Finance Gap Affecting Growth of Women-Owned Enterprises: IFC study

 

Financial inclusion is considered to be instrumental in empowering women as advancing credit to women, who own businesses, improves their economic stature and independence across the globe. In the Indian context, encouraging greater access to financial services becomes more relevant given the various degrees of socio-economic discrimination  women are subjected to in their daily lives. The following article discusses the findings of a report titled ‘Micro, Small, and Medium Enterprise Finance: Improving Access to Finance for Women-owned Businesses in India’ (Report) published on March 11, 2014 by the International Finance Corporation. The research report focuses on the opportunities, challenges, and way forward to improving access to finance for women-owned businesses in India.

In India, there are around 3.01 million women-owned businesses which account for about 10 percent of the total micro, small and medium enterprises (MSME). They collectively contribute around 3.09 percent of the total industrial output and employ over 8 million people.

As data reveals, 97.2 percent of women-owned businesses fall under the micro industries category. This concentration of industries indicates reduced growth capacities and opportunities these companies caused due to the huge gap in the demand and supply of financial services to the same.

According to the report, the financing gap for women-owned businesses amounts to Rs. 6.37 trillion in 2012. This accounts for 73 per cent of the total requirements by MSMEs in the country.

Currently, the various funding sources for women-owned business include formal, semi-formal and informal sources. Out of these available sources, women-run enterprises, much like the general trend in the MSME sector, largely depend on informal lending sources that constitute 92 per cent of the total share of funds provided in 2012. There are 3 million women entrepreneurs in India, but only 3 per cent have access to finance from formal financial institutions.

Barriers to financial inclusion of women

The major factors that impeded financial inclusion of women entrepreneurs are as follows:

Lack of adequate collateral: Due to persisting social restrictions around inheritance and land ownership, women in India do not have ownership of property or enough assets to use them as collateral for availing loans at low interests from formal funding sources. Even when women do own legal rights to properties, the male members either get them legally transferred to themselves or exercise control over them even without legal rights or title deeds.  Therefore, poor financial literacy amongst women and lack of agency of women in terms of title deeds restricts their capacity to ensure collateral for credit.

Lack of formal loans to women:   As the report mentioned above points out that approximately 90 percent of women-owned enterprises are in the informal sector and 78 percent of them belong to the services sector. Banks traditionally identify the informal and service sectors as high risk group as interest returns remain uncertain. This is mainly because of the following reasons:

a)      lack documents and papers essential for banking services, and

b)      increased number of smaller loans shoots up the cost for the banks to administer and provide equal financial services to all.

Absence of women employees in bank: Women employees, who are believed to act as mediators enabling more women to come up to banks to avail banking services, constitute less than 20 percent of the bank’s workforce.

Apart from the afore mentioned factors, lack of financial awareness, absence of support from the male members of the family and lack of confidence to approach financial institutions act as the major barriers.

Government Response

The MSME ministry launched the government’s only financing scheme for women entrepreneurs- Trade Related Entrepreneurship Assistance and Development (TREAD)-in 2008. This is the only targeted approach on the part of the government to provide finances focusing on the MSMEs. However, as against the target of Rs. 38 million only Rs. 7.7 million were disbursed as loan amount in 2012.

The central schemes like the Prime Minister’s Rozgar Yojana, the Swarna Jayanti Shahari Rozgar Yojana and the Swarna Jayanti Gram Swarozgar Yojana currently provide funds to MSMEs. But the net contribution of these schemes is a mere 7 per cent of the total share of funds supplied to women-owned MSMEs.

Lastly, by establishing more branches of Bharatiya Mahila Banks, the government aims at catering to the banking requirements of women and promote their economic empowerment.

Conclusion

Although microfinance plays a key role in encouraging individual women belonging to the low income group, who require loans to run tiny enterprises, its mono-product environment, singular delivery model, lack of flexibility, and shorter-tenure loans with limited amount of credit restrict their scope to low-income women or micro entrepreneurs rather than women-owned MSMEs.

Considering the gradual rise in the number of women entrepreneurs in India, there is an urgent need to encourage banks to step up formal funding of women entrepreneurs.

Pallavi Ghosh

Right to Entrepreneurship and Aspirations

Photo Source: Linked in

This is in response to Professor Shamika Ravi’s article, “No monkey business” (Indian Express, May 3, 2014), wherein she says that the “general improvements in physical and financial infrastructure have contributed significantly more to the growth of entrepreneurship in India than specific targeted policies of the government”. The Congress Party promised in its 2014 Lok Sabha elections manifesto a “Right to Entrepreneurship that will protect and assist all those who seek to become entrepreneurs”. There seems to be some serious confusion in dealing with the idea of the right to entrepreneurship. The right to entrepreneurship essentially mean the broad term of institutional framework rather than taking one of its sub-sets like the “physical and financial infrastructure” which the writer seems to be taking by underestimating a whole lot of other factors in a “Business Environment” or business eco-system. Moreover, there is a fundamental difference which the writer seems to miss notoriously. The difference is the policy perspectives of distinction between fostering new entrepreneurship opportunities and supporting existing enterprises.

At present, the aspiring Indian entrepreneurs are facing acute challenges related to structural issues such as finance (credit), legal and taxation, operational/functional, infrastructure and technology diffusion. The institutional perspective of a “right” to claim a defined service from a public authority would essentially deal with its totality. In the case of promoting entrepreneurship through a rights based approach, the aspiring entrepreneurs are entitled to demand services dealing namely from starting a business to closing a business by a law which facilitates services within a specified timeframe. In other words, the aspiring entrepreneurs should be guaranteed with a legal right to claim a service from a public authority within a timeframe as immunity.

 According to the World Bank’s Easy of Doing Business Report (2014), in India, to start a business it takes 27 days vis-à-vis 16 days in South Asia and 11 days in OECD countries. In terms of number of procedures, India has 12 procedures as compared to 7 in South Asia and 5 in OECD countries. In case of India, the 12 procedures have to be approved by both Union and State governments. Significant amount of delay in processing of each of the 12 procedures would be possible and are indeed in common practices. There are also considerable costs involved in each of the procedures processing in the government. In India, the cost of per capita income for starting a business is also high at 47.3% as compared to 19.8% in South Asia and 3.6% in OECD countries.

 Further, the World Bank Report (2014) shows the exact number of procedures involved in each stage and how many days takes to complete official process: for starting a new business (12 procedures and takes 27 days), dealing with various construction permits (35 procedures and takes 168 days), getting electricity connection (7 procedures and takes 67 days), registering property (5 procedures and takes 44 days), getting institutional credit (8 procedures), paying taxes (33 times in a year), enforcing contracts (46 procedures and takes 1,420 days), resolving insolvency (minimum 4 years to close a business), etc. All of these are seriously hurting especially the poor aspiring entrepreneurs much more than others because the poor entrepreneurs lack either capital or skill or both. Particularly, getting institutional credit in right time to start a business is really a daunting task for poor entrepreneurs.

 All over the world, the micro, small and medium enterprises are promoted vibrantly by the government interventions by the approach of institutional framework. Therefore, by guaranteeing a legal right to aspiring entrepreneurs in a structured institutional framework would inevitably enable them to demand not only clearing of all the processes and procedures within a timeframe from both Union and State governments but also go beyond and facilitate legal framework to reduce huge costs involved in the starting of a business to closing a business.

 According to Dr.Pronab Sen (2014), “The Economic Censuses demonstrate the huge size and growth of entrepreneurial activity in India... the net increase in the number of non-agricultural establishments in the country is about 8 million every ten years. While admittedly many of these enterprises reflect basic survival strategies, many do not.  The past decade has shown the dynamism that is possible in this sector under the right circumstances and with the proper policies. Many of the leading corporate houses existing today belonged to the SME category at the turn of the century.” The specific targeted policies of the government had its role helping of the once tiny SMEs become big corporate houses now! The UPA’s initiatives like MSMEs Development Act, 2006 has also played a major role.

 In a recent research paper by Bandiera et.al (2012) found that the “very poor can be transformed from labourers into basic entrepreneurs and that this occupational transformation is associated with dramatic improvements in their economic lives, bringing them closer to the middle classes in their communities on measures such as wages and spending.”  Further, the study shows that the “entrepreneurship programme in Bangladesh – the Ultra Poor programme, operated by the Bangladeshi NGO BRAC. The Ultra Poor programme provides asset transfers and skills training to the poorest women in rural communities. The programme aims to move these typically asset-less and unskilled women from low-wage and seasonal jobs to the more secure, self-employment based occupations, which are the choice of middle class women in these communities.”

 The structural reforms in the informal sector are yet to be embarked in a major way to create an enabling environment for even the poorest of the poor in the country. Two-thirds of Indians, nearly 82 crore people are below 35 year of age. The time has come for the idea of right to entrepreneurship in India to really re-look its entire apparatus of the regulatory environment from the perspectives of the rights based approach to unleash the potentials of entrepreneurs of all sections of the society.

 

B.Chandrasekaran

Urbanisation Trend in India and its Policy Challenges

Photo Source: Ace Geography

Global evidence, especially from developed nations, indicates that industrialisation and urbanisation accompany each other (Bairoch 1988). It was expected that the 1991 liberalization reforms, by paving way for greater industrialization, would trigger urbanisation in India just like the 1980 reforms did in China. However, India’s urbanisation post liberalization has been termed as below normally ‘expected’. This could partly be attributed to the rise of high-tech and specialised industries in metropolitan cities that were labour-light as against the expected growth of labour intensive manufacturing sector.

However, post 2001 India witnessed greater private investment in areas such as industries, information technology, services sector and infrastructure. This has been reflected in rising share in non-agricultural industries in the GDP since 2001. The increased investment largely flowed into urban areas and triggered the much delayed urbanization phenomenon. This has added 90 million people to India’s urban areas in 2011 over last decade. (Census 2011, 2001 report). A McKinsey Report (2010) on India’s urbanisation prospects  projects that during the period 2010-2030, urban India will create 70 percent of all new jobs in India. The labour-intensive manufacturing, construction, and services are further expected to drive greater migration to India’s urban areas as per various projections (HPEC Report). Population estimates show that another 55 million will be added to India’s urban areas by 2021 and another 100 million by 2026. At this pace, India’s urban population will exceed its rural population by 2045.

These statistics highlight that India is at a critical juncture where its traditionally rural characteristic, best captured by Gandhi’s observation “true India lies in its seven lakh villages”, is set to undergo a historic transformation. This rapid urbanisation couldn’t have come at a more crucial time. With 69 percent of India’s 1.2 billion people expected to be between the ages of 15 and 65 by 2035, India needs to create enough productive employment opportunities to reap the benefits of this demographic windfall. World over, urban areas tend to be invariably more productive due to economies of agglomerations. In line with this trend, McKinsey’s report not only estimated that Urban India will create 70 percent of all new jobs but also that these jobs would be twice as productive when compared to rural employment opportunities. With urbanization poised to play a crucial role in India’s growth it is imperative that policy makers and urban planners embrace this phenomenon by gearing policies towards accommodating and facilitating this transformation with proper social protection and due rights to its people.

 
Contemporary Challenges
 

India so far fares poorly in most of the elements of a successful urban development strategy including land use, affordable housing, transportation, access to basic services like water and sanitation and social security. The following sub-section delve into policy distortions that are hindering economic and spatial transformation in India.

 
 
Urban Housing

Restrictive land use policy and high property prices have given rise to ‘shelter poverty’ in the form of slum and pavement dwellers. One estimate (World Bank Report)) suggests that 25 percent of urban population in India resides in slums and the figure escalates to a staggering 54 percent for Greater Mumbai. As cities expand, policymakers need to develop an inclusive urban design which provides low income housing to economically weaker sections (EWS) of society. Related to this is the problem of rigid land use policy. Floor Space Index (FSI) limits in India have historically been set way below international standards thus hindering urban densification and making the process of urban expansion expensive. In actual practise low FSI restrictions also encourage illegal construction. Thus current land use policies fail to reflect market realities and socio-economic demands.

 

Mobility
 

Easy mobility and an efficient transport system are essential for successful urbanisation. From 1951 to 2004, road network had expanded only 8 times while vehicle numbers have increased by 100 times. Thus limited road carrying capacity has increased journey times in India’s mega cities by more than 30 percent compared to smaller cities (World Bank 2013). Further, public transportation which is the only form of mobility for the poor accounts for a mere 22 percent of the urban transport system; a figure much below the average 40 - 50 percent observed in other middle income countries (World Bank 2013). Public transportation in Indian cities is also one of the most unaffordable in the world with Mumbai’s cost being twice of London and five times that of New York.
 

Sanitation

 

To make cities liveable it is essential that they be clean and have reliable water supply. In Indian cities, it is a common sight to see slum dwellers stand in long queues to fill buckets of water whenever there is intermittent water supply; this involves an economic trade-off between going to work and accessing an essential necessity like water which the poor cannot afford. Further, poor waste water management leads to an annual expenditure of nearly $15 billion to treat water-borne diseases (CII and CEEW 2010).

Urban areas by their very nature of large population and high density are susceptible to adverse effects of poor sanitary conditions. According to the HPEC report nearly 50 million people in urban India are forced to defecate in the open due to a combination of poor sewerage network, shortage of public toilets and lack of running water in toilets. Further, there are spatial disparities in access to services such as drainage and sewerage which tend to worsen as one moves towards the suburbs and as the size of the city reduces.
 

Governance
 

The 74th Constitutional Amendment Act of 1992 led to decentralization of powers through the constitution of urban local bodies (ULBs) as ‘institutions of self-government’. This was aimed at strengthening urban service delivery. However, in practice, this decentralization has not progressed as envisaged. ULBs are plagued by partial devolution of power, inadequate finances and limited capacity.

 

The Jawaharlal Nehru Urban Renewal Mission (JNNURM) of 2005 which was supposed to be a game changer for pan India urban development has failed to implement many infrastructure projects because of abysmal capacity of personnel at local government level in preparing and implementing projects (Planning Commission). Also, funds released under JNNURM show insignificant correlation to poverty levels in a city in addition to a bias towards big cities (Kundu and Samanta, 2012).
 

Safety and Security

 

     Cities that attract economic power and foster growth also spawn crime, violence & and an overall sense of insecurity. Today’s cities face a wide spectrum of threats ranging from terrorism to rising crime rates, civil unrests, shootings, natural disasters and other emergencies. According to the National Crime Records Bureau (NCRB), the rate of incidences of crime (cognizable offenses under IPC) has seen a major upward trend. Foremost among these is rape, the number of incidences of which has risen by 873% since 1953. It is followed by kidnapping and abduction (749%) and murder (250%). The impetus for urban growth will depend much upon India’s ability to sustain its homeland security.

 

To prove well prepared against these threats there is growing demand for cities to be equipped with new and emerging technologies that can ensure safe and secure cities. Security experts propose that government strategies need to move beyond enhancing its defence preparedness against crimes and acts of terror to provide integrated public security infrastructure solutions which should include real time visual, audio and location-based information.

 

 Strengthening Policy Making Processes and Outcome

Remarkably, India has not updated its definition of “urban” in 50 years leading to a downward bias on India’s urban statistics. Therefore even though some areas might display urban features, the stringent definition of “urban” would exclude these settlements from urban statistics, hindering the integration of fast expanding peri-urban areas through good urban planning (World Bank 2011). Further, the data pool on housing is characterised by poor timeliness, coverage and inaccuracy; this has serious implications for making effective policies and fund disbursement.

Indian cities and towns lack basic amenities and services because the paradigm of urban planning in India has mostly focused on providing investment and infrastructure without adequately addressing concerns of governance and service delivery. The institution of urban governance is compromised by multiplicity of agencies, fragmented and often overlapping authority without adequate coordination and lack of accountability. Undoubtedly, urban governance needs major policy reforms.

As urban population is likely to increase by at least 250 million by 2030, it is expected that the number of urban poor will rise too (Planning Commission). Modern planning has failed to include the concerns of the poor who provide much needed unskilled and semi-skilled services to support skill based activity and capital. The process of urban planning must be inclusive and cater to housing and transport needs of the poor and not just be a technical and dehumanized exercise in urban design. Such an exercise must reflect the voice of all the affected stakeholders in an urban setting.

Twenty first century India is increasingly marked by inequality, political unrest and environmental degradation. Considering contemporary challenges the objective of Indian urban policy must be redefined to help cities steer towards economically, socially, politically and environmentally sustainable and not just be limited to mere provision of public services and infrastructure.

The process of framing urban policy in India so far has adapted a top down approach despite laws contrary to that. It does not have a mechanism to involve the voice of stakeholders in its formulation. In addition to this democratic-deficit, India’s approach towards urban policy is characterised by a failure to make use of sound statistical and scientific evidence. These factors combined with less than robust implementation mechanisms and weak accountability structures have resulted in nearly a complete breakdown in the functioning of Indian cities. Reforming and strengthening the foundation of urban policy making process will foster formulation of comprehensive urban policies capable of nurturing inclusive progress.

In its ‘Approach to the 12th five year plan’ the Planning Commission of India said, “it took nearly forty years (1978 to 2008) for India’s urban population to rise by 230 million. It could take only half the time to add the next 250 million. If not well managed, this inevitable increase in India’s urban population will lead to an implosion of urban infrastructural systems”. Undoubtedly, this is a challenge that cannot be ignored at policy level.

 

Karishma Mutreja

                                                           

India’s Development Outcomes through Right-Based Policy Initiatives : Case of MGNREGA

Photo Source: Ministry of Rural Development, GOI

There has been a paradigm shift in the development outcomes of Indian states in post 2005-06 period with many of the backward states performing better than earlier. Thus Bihar, Odisha, Assam, Rajasthan, Chhattisgarh, Madhya Pradesh, Uttarakhand and to some extent Uttar Pradesh, have demonstrated improvement in socio-economic performance. This was largely possible due to various right-based and redistributive policy initiatives of UPA government to reduce the gaps between the rich and poor, rural and urban, backward and advance regions, and to achieve a better development outcome with an inclusive agenda. Bharat Niram Yogona, Indira Awas Yojna, Prime Minister’s Gram Sadak Yojna, Sarva Shiksha Abhiyan, National Rural Health Mission are some such remarkable policies that India has undertaken in the period of last 10 years to attain development outcomes in infrastructure, poverty alleviation, education and health in a more balanced manner.

Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is another such historic anti-poverty policy step that India has laid down in the year 2005, which came in force in 2006. It addresses the issue of India’s massive rural unemployment challenge by creating a right-based framework and guaranteeing 100 days of wage-employment to a rural household, whose adult members volunteer for unskilled manual work. It makes government accountable for providing employment to those who ask for it and guarantees right to employment. In the larger context, it aims at enhancing livelihood security, social protection and capital asset creation to develop long term sustainable model for local and rural economy of India.

MGNREGA began its journey with 200 most distressed districts of India, and within this short span of 7 years time till 2013, it has covered all the 644 districts with a massive expansion across 6576 blocks and 778134 villages. The average wage per day per person is Rs 132.6. The All India minimum average daily wage rates in different occupation in both agricultural and non-agricultural sectors also have gone high substantially. But MGNREGA has ensured to give equal wage to both men and women, which so far was unimaginable in rural India. Such increase in wage rates has helped to boost the consumption pattern in rural India. Thus according to NSSO estimates the rural MPCE has gone high from Rs 579.17 in 2004-05 to Rs 953.05 in 2009-10 and then to Rs 1287.17 in 2011-12. The food expenditure share has gone down to 53%, with 10%, 8%, 6% and 8% in cereal, milk & milk products, vegetables and beverages & processed food. While in non-food category, the share is almost equal for major items like clothing (8%), medical (7%) and education (7%). This is an encouraging scenario reflecting better living standard in rural India. The rural poverty ratio in India has also gone down to 25.70% (2166.58 lakhs persons) in 2011-12 from 33.8% (2782.1 lakhs) in 2009-10 and 42% (3258.1 lakhs) in 2004-05. MGNREGA is the first ever act globally which guarantees employment at an unprecedented scale, touching to 732 lakhs rural population by the year 2013-14. It targets the most vulnerable and marginalized sections where women share almost 50% (351 lakhs), SCs share 23% (167 lakhs) and STs share 18% (129 lakhs) of total employment.

With such scale and coverage, MGNREGA certainly has penetrated the challenge of unemployment in rural India. But while critiquing many are of the opinion that MGNREGA has failed utterly in asset creation and has not optimally achieved the objective to strengthen natural resource management through works that address cases of chronic poverty like drought, deforestation, soil erosion, and to have a long term sustainable development frame. The total sanctioned work under MGNREGA in 2012-13 was 70.50 lakhs, of which only 10.21 lakhs (15%) projects are completed; where works like water conservation constitutes 60%, irrigation 12%, rural connection 17%, land development 8% and rural sanitation 0.22%. It is also being argued that as the scheme targets the unskilled workers, who henceforth do not develop any skill for their future workforce participation. Therefore to make it more useful, the workforce can be exposed to certain skill development programme, which later can be used at least for self-employment opportunities. In terms of financial leakages, it is being argued and verified by CAG reports that there is large scale of misappropriation of MGNREGA funds across some states in India. The states therefore need to be highly vigilant and pro-active as the expenditure of the scheme is incremental. For example in 2012-13, the total fund allocation has gone high to Rs 39735.4 crores from Rs 37072.7 crores in 2011-12 (7% rise by an year) with wage expenditure alone sharing around 75%. There are also serious problems of state-level delivery in wage and employment days, and there exists huge inter-state variation in the performance outcome of MGNREGA. Thus household employment in the year 2012-13 was highest in Tamil Nadu with 64.8 lakhs and lowest in Punjab with 1.7 lakhs. The women share in employment in the same year was 94% in Kerala and 19% in Uttar Pradesh with national average of 53%. Thus both social and financial audits need to be more rigorous and regular along with the role of states at implementation level. Finally to attain optimum development outcome from MGNREGA as one of the most successful right-based employment policies in the world, it may need certain revision at structural level by incorporating more voices of rural India.

Rakhee Bhattacharya

 Data Sources

·         Annual Reports, Ministry of Rural Development, GOI

·         NSSO reports, Ministry of Statistics and Programme Implementation, GOI

·         Annual Reports, Ministry of labour, GOI

·         Press Notes, Planning Commission, GOI

 

Skill Development Initiatives in some of the Congress ruled States in India

 

Photo Source: Rajiv Yuva Kiranalu , GoAP

What drives the people to become transformative in life and productive in work is actually how far the competition, choices and efficiency systems functions in the country’s education and training sector. That matters a lot. During the last decade skilling and re-skilling people have been a major agenda for both Union and State governments. Many new initiatives were taken up to increase the skill building capacity realizing the fact that the window of demographic dividend otherwise would go unutilized. And perhaps, many felt that failing to use properly the demographic dividend would end up social and economic disasters. However, it is interesting to note that the Union government has opened up the policy reforms in the area of skilling and re-skilling and some of the State governments have really invented its wheel to reform the skilling and re-skilling through various innovative delivery mechanisms. Among others, involvement of both private sector and the technology has played a major role in the process of skilling and re-skilling of large number of persons in different communities.

One of the main agenda of all the State Governments have been improving the conditions of imparting skill development to those who dropout early from school education, existing workers in unorganized sector, the marginalized sections, etc. Besides, Union government’s schemes on skill development and training, some State Governments are implementing their own skill development schemes which are far more effective in some ways. Indeed, few State Governments have initiated institutional reforms in skilling people with structured institutional mechanisms. There is uniqueness in each of these State government’s skill development initiatives.

 In what follows are the brief analysis of the key new initiatives of skill development by some of the States wherein the Congress Party is or was in power till recently. Basically, the aim is to look at the key policy initiatives and the performances of the schemes implemented by the State governments. Four States have been identified for present analysis: Andhra Pradesh, Maharashtra, Kerala and Manipur.

Andhra Pradesh (Congress Party was in power till recently)- New Initiatives: established Skill Development Fund (SDF), created a Rajiv Education & Employment Mission (REEM) to act as umbrella platform for all the skill development efforts of major departments. Best performance: Rajiv Yuva Kiranalu (RYK) started in 2010-2011 to convert the non-literate, school dropout, unskilled and unemployed youth into productive workforce by building their skills and place them in appropriate jobs. Several focused sub-missions were also set up to target the persons for skilling and job placement. The major changes the scheme brought-out include institutional mechanism approach; IT based implementation system; bio-metric attendance system and post-placement support services. As on April 16, 2014, over 4.95 lakh persons have been trained and placed with jobs in private sector.

Maharashtra-New Initiatives: established Maharashtra Knowledge Corporation (MKC) in 2001 to create new paradigm in education and development through universalization and integration of Information Technology in teaching, learning and educational management processes in particular and socio-economic transformative processes in general. Recently the State has also set up the Maharashtra State Skill Development Society (MSDS) which will act as nodal agency for policy planning, execution and monitoring of skill development initiatives. Best performance: Through MKC, network of over 5000 Learning Centers with more than 40,000 computers with state-of-the-art hardware, software and internet connectivity created; over 8.5 million youth  were given state-of-the-art IT Literacy Training; direct student facilitation services to 3.6 million + University students through 5,977 colleges in 13 universities in 2 States were provided; more than 8.4 million youth have been given Online Admissions and Online Recruitment Services across the State ; over 25,000 youth got direct regular employment or self-employment opportunities at their own native places; and about one lakh youths received indirect job opportunities at their own native places.

Kerala- New Initiatives: established Kerala Skills Excellence Academy (KSEA) in 2012 as an apex organization for the skill development initiatives in the State. KSEA facilitates focused training for high-tech automation driven industries (pneumatics, hydraulics or factory automation etc.) through specialized Training Centres which will be set up under existing government Industrial Training Institutes. Construction sector has created maximum employments in the country in recent years. KSEA has also set up a Construction Academy with industry association to conduct training courses, provide accreditations and certification for construction personnel across the entire spectrum ranging from architects and civil engineers to masons, plumbers, etc. Kerala is perhaps the second in the country after Andhra Pradesh to establish sector specific focus to train construction sector workers in large numbers as they are mostly in informal in job nature and unskilled or semi-skilled at present.

Manipur-New Initiatives: established Manipur Skill Development Society (MSDS) in 2011 to impart skill training for youths of Manipur and convert them from unemployed to be employed with a job that earns at least Rs.8,000 to Rs.10,000 per month. MSDS facilitates job oriented skill training offered by reputed institutes/knowledge partners outside the Manipur (Guwahati, Kolkata, Noida, Delhi, Hyderabad, etc.). Thousands of persons have been trained and placed with a job in sectors like Aviation& Travel & Tourism, Ayurveda & Spa Therapy, Beauty Therapy, Hair & Body make up, ITES/BPO, Retail Management, Front Office Operation, Food & Beverage, Banking & Financial Insurance, etc.

All of the above initiatives are quite transformative in nature for varied people in their States. These new initiatives have played a vital role for millions of people to equip with relevant skills and enhance the chances of employability in the job market. We need similar or more pragmatic approach towards skilling or re-skilling of varied sections so as to improve their living standards.

 

B.Chandrasekaran

Economic Recovery: Policy Imperative for Job Upturn in India

Photo Source: The Economic Times

The impending 16^th Lok Sabha election is going to be one of the most promising and extravagant events in Indian political history costing its exchequer about Rs 3,500 crores, excluding the expenses on security and individual political parties. The post-election scenario therefore legitimately awaits a new phase of  Indian political-economy. It beckons the hope of millions to find ways for economic recovery and job upturn, especially for the growing youth population in India, when present demographic profile is almost divided into two halves, the youth and the rest, a large part of which needs immediate attention for productive economic engagement.

 

According to National Sample Survey Organisation (NSSO), in 2011-12 unemployment rate (ratio of total unemployed to total laboure force) in usual status is nearly 2 percent at all-India level with about 2 percent in rural areas (for both male and female) and about 3 percent in urban area (3 percent for males and 5 percent for female). Thus with estimated 40 percent population belong to labour force as per the NSSO, India has a little high about 80 lakhs unemployed. The youth unemployment scenario is even worse, and according to Labour Bureaue estimates in 2013 about 4.7 percent is the youth unemployment rate in India with 4.4 percent in rural area and 5.7 percent in urban area. The all-India Youth Labour Force Participation is 50.9 percent with 52.8 percent in rural sector and 46.1 percent in urban sector. Amongst them, female LFPR is significantly lower (22.6 percent) as compared to male (76.6 percent) under the usual principal status approach. For 15-29 years age group, Labour Force Participation Rate and Unemployment Rate under the usual principal status approach is estimated to be 39.5 per cent and 13.3 per cent respectively. 

Such alarming situation is primarily for poor sectoral economic performance in India. For example, job creation in 2013 is worst affected with the manufacturing sector being the worst hit by the slowdown and projects being stuck due to lack of clearance and approval. Thus Indian companies have hit a three-year slump as slowing economy persists where a large number of development projects remain stalled despite the government trying its best to get them moving amidst efforts to accelerate investment and get growth back on track. The decline in hiring in 2013 was visible in sectors such as automobiles, capital goods, tyres, shipping, paper, construction, power generation and retail in line. Similar is the situation even in service sector, where job has declined by 31 percent by 2012, mostly from IT, telecom, financial services and hospitality services. A drop in GDP percentage from about 9 percent to about 4.5 percent from 2011 to 2013 had alarmingly taken away about 30 lakhs jobs from Indian market.

Despite persistent attempts by the UPA government to face such challenge through several centrally sponsored schemes like Swarna Jayanti Shahari Rozgar Yojana  for urban  India, and Mahatma Gandhi National Rural Employment Guarantee Act, Sampoorna Gramin Rojgar Yojana, Swarna Jayanti Gram Swarozgar Yojona for rural India, joblessness, especially amongst the youths remains a glaring issue. There possibly needs a much robust approach and planning where job creation needs to feature as a prime element in any development policy in India. It is being argued that non-farm job creation and productivity growth are fundamentals with more labour-intensive manufacturing, construction and service units. There are four major areas, where India can depend in the next phase of change, viz., IT, telecom, healthcare, infrastructure and retail. High-value-added manufacturing sector and increasing non-farm sectors, reformed labour laws in informal sector and raising shares of organized enterprises, linking skill-development prograrrme to all centrally sponsored schemes are the needs of the hour. Along such line of reform measures, India needs to deploy public investment to create ‘job creation engines’ like industrial clusters, tourism circuits and food-processing parks to expand the options for poorest citizens of the country.     

Lastly a congenial relation between industry and government is extremely important. According to a report by McKinsey Global Institute (2014), ‘India’s leadership can hit the reset button and redefine this relationship for a new era. Rather than taking a prescriptive approach that tightly manages industry, policy makers can adopt a new mindset-one focused on competitive market environment that allows business to thrive. By sweeping away arcane regulation and antiquated procedures, India can build a more efficient engine of job creation. Combining a bold reform agenda with forward-thinking investment in job creation engines of the future could generate opportunities for millions of Indians to obtain better jobs, attain a better livelihood, and reach the next rung on the economic ladder’ 

Rakhee Bhattacharya  

References

Press Note, Key Indicators of Employment and Unemployment in India, 2011-12, Press Information Bureau, GOI at http://pib.nic.in/newsite/erelease.aspx?relid=96

Press Note, Third Annual Employment & Unemployment Survey Report, 2012-13, Labour Bureau, GOI at http://labourbureau.nic.in/reports.htm

Report, Indian Labour Journal, No. 12, Volume 54, December 2013

Report, The Economic Times, 04.10.2013

Report, ‘From Poverty to Empowerment: India Imperatives for Jobs, Growth and Effective Basic Services’, McKinsey Global Institute, 2014

 

Education in India – the road ahead

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The ‘directive principles of state policy’ of the Indian Constitution, formulated in 1950 stated that “All states shall endeavour to provide within 10 years of commencement of constitution free and compulsory education to children till they reach the age of 14 years.” All states therefore had the primary responsibility of improving literacy rate and elementary education, whereas the centre dealt mainly with higher education. In 1976, education became a concurrent subject i.e. a joint responsibility of state and centre.

The concept of a National System of Education implies that, up to a given level, all students, irrespective of caste, creed, location or sex, have access to education of a comparable quality. This has sought to be achieved by successive governments in India. In achieving this aim, the guiding forces are the National Policy on Education documents of 1968, and 1986 under the Prime Ministership of Indira Gandhi and Rajiv Gandhi, and most recently by the Right to Education Act which came into force in 2009.

 The 1968 policy was the first significant and major step in education in post-independence India. “It aimed to promote national progress, a sense of common citizenship and culture, and to strengthen national integration.” The emphasis was on the need to radically overhaul and reconstruct the education system, with a focus on quality improvement. Yet, it was noticed that there were problems with the policy at the level of implementation – with “problems of access, quality, quantity, utility and financial outlay.”

The 1986 policy sought to address the lacunae observed in the 1968 policy by focussing on education for women, for the marginalised sections, minorities, the differently abled and also adult education. The policy defined and recommended Universal Elementary Education (UEE) embodying the concepts of universal access, universal retention and universal attainment. In order to address the widening class distinctions, and social segregation, NPE also recommended Common School System, where "children from different social classes and groups come together under common public school and thus promote the emergence of an egalitarian and integrated society”.

In 1993, in a PIL ‘Unnikrishnan versus state of Andhra Pradesh’, the Supreme court of India ruled that, “Education is a fundamental right that follows from the Right to life in Article 21 of the Constitution”. However, there was no legislative follow up from this for many years, primarily due to a volatile political situation at home in the following few years. In 2002, the 86^th Constitutional Amendment of India added Article 21A stating that, “The state shall provide free and compulsory education to all children of the age 6 to 14 years in such as a way as the State may, by law, determine”. This led to the formulation of the Right to Education Act, which was passed by the UPA Government and became a law in 2009.

Today, the results of the Right to Education Act and allied education policies like Sarva Shiksha Abhiyan and the mid day meal scheme are there for all to see. More and more children are now going to school, literacy rates are rising. The provision of seats for the EWS category has ensured that students from the economically deprived sections are not deprived of the benefits of education. Yet, we notice that gaps do remain – not only at implementation level, but recent figures have also pointed out how dropout rates are increasing in the post ‘compulsory’ period, how the mid day meal scheme is being manipulated etc. The recent mid day meal tragedy in Bihar is just a case in point of problems with implementation.

Today, as we have a new generation of youngsters, the education system in this country needs a drastic overhaul. There have been a number of attempts to streamline and review the CBSE in keeping with the times, but it has also often been seen that students scoring impossibly high marks in the CBSE often have no real grounding in the concepts. Students with nearly 100 marks in English often cannot string together a paragraph of correct English. Education in India needs to focus less on rote learning, and ‘keywords’ and more on concepts and processes. Similarly, the higher education system too needs an overhaul. The recent shift by Delhi University to a Four Year Undergraduate Program has been controversial. This new system, along with the move to a semester based system, rather than an annual system does have its benefits, which however, have become eclipsed due to an apparent lack of proper planning. For instance, how useful would a basic Foundation course in English be for a student already pursuing an Honours degree in the subject? Or a course in Maths for someone who has had no contact with the subject since Class VIII? The focus in India needs to shift to the higher education system – radical changes are the need of the hour, but these need to be well thought out and then implemented. Education needs to be equitable. Students need to feel that they are gaining something from the system that will empower them in the future. More skill development and vocational courses, employment generation opportunities need to be provided by the education system. A number of these ideas have been articulated in the 12^th Plan for Education, but it is upto the people of this country, especially the youth, to ensure that implementation does not fail. These are the challenges and opportunities facing Indian education today. 

 

Madhumita Chakraborty

 

Wake-up Call for Indian Economy: Policy Initiatives in Manufacturing Sector

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The interim budget of 2014 has made a series of significant policy announcements for India’s manufacturing sector, which would act as wake-up calls for its existing sluggish economy. It would wave all export related taxes on manufacturing sector and has announced 8 National Investment and Manufacturing Zones (NIMZ) along with Delhi-Mumbai Corridor. Three more additional industrial corridors like Bangalore-Chennai, Bangalore-Mumbai and Kolkata-Amritsar will be taken up along with the clearance of 296 projects worth of Rs 6,60,000 crores. It has reduced exercise duties in automobile sector to give a boost in production. Such positive policy steps are certainly encouraging to revive India’s investment ambience, especially in its manufacturing sector, which has seen a mere 1 percent growth in 2012-13 (as against 9.2% in service sector) having cascading effects on jobs, income, export and overall economic security of the country.

Manufacturing sector was not in forefront during India’s economic policy reforms in 1991. Rather India’s immense growth of 9 percent was largely driven by its service sector (sharing 58% of GDP). IT and ITES popularly known as ‘sunshine sector’ has made enormous contribution to India’s GDP growth and its skilled human capital has received world-wise acclamation. It has truly transformed India’s economic image, helping to reshape its conventional, traditional economy into a market driven, competitive ‘knowledge economy’. This high-skill sector provides 25 lakhs jobs with multiplier effect on future generation and has created a Nouveau riche Class in India with very high purchasing power. But such economic boom has neglected and sometimes marginalized many more lakhs in semi-skill, low-skill and no-skill category, creating huge economic disparity and a scenario of ‘jobless growth’. It is being argued by many scholars that such a situation has emerged because India has almost skipped its second stage of development, which ought to happen through industrialization and manufacturing, and which alone could create mass employment to this large section of population and could check such unmanageable disparity in the economy. Country therefore with 61 percent of working population of 15-59 years, and with additional about 200 million to enter job market in next 15 years necessarily needs to create opportunities for employment and entrepreneurship, mostly for semi-skilled and less-skilled workers. Sheer neglect of manufacturing sector also has affected India’s merchandise trade balance, and China whose manufacturing shares 34 percent of its GDP could easily grab this space in the world market. India’s share of manufacturing sector in GDP was stagnated at around 16 percent for last two decades.

Such rising challenges have forced India to revisit its policy initiative for manufacturing sector. The government has been  stressing the needs to increase manufacturing output on a number of occasions and in 2004, UPA I has set up a National Manufacturing Competitiveness Council (NMCC) with the objective to suggest ways to increase manufacturing competitiveness and to improve its share in GDP. Finally in 2011, UPA II has managed to implement country’s much needed National Manufacturing Policy. The policy vigorously envisages 25 percent share in national GDP and creation of additional 100 million jobs by 2022. It was initiated with an idea of having a robust manufacturing sector that can help to create jobs in mass scale and be one of strong pillars for economic growth in a sustainable way. The existing manufacturing capacity in India is not optimum and is heavily dependent on Micro Small and Medium Enterprises (MSME) which employs over 100 million people in around 4 million units across the country and contributes 45 percent to the total manufacturing output with 40 percent of country’s export. The current interim budget 2014 has notified Public Procurement Policy to establish technology and common facility centers and to launch Khadi-Mark, which is again a policy step to promote further the MSME in India.    

For expanding manufacturing sector per se, India needs to increase its supply chain through diversification, infrastructure management, flexible labour law, transparency in land acquisition and collaborations at various levels extending to multinationals. It is being argued that there exists ample scope for the manufacturing sector to return to high growth trajectory. The sharp depreciation of currency coupled with pick-up in growth revival of global economies in recent months has beckoned optimism to Indian manufacturing exporters. Thus sector like textile, petrochemicals can find more space now. But most importantly the roadmap for manufacturing sector needs cautious policy planning for a balanced growth with emphasis on various regions of the country. Multiple manufacturing sectors along with diversity, more cross-regional industrial corridors and region-specific endowments and interests needs to be promoted, as the potentials of mountainous Northeast India cannot be the same as coastal West of India. This can enhance productivity with more growth poles in laggard region and can restrain undue concentration of industrial expansion in advance regions, preventing another fresh challenge of core-periphery landscape in Indian economy.

Notes

1.      Economy Matter, Volume 19, No. 1, 2014, CII

2.      Economic Survey, 2012-13, GOI   

3.      India’s Continuing Manufacturing Drought, The Wall Street Journal, February 2014

Rakhee Bhattacharya