Much has been written about the impact of Covid-19 and the nationwide lockdown on India’s formal economy. But given that India’s informal economy employs nearly 90 percent of the country’s total employed population, it deserves some focus too. Since an overall evaluation of India’s informal economy would be too big a challenge, this article will only focus on informal workers and how they were impacted by Covid-19 and the nationwide lockdown. Before moving on to implications, it is important to highlight the problems an informal sector employee faces even under normal, non-pandemic circumstances. The Informal sector workforce largely consists of economically marginalized sections of the Indian society. Owing to lack of government regulation and documentation, they don’t receive social security services, pension schemes, paid holidays and a whole host of other basic rights that a formal sector employee receives. In addition to all this, their job security practically doesn’t exist. They are employed and serve at the pleasure of the employer who can remove them from their jobs without any notice. In this context, let us study the problems they faced during and in the aftermath of the nationwide lockdown.

  • Higher risk of Covid-19Before discussing the devastating economic consequences of the nationwide lockdown, it is imperative to state that India’s poor people are more likely to die from Covid-19 than any other section of the Indian society. An Oxford study published in April determined that lack of clean water and negligible access to healthcare facilities are the prime reasons for their vulnerability. On top of this, many of them already suffer from several co-morbidities such as tuberculosis and malnourishment thereby further reducing their chances of survival after contracting the disease. While recent data suggests a slump in Covid-19 deaths, the numbers may not paint an accurate picture. Most of the Indian poor are reluctant to get themselves tested owing to a lack of resources and will. Hence, it is not unreasonable to assume that a lot of Covid-19 cases among the Indian poor do not get reported at all. With the vaccination rate moving at a snail’s pace, the danger to poor people’s lives is still very much alive.
  • Decreased Earnings- This implication is in no way restricted to the informal sector. After all, almost all kinds of employees, regardless of wherever they work, witnessed cuts in their income during the lockdown. However, the difference lies in the impact and magnitude of decreased earnings. In the formal sector, the decrease in earnings has been triggered mostly by reduced salaries or delayed increments. While times have been hard, most of these employees have managed to hold onto their jobs and very few have seen their income levels drop to zero. But in the informal sector, the decrease comes majorly as result of sudden unemployment which implies no income. According to a survey conducted by Action Aid India in August, nearly 80 percent of India’s informal employees lost their jobs during the lockdown. And even those who could retain their jobs witnessed a drop in the intensity of work i.e. they were employed for fewer-than-normal hours resulting in a reduced income. As to when and how these workers will resume their jobs remains to be seen. But one thing is clear. Never in the history of our country have so many workers been rendered jobless because of a single event. India is currently facing one of its worst unemployment crises ever. 
  • Growing Indebtedness- This is a natural outcome of the preceding point. Most of the informal sector workers who lost their jobs, especially the daily-wage workers and street vendors, don’t really have much in the way of savings. After losing their sources of livelihood, they have found it increasingly hard to incur the costs of maintaining their families. They have had no choice but to exercise the dreaded option of borrowing from private individuals at sky-high interest rates in order to finance their bills and expenditure on food. Surveys indicate that nearly 58 percent of all informal sector workers have seen their debt rise during the lockdown. What makes this data even more concerning is that the repayment of these debts may take decades, in which case future generations of these families will have to shoulder the burden. But are they up to the task? Consider this fact. There have been reports of parents removing their children from school so that they can cut down on their household expenditure. This will have an adverse impact on the future employment prospects of these children and will further drive them down the socio-economic ladder. This will jeopardize their ability to repay these debts in the future.  Hence for these families, the lockdown has led to both an increase in their debt and a decrease in their future capacity to repay it. After considering these facts, it shouldn’t be surprising to note that suicide rates among the Indian poor have significantly risen in the past year. 
  • Food Shortage: In a survey of the Informal workforce conducted by Action Aid India, only about one-sixth (roughly 16 percent) of all respondents claimed that their food consumption was ‘sufficient’. The same organization reports that this number stood at 83 percent before the pandemic kicked in. This implies that a significantly large number of people were pushed into a state of food deprivation as a direct result of the nationwide lockdown. This survey further indicated a 30 percent decrease (compared to the pre-pandemic situation) in the number of people who were having at least two meals a day. Taking note of this situation, the government of India launched the Pradhan Mantri Garib Kalyan Anna Yojana in March 2020 with an aim of providing food grains to India’s poor. Under this scheme, state governments were supposed to procure a specified amount of food grains from the centre and then distribute them among the urban and rural poor. Initial reactions suggested that this scheme would be successful in containing the problem. But the wave of optimism soon dissipated due to issues in implementation and corruption by multiple state governments. To say that the data released by Ministry of Commerce, Food and Public distribution was shocking would be an understatement. It was reported that while most state governments had procured their respective quota, they had done a shoddy job at distributing it. Eleven states distributed less than 1 percent of their allocated amount and six did not distribute any at all. It was a colossal failure. However, to point fingers at one specific party would be counterproductive as it will stop us from acknowledging the systemic nature of the problem. The truth is that the political and bureaucratic elite as a whole betrayed the spirit of their offices and contributed to the failure of this scheme. A natural consequence of this fiasco is that millions of poor people are now facing a major threat of malnourishment. This will have an adverse long term impact on their life expectancy as they’ll be more susceptible to catching not just Covid-19 but a whole host of other diseases. 
  • Reduction in State Protections: Despite being the major sufferers of the pandemic, informal sector workers have been dealt with another blow in the form of suspension of labor laws in various states. State governments claim that their respective economies require urgent investments and a rise in productivity. So in order to give incentives to investors and producers, they have suspended many environmental regulations, social security laws, labor laws and have also ordered an increase in the maximum hours of work per day. This will allow and even encourage exploitation of daily wage laborers by factory owners throughout the country. Considering that some states have suspended even the Industrial Disputes Act 1947, workers and their unions won’t have an avenue to lodge complaints against their employers. Hence, even if workers manage to reclaim their jobs, it won’t be all smooth sailing for them.


This article attempted to highlight facts which the mainstream media doesn’t want to talk about. The plight of informal sector workers continues to worsen by the day and won’t necessarily improve even when the pandemic reaches its end. Fortunately, there are no known plans of another nationwide lockdown and things have slowly started getting back to normal. But with the danger of potential new strains always lurking around, we can only engage in cautious optimism at best. Let’s hope that the political class at the centre, state and local levels will take assertive measures to help the workers employed in the informal sector.




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