World Bank Study Reveals Impact of COVID-19 on Household Expenses in India

Migrant laborers were left stranded after the sudden implementation of a national lockdown. [Representative image by Rajesh Balouria from Pixabay]

Clanging plates and ringing bells, people in towns and cities expressed their support for healthcare workers in the front line of battling COVID-19 based on PM Modi’s recommendation. But days after a complete lockdown was imposed, city dwellers saw a glimpse of something that had gone largely unseen for years — one of the world’s largest internal migration movements.

Indian workers from small towns and villages migrate to larger cities and towns to earn a better living. But left without a source of income, and consequently, without the means to live in these cities, the lockdown left thousands of workers stranded. The shutdown of train and bus networks blocked their return home. These laborers then crowded train stations on rumors of special train services, and individuals walked, occasionally for hundreds of kilometers, just to get home.

Despite India’s tall claims of progress, it often fails the citizens who need its help the most. While the plight of migrants stirred many to action, the potential consequences of their loss of jobs and migration back home mostly went under the radar.

However, a survey by World Bank sought to fill in this gap. 3519 households across six states were telephonically interviewed about their average consumption spending during February (when no Covid-19-related restrictions were in place at the national or state level) and in the last week of April (when the survey was conducted). The difference between the two allows for drawing inferences regarding shifts in consumption patterns due to the strict pan-India lockdown. While the survey isn’t complete, data from the first round suggests a worrisome trend.

In the six states surveyed, rural households saw an average increase of 7.9% in their spending on food, household items, education, and health. While this figure may not seem very high, rural families spend most of their income on such expenses [See Table 1].

Table 1: Average income and household expenses in rural India (2016–17). Source: NABARD All India Rural Financial Inclusion Survey (2016–17)

A 2016–17 NABARD survey showed that rural households spend approximately 82.5% of their income on such expenses, leaving them with very little money for other costs like loan repayments, construction or repairs of house or farm equipment, etc.

Additionally, these figures vary considerably between states, with rural citizens in Andhra Pradesh (AP) spending as much as 98.3% of their income on household expenses. In comparison, citizens in Gujarat spend ‘only’ 71.2% of their income on similar expenses.

A deeper look at the World Bank survey data reveals a state-based difference, too, with Andhra Pradesh standing out (see Graph 1).

Graph 1: State-wise change in household consumption between February and April 2020. Data Source: World Bank Microdata Library

Since “public health and sanitation; hospitals and dispensaries” falls under the 7th Schedule’s State List, legally, states are exclusively responsible for tackling the pandemic within their borders. However, the prevention of the spread of diseases from one state to another falls under the Concurrent List, making it the center and states' joint responsibility. Thus, notable differences exist between state governments on their welfare and relief efforts.

While the Central government announced the provision of five kg wheat or rice and one kg of pulses to below poverty line (BPL) families under the Pradhan Mantri Garib Kalyan Yojana (PMGKY), state governments also offered monetary and ration grants and subsidies to the citizens of their states [See Table 2].

Table 2: Covid-19 associated relief efforts by state governments in India. Note: Table 2 only covers relief efforts announced till mid-May when the World Bank survey was conducted.

In UP, one thing immediately stands out — the state government provided open access to the public distribution system (PDS) without requiring identifying documents like AADHAR or Ration card. The Indian government provides subsidized food grains at prices as low as ₹1–3 to the country's poorest families through PDS. BPL families are entitled to 35kg of ration per month, while families above the poverty line can access 15kg of food grains through PDS. However, to access the PDS-ration shops, one needs a valid Ration Card. Many cannot get these cards either because they lack the right documents or because they don’t have a fixed address. Sometimes, ration cards are mortgaged in exchange for loans.

At a time of crisis, when faced with the risk of job losses due to the closure of businesses, access to subsidized food can not only bring down household expenses but also help in reducing malnutrition and starvation-related health emergencies. Thus, the relatively free access to the PDS could have been responsible for reducing expenses among rural citizens in Uttar Pradesh.

On the other hand, in AP, along with 1kg dal, free rice as per ration quota was given to Rice Card (a regional replacement for Ration Card) holders. But the scheme to replace Ration Cards with Rice Cards was launched in February 2020, and it remains difficult to calculate how many people did or did not receive these cards and availed of the benefits provided under it. This move may have led to several people falling through the gaps and potentially jeopardizing society’s least-privileged members' food security.

However, Madhya Pradesh provided similar access to the PDS system as UP. Even then, it saw a slight rise in expenses, while in Bihar, even without free ration (beyond one month), household expenses were close to the pre-lockdown amounts. This hints at the role of intervening factors like implementation of schemes, hoarding, and actions against hoarding, etc. Only on-ground interaction with citizens will help fill these gaps and aid in developing better policies for the future.