With over 80% of India’s workforce employed in the informal sector and one-third working as casual labour, Covid-19’s spread and subsequent unplanned lockdowns, have created economic havoc in the lives of millions. In this post, Reetika Khera puts forward suggestions on what can be done to help people immediately, ranging from cash and in-kind assistance to special measures for migrants in urban areas and urgent health-related measures.

Reetika Khera

Indian Institute of Management Ahmedabad


The spread of the Coronavirus Disease 2019 (Covid-19), and subsequent unplanned lockdowns to control its further outbreak have created an economic havoc in the lives of millions who are part of the informal sector – not just daily wagers, but also the gig economy workers. According to the Employment-Unemployment Survey, 2015-16, over 80% of India’s workforce is employed in the informal sector; one-third are casual labourers. 

Within 24 hours of the Prime Minister’s address on 19 March, crowds at railway and bus stations across the metros started swelling. If they cannot earn, they wanted to get home where they would have at least some food and shelter.

The economic situation resulting from the lockdown that is necessary to contain the spread of the virus, will affect even those who will escape Covid-19. The central government has not made any announcement so far on how it plans to cope with the economic emergency that many are already facing. Here are a few suggestions on what can be done immediately to deal with this situation.

Cash assistance

The world over, including in India, cash transfers are being advocated as the first line of action. At first glance, they seem like the easiest and quickest option, but there are some caveats attached to them:

a. Deciding the ‘base’ is not trivial: Who gets the cash, and how much? Should it be for all the MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) workers? Should they all get the same (irrespective of how much they worked in the past)?

b. The possibility of hoarding and price rise, may erode the value of cash.

c. The density of bank branches in rural areas is thin. Mass cash transfers will create crowding, which in turn will create risk of community transmission of the virus.

d. There is also a largely unacknowledged issue of a mess in the banking system due to the move towards the Aadhaar-Payment Bridge System, which results in rejected or diverted payments, etc. Recent data from the health ministry suggested that nearly 10% of direct benefit transfers (DBT) failed due to this payment bridge. Besides this, payments that appear successful on the DBT portal, get misdirected into other people’s accounts.

Yet, there are cash transfers that can (and must) be used. Given the urgency, it would be better to ride on existing cash transfer programmes. This will still leave out some vulnerable populations (for example, the urban poor), but for them, other measures are suggested below.

  1. Advance payments: Give three months’ pension (for old age, widows, and persons with disabilities) in advance in April. The elderly survive on the goodwill of other earning members of the family. As family earnings dry up, the elderly may suffer.
  2. Enhanced payments: The central government’s contribution to social security pensions has been stuck at Rs. 200 per person per month. These must immediately be increased to at least Rs. 1,000 per month.
  3. Universal coverage: Universalise social security pensions. Identifying all those who are above 60 years of age, single women, etc. is one easy way of scaling up cash transfers.
  4. Clear arrears: For MNREGA workers, the central government must immediately clear all wage arrears from the 2019-20 financial year.
  5. Cash transfers for MNREGA workers: Provide 10 days’ wages for job card holders in cash at Panchayat Bhawans or anganwadis (childcare centres), or through their bank accounts for the coming three months, without work, due to the risk of community transmission. This will amount to approximately Rs. 2,000 per month per household for all the job card holders (under 140 million households). This will cost approximately Rs. 1 billion over three months.
  6. Work guarantee for MNREGA workers for later: In later months, when risk of community transmission subsides, assure them work for at least 20 days per month for those who are willing to work. In any case, 100 days of work on demand is a legal obligation of the Indian government under the MNREGA. As other economic activities pick up and the work requirement is reintroduced for MNREGA, the numbers will automatically fall. According to MNREGA website, currently only 80 million job cards (out of 140 million) are ‘active’.
  7. Revert to NEFT payments: For all cash transfer schemes (for example, pensions, MNREGA wages, Pradhan Mantri Kaushal Vikas Yojana, etc.), avoid Aadhaar-Payment Bridge System because of the problem of rejected and failed payments. As mentioned above, the failure rates are high. Use NEFT (National Electronic Funds Transfer) instead, as it is more reliable.

In-kind assistance

Given the possibility of hoarding, disruption in the supply chains, and the lack of work opportunities, providing in-kind assistance is important at this stage. If hoarding happens on a large scale, it may lead to price rise, eroding the value of cash.

After the implementation of the National Food Security Act (NFSA), the Public Distribution System (PDS) covers two-thirds of the Indian population. This broad network, which still suffers from exclusion errors, must be utilised immediately to provide assistance. It provides priority households with 5 kg grain per month for Rs. 1-3/kg; Antyodaya (poorest of the poor) households get 35 kg per month.

There is currently a problem of surplus stocks of food grain with the Food Corporation of India (FCI). The wheat procurement season has already begun in some states, and was about to begin in others.

  1. Double rations: The central government could utilise the excess stocks to provide double rations to all ‘Priority’ households and AAY (Antyodaya Anna Yojana) households, for an initial period of 3 months, to be extended if the emergency continues.
  2. Expand PDS coverage: Excess stocks can also be used to provide 20 kg per household to ‘General’ cardholders (also called APL (above poverty line) in some states) at least at a controlled price (say, Rs. 10/kg). Not all states have this category of cards but those that do, can use it.
  3. For advance or free distribution: Some states have announced free distribution for 1-2 months (for example, Karnataka) and advance distribution (for example, Chhattisgarh).
  4. Inclusion of other essentials: The government must consider provision of soap, dal, and oil through the PDS for the coming months.
  5. Discontinue ABBA: The central government must stop Aadhaar-based biometric authentication (ABBA) immediately because of risk of transmission. It has already discontinued Aadhaar-based attendance for central government employees on the same grounds. At least two studies show that ABBA achieves nothing in terms of reduced corruption and possibly makes matters worse by increasing transaction costs and exclusion. A few states, including Kerala, Chhattisgarh, Jharkhand, and Odisha have suspended ABBA already. A central notification is urgently required.
  6. Home delivery of food for children: Nearby anganwadis and schools should provide dry rations at home. They can also try to give eggs and dates in the pack because both have long shelf life and high nutritive value. Following Kerala’s announcement, several states have announced this, other states can emulate the same model.

In urban areas

The measures listed above will still leave out an important category of vulnerable people: these are people working as migrants in urban areas, whose homes are in rural areas. With the lockdown they are stuck without work, and sometimes even without shelter in urban areas. They will not be covered by either the MNREGA or the PDS. Therefore, special measures are needed for them.

  1. Shelter for migrants: There is a need to use stadiums, community halls, etc. for accommodating migrant workers temporarily, and provide soap and other hand-washing facilities to reduce risk of community transmission.
  2. No harassment of migrant workers: Strict instructions must be given to police in all states that they cannot harass, beat, or ask for money from migrant workers stuck in cities. Action must be taken against such officers to deter such behaviour. Videos of police violence emerged from different parts of the country on 22 March (see for instance, from Goa and Bhiwandi), and migrant labourers are especially vulnerable.
  3. Community kitchens for all: As a large part of the workforce is in the informal sector, many are out of work, and either returning home or stuck in cities without employment. Such people need food and shelter. For food, the central government can supply free food grain and dal (pulses) from the FCI. Migrants can use this to run community kitchens (like Amma’s canteens in Tamil Nadu, Indira canteens in Karnataka, dal-bhaat kendras in Odisha, Chhattisgarh, and Jharkhand). These can be self-managed by the workers and provide them an opportunity to earn some money. There is need to target railway stations and bus stations, and Block headquarters in rural areas, for setting up new community kitchens for those who are similarly affected. To minimise the chances of community transmission, the density of such feeding centres needs to be very high, where entry is either regulated (10-15 at a time), or food packets are provided for pick-up.
  4. Essential services: Each state should clearly specify what services are included under essential services, and the administration must ensure that the providers of these services are not harassed.
  5. Controlled prices for essential goods: As cities enter lockdown, make provision of essentials at controlled prices (not necessarily subsidised) to reduce panic buying and hoarding. Existing (government and private) networks of shops can be used for this purpose. For example, in Delhi, Safal outlets can be used; in Bangalore, Hopcoms; and so on.
  6. Controlling panic: Each district administration needs to set up a daily (area-wise) roster for people to get essential goods and services, to minimise disruption of daily life.

Urgent health-related measures

  1. Education, not surveillance: Deter community members from indulging in peer-to-peer surveillance. Instead, educate people regarding the importance of self-isolation.
  2. More public education: Launch very widespread messaging regarding washing hands, logic of social/physical distance, not touching mouth, eyes and nose without washing hands.
  3. Enhanced testing: Let people know what symptoms to watch out for, and at what stage they should approach doctors. Do NOT deter them from approaching doctors for fear of escalating numbers.
  4. Free testing: Scale up testing immediately. Tests should be made free, whether they are conducted by the private labs, or by the government.
  5. Mobilise frontline workers for education: Mobilise ASHA (Accredited Social Health Activists) workers, Anganwadi workers and helpers, ANMs (Auxiliary Nurses-Midwives) to create mass awareness about symptoms, spread, and precautions. Enhance their salaries/honorarium, and provide protective gear for them.
  6. Public hygiene: Provide hand washing stations across cities, especially at railway stations, bus stations etc. That will send an important message.
  7. Nationalise or regulate private health services: Wherever necessary (for example, in the case of protective equipment), the government may consider temporary nationalisation (for instance, the National Health Service (NHS) in the UK, has taken over private hospitals). At the very least the government must take steps to ensure price regulation of these sectors, by taking exemplary and swift action against unscrupulous behaviour (for example, fake testing, inflated pricing of masks, soap, sanitisers, etc.).
  8. Listen to public health professionals: More health related recommendations have been made by the Jan Swasthya Abhiyan, which are available here.

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