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ACADEMIA Letters Household Finance During the COVID-19 Pandemic Richard Sagor Mitra, Spicer Adventist University Introduction The COVID-19 pandemic has shaken and paralyzed the world at the same time. It will take some time for the world to recover from this and get back to normal. In this article we shall try and understand the possible affect of this global pandemic on household finances; income, expenditure and saving. We shall also try to understand how things might turn out if prompt and adequate actions are not taken. Survey was conducted to get a better understanding of the situation. Current Situation With the COVID-19 pandemic, many people have been asked to work-from-home, while many have been laid off from their work. Both these situations have resulted in reduction or loss of income. According to an article in The New Indian Express (2020), 73 per cent of the 1,124 surveyed companies stated that they are planning to reduce salary, 57 per cent are laying off their employees temporarily, while 21 per cent are doing permanent lay off for at least for 2 years. Bhattacharyya & Verma (2020) interviewed HR heads form a dozen of leading corporations and they are of the opinion ‘that virtual workplace are the future of work’. If this continues, the concept of both work place and work itself will never be the same again. If this poses a potential threat to global job market is another area of research. According to an article in The Hindu (2020), Center for Monitoring Indian Economy (CMIE) stated that an estimated 12.2 crore Indians lost their job during the lockdown in April. Sharma (2020) also reports that according to Center for Monitoring Indian Economy (CMIE), Academia Letters, July 2021 ©2021 by the author — Open Access — Distributed under CC BY 4.0 Corresponding Author: Richard Sagor Mitra, richard25mitra@gmail.com Citation: Mitra, R.S. (2021). Household Finance During the COVID-19 Pandemic. Academia Letters, Article 2237. https://doi.org/10.20935/AL2237. 1 27 million youth in the age group 27-30 years lost jobs in April. The repost also said that this loss of job will have a long term impact on household savings. With the current situation and reports, it is evident that there has been a great number of job losses and work-from-home is now becoming the new norm in many industries. In addition, it needs to be noted that many companies are cutting down salary and other benefits, which will reduce the real purchasing power of the people; as the prices of commodities remain the same, or increased. Under this situation, people have no other option but to turn to their savings to meet their needs. Consumption is the final purpose of economic activity (Carrol, 2016). Individual works for wages which is later used on consumption. Part of income which is set aside for future use is called saving (Britannica, 2019). The expenditure has to be less than income for a household to make saving; accumulated saving is called savings. Saving is indeed done for times like this, so it can be rightly said that saving is used properly. However, the question is how long will it sustain the household if the current situation prevails? Methodology This is a quantitative research aimed to understand how household finances are affected with the COVID-19 pandemic. Questionnaire was circulated over Facebook and Whatsapp using Google Forms. A total of 30 people responded back; 19 responded from India, 5 responded from Bangladesh, 1 responded from Philippines, 1 didn’t mention their place of residence while 2 were from Canada and England, respectively. Respondents shared about their current income status, previous savings, current expenditure behavior and also how long can their savings sustain them if the condition prevails. Result and Analysis Collected data revels that most of the respondents have a source of income amidst the pandemic. Which is good for them as most of them belong to the salaried middle-class group and this may not be the case with everyone. Most of the respondents have a saving habit while some did not. The main findings from this survey are: 1. The spending behavior has been diverse among the respondents. There has been overspending, consumption of those goods which were not consumed previously, and these has also been reduction in spending. While the over spending can be due to anything like over eating of snacks, increased Internet usage or Netflix subscription to help with the Academia Letters, July 2021 ©2021 by the author — Open Access — Distributed under CC BY 4.0 Corresponding Author: Richard Sagor Mitra, richard25mitra@gmail.com Citation: Mitra, R.S. (2021). Household Finance During the COVID-19 Pandemic. Academia Letters, Article 2237. https://doi.org/10.20935/AL2237. 2 boredom. However, the major reasons for reduction in expenditure are increased price, reduced income or the lock-down itself as both online and off-line shops are closed. 2. Most of the respondents who had been saving a part of their income have started to spend from their savings to meet their expenses. With no income coming in and their savings going out without being replenished will very soon result in insolvency. 3. Among the respondents, most of them have enough savings to sustain for another 3 months but less than 1 year if the situation prevails. Some are not even sure for another month while some even have no savings. Some have enough saving which will sustain them through this pandemic. This implies, most people are facing financial crisis over their household finance. An Analysis of the Future In the current situation, with people using up their savings and if they don’t revive their source of income, they are most likely to run into insolvency. Where people have no inflow of money but is only spending from their savings, companies are supposed to have most of the money with them. This should create more employment but this may not be the case as there would be less actual demand in the market, which will discourage producers from making additional investment. However, economy is a flowing concept so the money needs to come back into the economy. Banks will needs to offer personal loans, provided that businesses deposit their excess cash in the bank, to households at reduced interest rates so people can avail bank loans and start spending. This spending will create demand and so the production process will resume, creating more employment. Otherwise, if people won’t have resources to meet their ends, they might engage in anti-social activities, theft, robbery, etc. However, if banks will not have enough money to sanction personal loans against no or less collateral security then people may have to turn to agriculture and husbandry, and the Indian economy will go back a few years back! Conclusion and Recommendation Based on the responses received and their analysis it can be concluded that the household finances of middle-class salaried individuals have not really been affected as most of them have a saving habit. Consumption patterns on the other hand have varied with increased purchase, new demand for certain goods that were not demanded previously and also reduction in purchase. Most people are spending from their savings and most won’t last more than a few Academia Letters, July 2021 ©2021 by the author — Open Access — Distributed under CC BY 4.0 Corresponding Author: Richard Sagor Mitra, richard25mitra@gmail.com Citation: Mitra, R.S. (2021). Household Finance During the COVID-19 Pandemic. Academia Letters, Article 2237. https://doi.org/10.20935/AL2237. 3 more months if the situation prevails. With all of this, the government and banks will have to play a major role, with their fiscal and monetary policies, in getting the economy back on track. References An estimated 12.2 crore Indians lost their jobs during the coronavirus lockdown in April: CMIE. (2020, May 07). The Hindu. Retrieved May 21, 2020, from https://www.thehindu. com/data/data-over-12-crore-indians-lost-their-jobs-during-the-coronavirus-lockdown-inapril/article31520715.ece Bhattacharyya, R., & Verma, P. (2020, April 03). Work-from-home going to stay, even after Covid-19 scare is over. The Economic Times. Retrieved May 20, 2020, from https:// economictimes.indiatimes.com/jobs/work-from-home-going-to-stay-even-after-covid-scareis-over/articleshow/74956231.cms Carroll, C. D. (2016, February 22). Consumption theory. Retrieved May 19, 2020, from https://www.britannica.com/topic/consumption/Consumption-theory COVID-19 Effect: Organised private sector planning layoffs, salary cut. (2020, May 14). The New Indian Express. Retrieved May 21, 2020, from https://www.newindianexpress.com/ business/2020/may/14/covid-19-effect-organised-private-sector-planning-layoffs-salary-cut2143317.html Sharma, Y. S. (2020, May 13). 27 million youth in age group of 20-30 years lost jobs in April: CMIE. The Economic Times. Retrieved May 21, 2020, from https://economictimes. indiatimes.com/news/economy/indicators/unemployment-rate-dips-to-23-97-data-from-cmieshows/articleshow/75689370.cms?from=mdr The Editors of Encyclopedia Britannica. (2019, December 19). Saving. Retrieved May 19, 2020, from https://www.britannica.com/topic/saving Academia Letters, July 2021 ©2021 by the author — Open Access — Distributed under CC BY 4.0 Corresponding Author: Richard Sagor Mitra, richard25mitra@gmail.com Citation: Mitra, R.S. (2021). Household Finance During the COVID-19 Pandemic. Academia Letters, Article 2237. https://doi.org/10.20935/AL2237. 4