Reviving India’s Informal Economy

Just as India was recovering from the first wave of the COVID-19 pandemic, the second and more vicious wave pushed many to the brink of livelihood loss. As news of the health crisis takes precedence, the economic ravages of the pandemic and its impact on livelihoods has been less documented and discussed. The devastating effects of the pandemic have had compounding negative effects on women’s progress, access and inclusion of vulnerable communities, social security of informal workers, etc. 

As we continue to see the devastating effects of the second surge, we have signs of hope with vaccine efforts increasing and international collaborations, with the Indian diaspora at the forefront, contributing efforts to address the gaps this crisis has revealed.

The REVIVE Alliance, the brainchild of Samhita, in partnership with USAID, MSDF, Omidyar Network India, UNDP and British High Commission, New Delhi, is a financial instrument to aid those who are excluded from banks and other formal lending institutions. The intervention is designed to protect those who are most severely affected by the pandemic, so that they can come back from the crisis stronger and in a way that enables them to be more integrated in the formal economy. In essence, the goal is to build back a better normal.

In this important and powerful conversation between Priya Naik, CEO and Founder, Samhita Social Ventures; Rahil Rangwala, Director of India Programs, Michael & Susan Dell Foundation; Alison Eskesen, Vice President, Mastercard Centre for Inclusive Growth; and Dr. Amita Vyas, Non-resident Senior Fellow, Atlantic Council’s South Asia Centre, moderated by Imrana Khera, Partnership Advisor, USAID India and hosted by The Atlantic Council’s South Asia Centre, the panelists discusses why it is important to take a comprehensive approach to recovery from COVID-19, keeping in mind the importance of livelihoods, healthcare and educational needs of vulnerable communities. 

Watch the whole conversation here:

Insights from the panelists:

Director of India Programs, Michael & Susan Dell Foundation

India typically has an unemployment rate hovering around 5%. When we experienced the first wave in 2020, our unemployment rate peaked at 23%, because India went into one of the strictest lockdowns in the world. It devastated India’s 80% informal economy, with so many jobs and livelihoods lost. We recovered by the end of 2020; we were down to a 7% unemployment rate. In May 2021, during the second wave, we were back to 12%. In a recent CMIE (Centre for Monitoring Indian Economy) survey, 97% of households in India have reported decline in household income. In the second wave, India has lost 10 million jobs.

CEO and Founder, Samhita Social Ventures

REVIVE was set up with a modest ambition to aid blue collar workers who were unimaginably affected by the pandemic. We started with a straightforward direct cash transfer to 33,000 identified individuals. We soon realised that the path towards recovery, resilience and growth for different people — a gig worker, a woman sanitation worker or a farmer — all looked very different. With MSDF support, we set up a returnable grant instrument. It was a no-risk, flexible and safe mechanism to get people back on their feet, as they could use the money however they wanted and return it whenever they were able. We wanted to ensure dignity in how we were structuring the mechanism — these were not people who needed our charity. They are hardworking individuals with full-time jobs and it’s a pandemic that has devastated their livelihoods. In the last year, we’ve learnt that when you give people money not just to meet their immediate needs, but also their future aspirations, they use it wisely and pay it back. We now see between 93-100% repayment of our returnable grants.

Vice President, Mastercard Centre for Inclusive Growth

Existing gaps have been exacerbated by the economic long tail of COVID-19. India lagged behind in women’s labour force participation even before this crisis. The effect of COVID-19 has really pushed us behind further. So we need to think about empowerment in a more holistic way: how do you work with women to grow their business acumen and skills? Also, how do you work with them to engage their families and have conversations to create a more supportive ecosystem at home? How do you reach out to these families and communities to start shifting mindsets? We need to create more conducive environments where women can succeed and realise their full economic potential. 

Non-resident Senior Fellow, Atlantic Council’s South Asia Centre

We need to take a comprehensive approach to livelihood recovery during this pandemic — we have to address health needs, and also educational needs. We’ve learnt that in West Africa, after the Ebola epidemic, adolescent girls did not go back to school. They were married off. We are now going into a second academic year of schools being shut down and that can have devastating effects on girls’ education. India has made great strides in girls’ education in the last decade, at the secondary level and also in higher education. We can’t let those gains diminish.