Day 11 – Q 2. Examine the significance of internal migration for the economy. How is the current exodus of migrants hurting the economy? Explain.

  • IASbaba
  • June 22, 2020
  • 0
GS 3, Indian Economy, TLP-UPSC Mains Answer Writing
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2. Examine the significance of internal migration for the economy. How is the current exodus of migrants hurting the economy? Explain.  

अर्थव्यवस्था के लिए आंतरिक प्रवास के महत्व की जांच करें। प्रवासियों का मौजूदा पलायन अर्थव्यवस्था को कैसे नुकसान पहुंचा रहा है? स्पष्ट करें।

Demand of the question:

It expects students to write about the significance of the internal migration for the Indian economy and impact of current exodus of the migrants on the economy. 


The COVID-19 crisis for India has also become economic as well as humanitarian involving inter-State migrants on return journeys home racked by pain and suffering and no surety of any income going ahead. For a majority of migrant labourers, migration is either a livelihood accumulation strategy or survival risk reducing strategy whichever way we define the nature of migration.


According to the Census of 2011, there were 139 million interstate migrants who moved for all manner of reasons ranging from education to marriage, not just employment. The data reconfirm the dominance of Uttar Pradesh and Bihar as well as other Hindi-speaking states as main source states, while Maharashtra, Delhi, Gujarat, Uttar Pradesh and Haryana absorbed half of the migrants.

According to the Centre for Monitoring Indian Economy (CMIE), an estimated 122 million people lost their jobs in April alone and three-quarters of these were small traders and wage labourers majority part of internal migrants. 

Significance of internal migration for the economy: 

  • Dependence of multiple industries: Major sub-sectors using migrant labour are textiles, construction, stone quarries and mines, brick-kilns, small-scale industry (diamond cutting, leather accessories, etc.), crop transplanting, sugarcane cutting, rickshaw-pulling, fish and prawn processing, salt panning, domestic work, security services, sex work, small hotels and roadside restaurants/tea shops and street vending. Calculations based on these estimates indicated that the economic contribution of migrants was around 10% of India’s gross domestic product (GDP) as per study of Priya Deshingkar.
  • Demand of casual work and better income: Internal migration is major force for unskilled work in industry and daily wage sector of informal economy. E.g. Daily wages in state like Odisha is 100 to 120 for unskilled work whereas it is as high as 600-800 in state like Kerala.  
  • Income source for poorer region: Internal remittances in India totalled $7.485 billion in 2007-08, highlighting the poverty and inequality reducing potential of internal migration as the money flows directly to families in poorer parts of the country.
  • Interstate male migrants often move alone which became part of cheap labour force on which Indian economy capitalise to attract foreign direct investment. E.g. out of 11 million migrant population registered under census 2011 in south Delhi only around 27000 are female. Left over families in rural area reduces the cost of living in the urban centres which help them to survive and send remittances in comparatively satisfactory wages.
  • On the other hand, internal migration increases homogeneity of Indian society with more cosmopolitan cities helps in increasing national integrity. 

Impact of migrant exodus on the economy:

  • Collapse of mini-economies: Mini economies which sustain labour supply in urban centres as well as add to the aggregate demand in the overall economy faced major blow due to exodus. E.g. Tea shop outside private offices which catered demand in the urban centre generated demand in the distant rural areas by remittances of money, which completely closed due to exodus. 
  • The establishment of local ancillary service economies is not automatic. They rely on a critical mass of migrant workers in order to ensure profitability. If there is enough number of customers, then the street vendor finds it profitable to sustain his service. After the reverse migration, their incomes would be adversely affected.
  • High cost of labour in comparatively industrialised and manufacturing states: The networks of migrant labour supplemented local workforce and plugged regional resource gaps to expand the productive capabilities of the region. Without them, this ostensibly demands problem might turn into a supply bottleneck too. 
  • High input cost in manufacturing states will wipe out profits of businesses which will reduce the export potential eventually. 
  • Production delay: The aggregate growth in GDP relied on high growth industrial or trade centres which spearhead production and generate momentum for the rest of the economy. The lockdown strips these centres of their capability and threatens India’s overall macroeconomic stability.
  • Stress on MSMEs: Now parts of the economy which seemed to have the capacity to pause during the lockdown would experience a strain eventually due to their linkages with the SME’s. Unable to obtain ancillary inputs, the larger enterprises will end up with a clogged value chain. This is the domino effect of an unanticipated demand drop which permeates into a general adverse effect on the overall economy.
  • Socio-economic inequality: when the poor become poorer, there can be serious long-term impacts on economic growth. Studies have shown that one of the main mechanisms through which inequality affects growth and development is by limiting educational opportunities for children from poorer backgrounds, reducing their prospects for social mobility and breaking out of caste-based occupations. With remittances no longer flowing to rural areas, for the time being, the poor will struggle to invest in education and other ways of enhancing their children’s life chances.

However, governments should better plan the reverse migration because market forces might work with a lag under uncertain economic environment due to the pandemic.


The mass exodus of migrants now becomes a significant barrier and acceleration to maintain the $2.7 trillion economy needs planned policy for reverse migration along with reduction in development deficit to increase opportunities in source states. Otherwise it will be difficult in the foreseeable future to realise dream of $5 trillion economy.

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