0642 GMT July 10, 2020
Now, as Asia’s third-largest economy slowly reopens, the effects of that massive relocation are rippling across the country. Urban industries don’t have enough workers to get back to capacity, and rural states worry that without the flow of remittances from the city, already poor families will be even worse off — and a bigger strain on state coffers, Bloomberg reported.
Meanwhile, migrant workers aren’t expected to return to the cities as long as the virus is spreading and work is uncertain. States are rolling out stimulus programs, but India’s economy is hurtling for its first contraction in more than 40 years, and without enough jobs, a volatile political climate gets more so.
“This will be a huge economic shock, especially for households of short-term, cyclical migrants, who tend to come from vulnerable, poor and low-caste and tribal backgrounds,” said Varun Aggarwal, a founder of India Migration Now, a research and advocacy group based in Mumbai.
In the first 15 days of India’s lockdown, domestic remittances dropped by 90 percent, according to Rishi Gupta, chief executive officer of Mumbai-based Fino Paytech Ltd., which operates the country’s biggest payments bank.
By the end of May, remittances were back to around 1750 rupees ($23), about half the pre-COVID average. Gupta’s not sure how soon it’ll fully recover. “Migrants are in no hurry to come back,” Gupta said. “They’re saying that they’re not thinking of going back at all.”
If workers stay in their home states long term, policymakers will have more than remittances to worry about. If consumption falls and the new surplus of labor drives wages down, Agarwal said, “There will also be a second-order shock to the local economy. Overall, not looking good.”
India announced a $277 billion stimulus package in May and followed it up with a $7 billion program aimed at creating jobs for 125 days for migrants in villages across 116 districts. Separately, local authorities are also looking for solutions.