Who was Impacted and How? Covid-19 Pandemic and the Long Uneven Recovery in India

Mrinalini Jha, O.P. Jindal Global University

Rahul Lahoti, UNU-WIDER

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We investigate the impact of the Covid-19 pandemic on income levels, poverty, and inequality in both the immediate aftermath and during the long uneven recovery till December 2021 using high-frequency household survey data from India. We find that the average all-India household income dropped between 30 to 38 percent during the months of the nationwide lockdown of April and May 2020. The subsequent recovery remained incomplete and was unevenly spread over the population even twenty-one months after the start of the pandemic. Households on an average continued to make 16 to 19 percent lower cumulative income in the post-lockdown period, but have mostly recovered after the second wave in the second half of 2021. Poverty more than doubled during the lockdown and was 50 to 80 percent higher in the post-lockdown period in comparison to the pre-pandemic levels. In the post-second-wave phase, poverty was still slightly higher than in the pre-pandemic period, and any progress in poverty reduction that would have been achieved under normal circumstances over the two years was lost. Inequality too spiked during the lockdown, but returned back to the pre-pandemic levels. Using an event study model we find that the initial shock of the lockdown was more severe for the bottom of the income distribution, but the bottom also experienced a faster recovery. On the other hand, the top end of the distribution experienced smaller declines during the lockdown but they have been slow to recover. The bottom deciles in any period typically constituted households working in contact-intensive, informal, less secure occupations that were hit the hardest during the lockdown, but were quick to recover when the
economy opened up. The upper end of the distribution constituted households working in less contact-intensive, formal, secure occupations that were shielded from the sudden shock but were slow to recover.

Keywords: Covid19, Income, Poverty

Suggested citation:

Jha, Mrinalini and Rahul Lahoti. 2022. “ Who was Impacted and How? Covid-19 Pandemic and the Long Uneven Recovery in India” Centre for Sustainable Employment Working Paper #49, Azim Premji University, Bangalore.