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

 

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

Photo Credit: Rediff.Com

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

Invisible Cogs – India’s informal workers

Photo Credit: Wikipedia

Half of India’s $1.85 million economy is informal. Informal workers constitute more than 90% of the country’s workforce and generate about 50% of the country’s national product. Yet, legal and policy tools have failed to create an environment which promotes secure and productive economic opportunities, labour rights and benefits and protection for these workers.

International Labour Organization (ILO) notes that the term 'informal economy' refers to all economic activities by workers and economic units that are – in law or in practice – not covered or insufficiently covered by formal arrangements. Informal workers are everywhere – as cab drivers, domestic workers, waste pickers, vendors, cobblers, forest workers, private security guards, construction workers etc. and despite their contribution to the economy, they have been battling against their invisibility as ‘workers’ and their concerns largely remain unaddressed. Their activities are not included in the law, which means that they are operating outside the formal reach of the law; or they are not covered in practice, which means that – although they are operating within the formal reach of the law, it is neither applied nor enforced.

A fundamental legal demand across all occupational groups within the informal sector is that of obtaining recognition as workers, social protection and regulation of working conditions as afforded by labour law to other (formal) workers. Policies must also be framed to address the varied concerns of different occupational groups based on the nature and realities of their work and livelihood. For e.g., demands raised by forest, fish workers and miners have largely revolved around protecting traditional access to natural resources in a manner that ensures sustainable use,  strengthening pricing policy for craftsmen, transforming municipal laws to carve out spaces for urban vendors etc.  

Recognition as ‘worker’

The contract of employment is the primary means through which a person is recognised as an employee and is granted benefits and protection. A major hurdle in identifying many informal workers is the absence of an exclusive legal ‘employer-employee’ relationship established through an enforceable written contract. In fact, most often, employment is mediated through jobbers/contractors and is based on oral contract. 

There is a need for a broader definition of ‘worker’ to recognise those who fall outside traditional employer-employee relationship. An expanded concept would include not just those engaged in final stages of production or value addition, or those who work in what the labour law terms as ‘industry’, but also those engaged in collection of resources which constitute vital inputs for these industries (forest workers, tailors etc.)

Internationally, there exist legal provisions for informal working arrangements. Those, who do not enjoy an employee status (sub-contractors or self-employed) have been accepted as “workers” in the 1996 ILO Home Workers Convention as well as in the 2002 International Labour Conference Resolution and Conclusions on Decent Work and the Informal Economy. Policymakers need to lobby for the idea that informal workers, though outside an employment relationship based on a commercial contract, are entitled to basic rights and enjoy what the ILO calls “decent work.”

Social protection and regulation of working conditions

Of all informal workers, domes­tic workers have been most successful in getting their status as workers recognised under specific laws enacted by some states in India and securing certain welfare measures.  The enactment of the Minimum Wages Act, 1948 and the Unorganised Workers Social Security Act, 2008, has the potential to cover all ‘workers’ in­cluding the self-employed (both dependent and independent) for the purpos­es of ensuring access to basic social security. However, the policies largely remain confined to paper.

Even when informal workers are covered by labour law de jure, this alone will not ensure that their position is immediately at par with formal workers. Erratic working hours, abysmal working conditions and poorly demarcated work spaces have meant that it is not possible to apply many of the minimum standards contained in the labour laws to the majority of these workers.

There is an urgent need to bring these workers within the purview of labour law or create alternative structures for social protection and regulation of working conditions as per the standards set by labour law. A related struggle is to ensure a decent and market price for their products (craftsmen, rag-pickers etc.) i.e. setting minimum support prices for many such occupational groups.

Political representatives and civil society groups must engage in dialogue and formulate innovative strategies centring on law and policy initiatives to address the core demands of this group – recognition as workers, social protection and regulation of working conditions.

There is huge incentive for political representatives to intervene in this area. Addressing the core demands of this group will have a direct positive bearing on earnings and  poverty levels leading to economic well–being and growth.

 

Deepti Somani

SEZ Policy in India and Issues with Labour Law

Source: Bangla Mail

To achieve an instant and overall sense of the content of Indian labour law, the Industrial Disputes Act 1947 (IDA) can be read as a metaphor for Indian labour law in general. The IDA is the essential legislation associated with ‘industrial relations’ in India, covering labour disputes, strikes, lock-outs, lay-offs and retrenchments. Clause 2(n) (vi) of IDA gives the government the right to notify in public interest, any industry specified in the First Schedule of the IDA as a ‘public utility service’. A ‘public utility service’ is associated with railways, ports, post, telegraph, telephones, power, light, water and sanitation etc. Since labour is a concurrent issue in the Indian Constitution, individual states have by amendment put in a host of industries such as polyester, resin, flour and rice mills in the First Schedule and dubiously labelled them as a ‘Public Utility Service’. Special Economic Zones (SEZs) fall in this category as well.

Even before the SEZ movement had reached the levels of current enthusiasm, ‘Hundred percent Export Units’, particularly those located in Export Processing Zones (the smaller precursors of the SEZs) were listed in the First Schedule by a number of Indian states. With the initiation of an explicit SEZ policy in 2005, one of the key devices sought to be used to circumscribe labour rights was to have the establishments located in a SEZ to fall in the First Schedule.

There are three significant features regarding the regime governing labour in SEZs. Firstly, labour laws in SEZs are not covered under formal sector labour laws but under labour laws meant for ‘public utility service’. By classifying employment in SEZs as formal sector employment, labour costs would rise, thus dampening national and international investment. This would go against the overall desire of the SEZ endeavour to push for labour intensive export oriented consumer goods. Secondly, the law is implemented by the office of the Development Commissioner rather than the Labour Commissioner unlike in other industries. Thirdly, the ability of the workers to organise strikes is curtailed in SEZs on account of being labelled as a ‘public utility service.’

Concentration of power in the hands of the Development Commissioner and not the Labour Commissioner has been criticised even by supporters of SEZs. Firstly, it leads to conflict of interest. Indian labour legislation is structured to give the Labour Commissioner enormous voice in determining labour market outcomes, whether it is in relation to work conditions or firing decisions – all this power now comes to vest with the Development Commissioner, whose job, unlike that of the Labour Commissioner is not primarily to look into labour matters but to ensure that the SEZ is able to attract sufficient investment and generate earnings. This clearly generates a conflict of interests and there is no in-built guarantee that labour interests will be privileged efficiently in relation to those of employers.

Secondly, will the office of the Development Commissioner be able to learn about the implementation of the plethora of labour laws in place, if so, it is essential to acknowledge that this will be costly in resources and to the extent such learning is not invested in, it will be costly to the degree the units slackens in the implementation.

The circumscription of labour rights has been reaffirmed by a survey of The International Trade Union Confederation (ITUC). According to its findings, trade unionists are not able to enter the SEZs in India because entry in to the zones is restricted to the workers who are transported in by their employers, making it very hard to organise workers and rendering union activity virtually non- existent. It also notes that that the bulk of the employment in these zones is confined to young women who are too frightened to form unions. These women are subjected to bad working conditions and compulsory overtime. Also, workers face the constant threat of immediate sacking if they make demands to implement labour laws.

Section 49 of the SEZ Act empowers individual states to modify the SEZ Act and other related laws and regulations that enable the delivery of fiscal benefits envisioned by the SEZ policy, however, it excludes labour laws from its purview. It states that such powers of modification are not applicable to “matters relating to trade unions, industrial and labour disputes, welfare of labour including conditions of work, provident funds, employers’ liability, workmen’s compensation, invalidity and old age pensions and maternity benefits applicable in any Special Economic Zones.” In other words unlike fiscal laws, rules and regulations, the set of labour laws, rules, regulations and orders relating to labour matters cannot be modified by invoking the provisions of the SEZ Act. Needless to say, there is a definite case to reform the laws in a manner such that both labour and producer interests are adequately balanced.

In the end it may be noted that India has signed some of the Conventions associated with the International Labour Organisation (ILO) Declaration on Fundamental Principles and Rights at Work, but it has not ratified the critical Conventions regarding Freedom of Association, Right to Organise and Collective Bargaining*.

Note
* India has ratified a total of 39 Conventions adopted at different sessions of the International Labour Organisation. These include conventions on hours of work, unemployment, night work, minimum wages, weekly rest, workers’ compensation, forced labour, labour inspection, child labour, underground work and equal remuneration for men and women for work of a similar nature.

By Karishma Mutreja