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Coronavirus Lockdown Impact On Daily Wage Labourers And Indian Economy

Sectors ranging from travel and tourism to retail and hospitality are taking a hit as social distancing becomes the norm to tackle the coronavirus outbreak. The government, businesses, and consumers are all taking precautions to limit the spread of the virus.

The lockdowns are likely to first hit contract workers across many of these industries. To counter this, economists are now calling for some form of cash transfers to support those who have lost their source of income, even if temporarily.

Contract workers are usually the most vulnerable and the first to be laid off in the event of such downturns, said Mahesh Vyas, chief executive officer at the Centre for Monitoring the Indian Economy. The spread of COVID-19 has started to impact tourism and hospitality industries which are significant providers of employment.

The biggest impact of the slowdown in business is expected on entities in retailing, tourism and transportation, self-employed workers in the gig economy and contract workers in the informal economy. Small businesses and low-income households do not have the cash flows, balance sheets or savings to sustain the downturn in business or loss of income for a few months.

Growing Restrictions

On March 24, the Government issued a notification mandating the closure of malls and theatres in all countries. A hit to the retail business will mean a direct impact on employment in the sector.

“The retail sector alone employs about 40 million people in the informal sector and 6 million people in the formal sector, said Kumar Gopalan, chief executive officer of the Retailer Association of India. Even in the formal sector, about 3-4 million people are employed on a contractual basis.

“For stores to remain closed for so many days at a stretch is unprecedented. When a store is shut, there is a cash flow crunch. About 85 percent of a store’s expenses are fixed costs and that creates a problem,” Gopalan said.

Tourism is the other sector which provides large contract employment. That, too, has taken a hit. Travel and tourism accounts for 8.1 percent of total employment, said Citi Asia Economics in a report last week.

Real estate construction, which also has a large number of contract workers, has also seen a direct impact on the industry.

So far, construction and infrastructure sites, which employ a large chunk of daily wage laborers, are also at great risk.

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