The necessary institutional mechanism should be developed at the grass-root level to ensure accessibility to necessities and amenities including food, shelter, and healthcare, among others.
  • iii. Social security norms should be strengthened and implemented effectively with the support of SSE to safeguard informal sector workers and enhance the DRR.


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  11. ILO (2018): Women and Men in the Informal Economy: A Statistical Picture, International Labour Organization, And Geneva
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  14. NDTV (2020): A Report on ‘No Food No Money: Rush back homes, of 6th May, 2020, 9.13 AM IST
  15. Press Trust of India (2020): COVID-19 impacts: 400 million workers in India may sink into poverty, 14-August-2020
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  17. SBI- Eco wrap report (2020): The good: Q1GDP will be significantly better the bad: rapid covid surge in rural hinterland the ugly: lives vs. lives debate at Centre stage with All Quarters in FY21 to Witness Large GDP DE growth, Issue No. 34, financial year 2021 Date: 17 August 2020
  18. UNDP (2009/13): Migration and Human Development in India, United Nation Development Programme

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