The Impact of Covid-19 on the Service Sector

Let me start this piece with a personal experience of my wife.

When the last lockdown in Delhi was winding to a close, my wife visited a parlour near our apartment. The parlour hardly had any customers but my wife was relieved to see the girl who usually attended to her. When she asked about her the welfare of her family, she almost broke down. She had a very harrowing experience to narrate. Her salary in pre-pandemic days was 14000 rupees but the owner could not pay her during the lockdown. It had come down to 7000 rupees when it opened as the parlour hardly had any customers. Both here parents were ironing cloths for a living. The virus saw it that their incomes had reduced to zero. The tiny flat in which they lived was on rent and the house-owner was pestering them for payment. The only option available to them was to borrow money on a high interest (at 2% per month) and pay the dues. The future looked bleak even then for the poor girl. Then came the second wave. It has just subsided but the parlour is still closed. There is no way of knowing it will ever open all. My wife doesn’t know what has happened to the girl. She doesn’t have her number and there is no one answering the phone at the parlour.

The story is not unique. There are several such stories all over India in different horrific hues. Many end in unspeakable tragedies.  

The “work from home” guys, pensioners, and Government servants with assured income, government school and college teachers have all personally suffered but not because their incomes have dried out. In fact, most times, their savings have ballooned. But the incomes of the persons who had been rendering them support service have almost completely dried out.

I have made some very rough calculations about their plight and the picture they present is truly horrific.

India’s total workforce will be around 50 crores. The service sector will comprise about 35% of the workforce that works out 17.5 crore. Of them IT sector employs 0.4 crore, the central and state governments and banks (including teachers) employ about 3.5 crore. Let us assume that the number of persons with assured income to whom the ‘working from home’ facility is available either fully or partially is around 4 crore. That leaves us 13.5 crore persons. Of them, at least 40% must be serving in major urban centres and they have all been severely affected. Even in semi-urban and rural areas the service sector would have certainly felt the impact of the ravage caused by the virus. Let us therefore assume that slightly over 50% of the 13.5 crore persons, that is about 7 crore persons need financial help. If we assume that at least three persons depend on them, the number of persons who are affected in various ways will be, at the very least, around 21 crore – a huge number.  

The only way to prevent these people from meeting total disaster is to support them directly by giving them monetary help. A monthly payment of rupees 2000 to them for a period one year will go a long way. That will work out to approximately rupees 1.75 lakh crore. A major part of this help must come from the ‘work from home’ classes and the pensioners – and of course income-tax payers and the corporate sector employees. It is good to remember that India spends 8% of its GDP on government employees and pensioners. Our GDP is around rupees 140 lakh crore and hence the governments pay as salary and pensions around rupees 12 lakh crore. Add to it the salaries being paid by the private sector to its regular employees the total will be enormous. My suggestion is the government (s) start deducting 2% of the salaries of both Government employees, pensioners and private sector employees (earning more than rupees 20000 per month on a regular basis) until such time the total amount reaches, rupees 1.75 crore and use that money to provide succour to the hapless persons in the service sector. Of course there will be the usual howls which are best ignored. This is just one method. I am sure the economists will come out with much better methods.

Personally speaking, all of us, who are better placed, can help at least one such family by paying it rupees 2000 per month for at least one year. I am not talking about the drivers and helpers who work for us. I am talking about the nameless guy in the street. Choose anyone and help his or her family. A little extra effort is all that is needed.

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