Abstract

The economic impacts of COVID-19 lockdowns on poor and vulnerable households living in rural areas of developing countries are not well understood due to a lack of detailed micro-survey data at the household level. Utilizing weekly financial transaction data collected from households residing in a rural region of India, we estimate the impacts of India's COVID-19 lockdown on household income, food security, welfare, and access to local loan markets. A large portion of households living in our study region is reliant on remittances from migrants to sustain their livelihoods. Our analysis reveals that in the month immediately after India's lockdown announcement, weekly household local income fell by INR 1,022 (US$ 13.5), an 88% drop compared to the long-term average with another 63% reduction in remittance. In response to the massive loss in earnings, households substantially reduced meal portions and consumed fewer food items. Impacts were heterogeneous; households in lower income quantiles lost a higher percentage of their income and expenditures, but government food aid slightly mitigated the negative impacts. We also find an increase in the effective interest rate of local borrowing in cash and a higher demand for in-kind loans, which are likely to have an adverse effect on households who rely on such services. The results from this paper have immediate relevance to policymakers considering additional lockdowns as the COVID-19 pandemic resurges around the globe and to governments thinking about responses to future pandemics that may occur.

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Abstract

The COVID-19 pandemic caused the largest number of lockdowns across the globe, affecting nearly half of the world’s population by the first week of April 2020. The biggest lockdown was the one declared by the Indian government. All economic activity was shut down overnight, impacting the lives of the nation’s 1.3 billion people. The economic impacts of lockdowns on the poor are little understood because the data have not been available. We have been tracking the weekly financial activities of a sample of poor households in rural India for over a year. Using this unique high-frequency weekly data before India’s COVID-19 lockdown and supplementing that dataset with phone-call surveys conducted on the same households for four weeks after the lockdown announcement, we econometrically estimate the impacts of the lockdown. Our analysis reveals that in the first four weeks after India’s lockdown announcement, poor households lost INR 1,022 (US$ 13.5), which is about 88 percent of their average weekly income from the previous year. In addition to the income loss, households reduced meal portions and consumed fewer food items. The poorer households were hit harder, but government food aid slightly mitigated the negative impacts.

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Abstract

This paper analyzes the short-run responses of poor rural households to India’s demonetization in 2016. We estimate an economic loss of 15.5% over the two months post demonetization and discuss a range of strategies that the households adopted to exchange their banned currency-denominations.

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