Covid-19 forced cuts in household expenditure on health, education

The Covid-19 pandemic forced Indian households to slash all kinds of spending except on food and essentials such as electricity bills, showed data released by the National Statistical Office (NSO) on Monday

The Covid-19 pandemic forced Indian households to slash all kinds of spending except on food and essentials such as electricity bills, showed data released by the National Statistical Office (NSO) on Monday. The pandemic’s spending squeeze includes health and education, bearing out anecdotal evidence.

The pandemic’s spending squeeze includes health and education, bearing out anecdotal evidence.(AP file photo)

The numbers capture the severity of the pandemic’s effect on incomes and demand. They also underline the growing divergence between the rich and the poor, as the NSO does not expect private final consumption expenditure to return to pre-pandemic levels even in 2021-22 financial year.

Spending on clothing and footwear declined by 22.2% on the back of a 1.2% annual contraction in 2019-20.

The poor spend a greater share of their incomes than the rich, which makes the issue of tackling inequality central to the economic task at hand.

It was expected that the pandemic would take a heavy toll on contact-intensive services such as transport and hospitality. For example, private spending on hotels and restaurants fell by a massive 54% on an annual basis in 2020-21.

However, spending declined even on services such as health, that too in a pandemic year, and also education, suggesting that there was serious economic distress. The fall in spending on education is in keeping with anecdotal accounts of parents shifting their children from private to less expensive government schools.

Spending on clothing and footwear declined by 22.2% on the back of a 1.2% annual contraction in 2019-20, indicating that the bulk of India’s households were cutting back on spending even before the pandemic.