As India’s economy continues to be locked-down, Rituparna Patgiri (Jawaharlal Nehru University, India) and Ritwika Patgiri (South Asian University, India), review the state of the country’s economy and the place of small businesses and the self-employed within it during the coronavirus lockdown

Patgiri, Rituparna

Patgiri, Ritwika

English

LSE Research Online

India’s lockdown: why small businesses and the self-employed need helpLSE Research Online URL for this paper: http://eprints.lse.ac.uk/104924/Version: Published VersionOnline resource:Patgiri, Rituparna and Patgiri, Ritwika (2020) India’s lockdown: why small businesses and the self-employed need help. South Asia @ LSE (25 May 2020). Blog Entry. lseresearchonline@lse.ac.ukhttps://eprints.lse.ac.uk/ ReuseItems deposited in LSE Research Online are protected by copyright, with all rights reserved unless indicated otherwise. They may be downloaded and/or printed for private study, or other acts as permitted by national copyright laws. The publisher or other rights holders may allow further reproduction and re-use of the full text version. This is indicated by the licence information on the LSE Research Online record for the item.India’s	lockdown:	Why	small	businesses	and	the	self-employed	need	helpAs	India’s	economy	continues	to	be	locked-down,	Rituparna	Patgiri	(Jawaharlal	Nehru	University,	India)	andRitwika	Patgiri	(South	Asian	University,	India),	review	the	state	of	the	country’s	economy	and	the	place	of	smallbusinesses	and	the	self-employed	within	it	during	the	coronavirus	lockdown.The	COVID-19	outbreak	has	changed	how	all	of	us	view	the	world.	Every	part	of	people’s	lives	in	India	has	beenaffected,	as	well	as	the	economy,	politics,	culture,	and	society.	The	impact	on	each	of	these	areas	has	been	well-documented,	and	a	lot	has	been	said	and	written	about	the	economic	effects	of	COVID-19.	According	to	the	Centrefor	Monitoring	Indian	Economy	(CMIE),	the	urban	unemployment	rate	has	gone	up,	it	is	now	as	high	as	30.9%,	withthe	overall	unemployment	rate	jumping	from	8.4%	in	mid-March	to	23.4%	in	end-April.About	400	million	people,	which	is	90%	of	India’s	workforce,	work	in	the	informal	sector	in	India,	and	face	deep	jobinsecurity.	But	even	in	the	formal	sector,	there	is	massive	job	insecurity.	There	have	been	both	layoffs	and	pay	cutsin	the	private	sector,	in	media	houses,	in	NGOs	and	corporate	houses.	In	some	cases,	the	government	and	thejudiciary	have	intervened	and	asked	the	employers	not	to	lay	off	employees	during	this	period.	But	is	it	only	issuingadvisory	notices	enough?	What	about	policy	interventions?It	is	important	to	understand	how	the	owners	of	small	businesses,	start-ups,	and	the	self-employed	are	faringamidst	this	lockdown.	Most	of	these	economic	ventures	navigate	the	boundaries	of	the	formal	and	informal	sectors.The	people	working	in	these	sectors	have	been	generally	excluded	from	debates	on	the	economic	impact	of	theCOVID-19	pandemic.	While	there	have	been	discussions	about	paying	one’s	domestic	workers,	security	guards,gardeners	and	other	house	helps,	what	about	other	small	businesses	and	self-employed	workers?How	are	small	businesses	and	start-ups	that	sell	non-essential	items	managing	their	operations?	What	about	thesmall	businesses	that	run	online?	How	is	the	neighbourhood	momo	seller	(steamed	filled	dumplings	popular	inSouth-East	Asian	regions)	doing?	What	about	the	person	who	sells	earrings	in	the	footpath?	What	about	LifeInsurance	Corporation	(LIC)	agents?	What	about	the	make-up	artists	and	people	working	in	beauty	parlours?	Howare	the	weavers	of	Assam	faring?	These	are	some	of	the	questions	to	which	we	still	seek	answers.Indian	start-ups	contributed	around	$11	billion	to	India’s	economy	by	the	end	of	2019,	showing	tremendous	job-creating	capacity.	Economic	success	and	a	good	GDP	growth	rate	had	brought	in	several	policy	benefits	toentrepreneurs	like	tax	benefits,	simplified	business	set-up,	financial	support,	tinkering	labs,	a	fund	of	Rs	10,000crore,	and	the	motivation	of	the	government	to	improve	India’s	position	in	the	Ease	of	Doing	Business	Index.Flipkart,	one	of	India’s	first	start-up	successes	is	now	worth	$20	billion.	An	e-commerce	idea,	Flipkart	has	madeway	to	numerous	similar	online	ventures.	According	to	a	2018	survey	of	young	people	by	the	World	EconomicForum	and	Observer	Research	Foundation,	one-third	of	the	respondents	indicated	entrepreneurship	as	the	mostattractive	career	option.	But,	income	insecurity	in	these	extraordinary	times	will	surely	leave	a	mark.The	central	government	had	launched	the	Make	in	India	initiative	in	2014	and	the	Start-up	India	scheme	in	2016	topromote	manufacturing	and	entrepreneurship	in	India.	Several	National	Skill	Development	Corporation	(NSDC)Training	Centres	have	also	been	opened	across	the	country.	However,	these	initiatives	have	not	been	able	tohandle	the	economic	impact	of	the	COVID-19	crisis.	Business	owners	were	not	prepared	to	deal	with	a	calamity	ofthis	scale.Benaaz	Anam	is	the	founder	of	Periwinkle,	a	clothing	line	that	was	launched	in	2018.	Anam	says	that	they	had	tocompletely	stop	production	as	their	unit	was	shut.	“Production	for	our	new	collection	has	been	stopped	because	wehad	to	shut	our	unit”,	says	Anam.	She	is	scared	about	the	future	as	she	deals	with	clothes,	which	falls	under	thecategory	of	‘non-essential’	item.	Apart	from	that,	these	start-ups	that	rely	on	online	delivery	platforms	for	shippingtheir	products	are	particularly	facing	problems.	“Our	third-party	partners	like	Amazon,	Little	Black	Book,	and	WorldArt	Community	stopped	taking	orders”,	says	Anam.	This	is	because	the	government	had	prohibited	these	platformslike	Amazon	from	selling	non-essential	items.South Asia @ LSE: India’s lockdown: Why small businesses and the self-employed need help Page 1 of 2		Date originally posted: 2020-05-25Permalink: https://blogs.lse.ac.uk/southasia/2020/05/25/indias-lockdown-why-small-businesses-and-the-self-employed-need-help/Blog homepage: https://blogs.lse.ac.uk/southasia/Divish	Gupta,	the	co-founder	of	Leap	Club	–	a	curated	marketplace	that	promotes	ethical	consumption	which	waslaunched	in	2019	–	also	says	that	they	were	facing	shipping	problems.	“All	our	shipping	partners	had	stopped	doingdeliveries	because	of	the	uncertainties,”	said	Gupta.	But	since	they	deal	with	something	like	organic	food	productsand	not	clothing	or	shoes,	they	shifted	to	local	delivery	channels	and	producers.	But	figuring	all	of	this	out	took	bothtime	and	effort.Both	Anam	and	Gupta	are	entrepreneurs	who	acknowledge	that	the	pandemic	is	an	unexpected	crisis	but	they	areworried	about	their	employees.	While	Periwinkle	had	to	ask	their	workers	to	be	at	home,	Leap	Club’s	organicfarmers	also	faced	problems	in	selling	their	products.	If	formal	business	set-ups	had	to	face	these	problems,	onecan	only	imagine	the	plight	of	self-employed	workers.The	absence	of	data	makes	it	hard	to	estimate	the	actual	rate	of	self-employment	in	India,	which	was	51%	in	2013-14.	A	largely	agrarian	economy,	the	majority	of	Indians	have	always	been	self-employed.	Recently	it	has	beenclaimed	that	self-employment	is	the	answer	to	India’s	unemployment	challenges	by	many	economists,	policymakersas	well	as	the	government.According	to	the	2017-18	Periodic	Labour	Force	Survey	(PLFS),	70%	of	the	self-employed	are	own-accountworkers	who	do	not	hire	any	other	worker.	26%	are	unpaid	helpers	who	assist	their	family	members.	Only	4%	areemployers	who	employ	paid	workers.	It	is	also	a	worrying	matter	that	only	10%	of	the	self-employed	reported	anincome	of	more	than	20,000	per	month.Also,	almost	95%	of	the	self-employed	belong	to	the	informal	unorganised	sector,	who	may	not	have	savings	to	goback	to.	With	no	special	government	policy	other	than	Pradhan	Mantri	Garib	Kalyan	Package	and	the	NationalFood	Security	Act,	2013	for	now,	the	low-income	self-employed	have	become	one	of	the	biggest	victims	of	thepandemic.Banita,	a	LIC	agent,	works	on	a	commission	basis	and	because	of	the	lockdown	is	facing	problems	in	recruitingcustomers	for	various	schemes	of	LIC.	“My	income	has	been	non-existent	since	the	lockdown.	I	had	to	borrowmoney	from	my	neighbours	to	buy	essential	items.”	She	is	not	alone;	many	self-employed	people	are	facing	similarissues.	Sunita,	who	sells	cosmetic	items	in	the	Hengerabari	area	of	Guwahati,	said	that	she	is	having	a	tough	timerunning	her	household	because	there	has	been	no	income.	“I	have	not	been	able	to	open	my	shop	at	all,	so	howcan	there	be	any	income?”Another	sector	that	has	been	adversely	affected	is	beauty	parlours	and	salons.	People	working	in	parlours	andsalons	are	also	fearful	that	their	business	will	not	recover	even	if	the	restrictions	are	lifted	because	they	areengaged	in	occupations	that	involve	contact.	The	fact	that	a	barber	was	tested	COVID-19	positive	in	Guwahati	hasworsened	the	matter.	People	are	apprehensive	of	availing	these	services.	As	such,	a	large	sector	of	self-employedpeople	are	facing	a	gloomy	future.The	famous	Assamese	weavers,	too,	are	victims	of	this	crisis,	especially	the	self-employed	ones.	Their	productionand	sale	have	stopped,	which	means	their	income	has	also	stopped.	Most	of	them	are	worried	about	their	futuresas	their	pre-existing	contracts	are	getting	over.	The	weavers	who	are	owners	of	small	units	are	also	unable	to	paytheir	workers.It	is	also	pertinent	to	mention	that	none	of	these	small	businesses,	start-ups,	and	self-employed	workers	havereceived	any	kind	of	substantial	financial	assistance	from	the	government.	Some	of	them	have	received	Rs.	500under	the	Pradhan	Mantri	Garib	Kalyan	Package	but	there	is	no	specific	policy	for	them.	They	need	urgentprotection	and	relief	from	the	government.This	pandemic	has	been	an	eye-opener	in	terms	of	telling	us	that	future	planning	is	a	necessity.	Launchingschemes	with	attractive	tag-lines	like	Stand	Up	India,	Start-Up	India	seemed	perfect	for	a	happy	economy.	But	withgreat	uncertainties	comes	great	responsibilities.	There	must	be	provisions	for	emergency	and	relief	funds	for	smallbusiness	and	other	self-employed	workers.	The	COVID-19	crisis	is	not	going	to	go	away	anytime	soon,	and	thus,we	must	be	prepared	for	more	lockdowns	and	hence	policy	measures.	This	article	gives	the	views	of	the	author,	and	not	the	position	of	the	South	Asia	@	LSE	blog,	nor	of	the	LondonSchool	of	Economics.	Featured	Image:	Indian	Rupees.	Credit:	Shameersrk,	Pixabay.South Asia @ LSE: India’s lockdown: Why small businesses and the self-employed need help Page 2 of 2		Date originally posted: 2020-05-25Permalink: https://blogs.lse.ac.uk/southasia/2020/05/25/indias-lockdown-why-small-businesses-and-the-self-employed-need-help/Blog homepage: https://blogs.lse.ac.uk/southasia/

India’s lockdown: why small businesses and the self-employed need help

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India’s lockdown: why small businesses and the self-employed need help

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