- The consolidated codes on labour laws need a thorough vetting and discussion in parliament:
Relevance: mains: G.S paper II & III: Labour laws, human Resource
As part of its commitment to simplify and consolidate labour rules and laws under four codes, the Union Cabinet has cleared the Occupational, Safety, Health and Working Conditions Code, a week after it approved the Code on Wages Bill. The latter seeks to include more workers under the purview of minimum wages and proposes a statutory national minimum wage for different geographic regions, to ensure that States will not fix minimum wages below those set by the Centre. These steps should be welcomed. The Code on labour safety and working conditions include regular and mandatory medical examinations for workers, issuing of appointment letters, and framing of rules on women working night shifts. Other codes that await Cabinet approval include the Code on Industrial Relations and the Code on Social Security. Unlike these pending bills, especially the one related to industrial relations that will be scrutinised by labour unions for any changes to worker rights and rules on hiring and dismissal and contract jobs, the two that have been passed should be easier to build a consensus on, in Parliament and in the public sphere. Organised unions have vociferously opposed changes proposed in the Industrial Relations code, especially the proviso to increase the limit for prior government permission for lay-off, retrenchment and closure from 100 workers as it is currently, to 300. The Economic Survey highlighted the effect of labour reforms in Rajasthan, suggesting that the growth rates of firms employing more than 100 workers increased at a higher rate than the rest of the country after labour reforms. But worker organisations claim that the implementation of such stringent labour laws in most States is generally lax. Clearly, a cross-State analysis of labour movement and increase in employment should give a better picture of the impact of these rules.
Simplification and consolidation of labour laws apart, the government must focus on the key issue of job creation. The Periodic Labour Force Survey that was finally made public in late May clearly pointed to the dire situation in job creation in recent years. While the proportion of workers in regular employment has increased, unemployment has reached a 45-year high. The worker participation rate has also declined between surveys held in 2011-12 and 2017-18. The government’s response to this question has either been denial, as was evident after the draft PLFS report was leaked last year, or silence, after it was finally released. In such a situation, the government should be better off building a broader consensus on any major rule changes to existing worker rights rather than rushing through them for the sake of simplification. The consolidated code bills should be thoroughly discussed in Parliament and also with labour unions before being enacted.
(Source : The Hindu)
- Recycling is integral to addressing the problems posed by plastic packaging material:
Relevance: mains: G.S paper: Conservation, environmental pollution and degradation, environmental impact assessment.
The Central Pollution Control Board (CPCB) has put 52 producers, brand owners and importers, including big online retailers such as Amazon and Flipkart, and companies such as Patanjali Ayurved and Britannia, on notice, for failing to take responsibility for their plastic waste. These and other entities with a large plastic footprint need to respond with alacrity. It is eight years since the concept of Extended Producer Responsibility (EPR) was incorporated into the Plastic Waste Management Rules, but municipal and pollution control authorities have failed to persuade commercial giants to put in place a system to collect and process the waste. Tighter rules in 2016 and some amendments two years later put the onus on producers and brand owners to come up with an action plan for the retrieval of waste within six months to a year, but that too failed to take off. Mountains of garbage with a heavy plastic load have been growing in suburban landfills, out of sight of city dwellers. Without determined steps, the crisis is certain to worsen. It should be noted that the retail sector expects e-commerce to grow from about $38.5 billion-equivalent in 2017 to $200 billion by 2026. Given the role played by packaging, the waste management problem is likely to become alarming. There is also a big opportunity here, which the trade, municipal governments and pollution control authorities need to see. The two prongs of the solution are packaging innovation that reduces its use by using alternatives, and upscaling waste segregation, collection and transmission.
Recovering materials from garbage should be a high priority, considering that India is the third highest consumer of materials after China and the U.S.; the Economic Survey 2019 estimates that India’s demand for total material will double by 2030 at current rates of growth. Plastics may be less expensive than other inputs in manufacturing, but recycling them into new products extends their life and provides a substitute for virgin material. Keeping them out of the environment reduces clean-up and pollution costs. Unfortunately, in spite of legal requirements, municipal and pollution control authorities fail to see this and mostly pursue business-as-usual waste management methods. Recyclable waste is rendered useless when it gets mixed with other articles. Online retailers have not felt compelled to take back the thousands of polybags, plastic envelopes and air pillows used to cushion articles inside cardboard boxes. This is in contrast to more developed markets where they are trying out labels on packages with clear recycling instructions. These companies can form waste cooperatives in India, employing informal waste-pickers. In such a model, consumers will respond readily if they are incentivised to return segregated plastic waste. Making municipal and pollution control authorities accountable is also equally important.
(Source: The Hindu)
- Earlier confined largely to the organised sector, it has now spread to other areas, as revealed by the latest survey results:
Relevance: mains: G.S paper III: employment.
he findings of the latest employment survey, called the Periodic Labour Force Survey (2017-18), are a cause for concern as the scenario is still far from anything that would denote decent employment. The two biggest issues here are: the shrinking share of the labour force; and the rising unemployment.
The labour force participation rate (% of people working or seeking work in the above-15 years age category) in the earlier survey of 2012 was 55.5%. This has shrunk to 49.7% in 2018. There is an absolute decline in the number of workers from 467.7 million in 2012 to 461.5 million in 2018.
Multiple dimensions
Recent attempts by some to create an impression that self-employment has not been captured by the National Sample Survey is absolutely false since the definition of ‘employment’ includes in itself ‘self-’ as well as ‘wage employment’. Within the category of ‘self-employed’, the survey also counts those engaged in ‘unpaid family labour’.
The figure for the overall unemployment rate at 6.1% is 2.77 times the same figure for 2012. A few experts have raised doubts about comparability of estimates between the two periods though we feel that they are not substantial issues that prevent anyone from a judicious comparison.
The rise in overall unemployment has both locational and gender dimensions. The highest unemployment rate of a severe nature was among the urban women at 10.8%; followed by urban men at 7.1%; rural men at 5.8%; and rural women at 3.8%.
When we ignore the location of residence, we find that severe unemployment among men at 6.2% was higher than among women at 5.7%. However, given the sharp decline in women’s labour force participation rate, they have been losing out heavily due to the double whammy of exclusion from the labour force and an inability to access employment when included in the labour force. The decline in women’s labour force participation from 31% to 24% means that India is among the countries with the lowest participation of women in the labour force.
The issue of educated unemployment, given its link with not just growth but also with transformative development, has never been as acute as at present. Defined as unemployment among those with at least a secondary school certificate, it is at 11.4% compared to the previous survey’s figure of 4.9%.
But what is significant is that the unemployment rates go up as levels of education go up. Among those with secondary school education, it is 5.7% but jumps to 10.3% when those with higher secondary-level education are considered.
The highest rate is among the diploma and certificate holders (19.8%); followed by graduates (17.2); and postgraduates (14.6%).
Of course, educated persons are likely to have aspirations for specific jobs and hence likely to go through a longer waiting period than their less-educated counterparts. They are also likely to be less economically deprived. But the country’s inability to absorb the educated into gainful employment is indeed an economic loss and a demoralising experience both for the unemployed and those enthusiastically enrolling themselves for higher education.
Burden more among women
Here again, the burden is the highest among urban women (19.8%) followed by rural women (17.3%), rural men (10.5%) and urban men (9.2%). Among the educated, women face a more unfavourable situation than men despite a low labour force participation rate. Compared to the earlier 2012 survey, unemployment of educated men has more than doubled in both rural and urban areas and in the case of women, the rate has nearly doubled. However, it is important to remember is that the rate was higher for educated women, when compared to educated men, in both the periods.
It is almost scandalous that youth unemployment rate (unemployment among those in the 15-29 years age category) has reached a high 17.8%. Even here, the women stand more disadvantaged than the men, especially urban women, whose unemployment rate of 27.2% is more than double the 2012 figure of 13.1%. The rate for urban men, at 18.7%, is particularly high as well.
The overall conclusion here is that the trend of ‘jobless growth’ that was till recently confined largely, if not only, to the organised sector has now spread to other sectors of the economy, making it more generalised. This calls for a thorough re-examination of the missing linkages between growth and employment.
(Source: The Hindu)
- There is something the new government needs to do before making foreign policy:
Relevance: mains: G.S paper III: issues relating to planning, mobilization of resources, growth, development and employment.
This article proposes to argue that decisions on policymaking are a rigorous two-step process. The first step is to define or specify the strategic environment either compartmentally or holistically, and then, to address policy at that environment. This suggestion has come up in various forms at different times and also been addressed sporadically. Most easy to understand is making foreign policy, which cannot really be done without defining the prevailing or near future strategic environment.
In the late 1980s, an attempt was made to create a multi-disciplinary platform called the Defence Planning Staff consisting of service officers, diplomats, scientists and civil servants to make integrated policy. This body’s first product, the ‘Strategic and Technological Environment Assessment (STEA)’ saw the light of day, before the paper and the planning staff fell out of fashion. In the mid-Nineties, the formidable Andrew Marshal and his creation — the Office of Net Assessment (ONA) turned its attention to New Delhi to advise policymakers that making decisions without defining the environment was a shoddy process. Backing Marshal’s words were some formidable achievements. His ONA, originally constituted to make decisions to win the Cold War, had indeed won the Cold War.
Marshal’s staff addressed a number of workshops of multi-disciplinary groups in New Delhi. The military took to the idea immediately and started teaching it in the college of defence management, apart from creating its own Directorate of Net Assessment under the Commander of the Defence Staff. The civil service and foreign services were too mentally inert to make internal changes.
After a modest beginning, the practice of making a holistic strategic environment was given up. Not that there is no expertise or coordination in the present government. The National Security Council Staff has regional desks, as does the MEA. The R&AW has its own regional expertise and at the head of it all, is the Cabinet Committee on Political Affairs, where coordination takes place. However, a holistic staff study of the strategic environment is absent and ministerial decision-making occurs independently of a common estimate of the environment. The US generously circulates its own version of the world environment every four years in a document called ‘Global Futures’. We have nothing similar and this writer managed to persuade the NSA in 2008 to set up a small Task Force on Net Assessment and Simulation in the NSC staff. Net Assessment studies and a number of simulation studies were produced. The task force’s tenure lapsed after two years and since then the only document produced on geopolitical Net Assessment is The Long View from Delhi: The Grand Strategy of Foreign Policy, a book co-authored by this writer and Rajiv Kumar.
Today, as the new government begins its tenure, there is a crying need for a five or 10-year vision of the strategic environment. Addressing policy without such a document is a haphazard process. For instance, what is the government’s coordinated view on the future of petroleum? Today the Ministry of Petroleum, External Affairs, Defence and Environment, each probably have their own visions. The US, we know has a co-ordinated study. It is impossible to believe that Beijing does not have a five or 10 or even a 20-year study of global futures, when it is building the OBOR.
Some basic questions need answers. Most analysts say that it is possible that the power structure of the world will change in the next decade. There is still an argument whether the manifestation of hegemonic power is going to be economic or military or technological. Is the conflict over Huawei about selling cellphones or is it an impending conflict over dominating the world through technology? Which think tank in India is seized of these questions, or which parts of the government are worrying over the emerging future, especially since claims have been made that we will be a $5 trillion economy by 2030?
(Source: Indian Express)
- Income inequalities must be reduced. But a national minimum may have unintended consequences:
Relevance: mains: G.S paper III: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Last week, the Union cabinet approved the revised version of the Code on the Wages Bill. The bill envisages a national minimum wage, linked to factors such as skill level and geographical region. This national wage would effectively serve as a floor wage, with states having the option of setting higher wages. Minimum wage legislation forms a vital component of the architecture for social protection. A well designed minimum wage system, as articulated in the Economic Survey 2018-19, can help “reduce inequalities in income, bridge gender gaps in wages and alleviate poverty”. It could also help address the imbalance of power between workers and employers.
Having said that, the government must carefully think through the consequences of this move for the very constituency it seeks to address. There is concern that if wages are pushed up, without being linked to productivity, companies will respond by hiring fewer workers. In a country where preference for capital intensive production is well documented, despite the abundance of labour, a high minimum wage may further skew the capital-labour ratio. It is also likely that companies will try to circumvent the system by opting to route part of their workforce through informal channels. By pushing up costs, a high minimum wage could erode competitiveness, making certain segments economically unfeasible. Coming at a time when India is struggling to find ways to boost exports, especially those of labour intensive sectors such as garments, such a move might have unintended consequences. And while the bill has proposed to take into account regional variations, wage differences across regions could impact labour mobility. Then, there’s also the structure of the labour market in India to consider. The duality of the labour market, characterised by the presence of a large informal sector — 93 per cent workers are in the informal economy according to the latest Economic Survey — suggests that enforcement is likely to be problematic.
It is also true that with little bargaining power, workers are being squeezed, and that the government must intervene to address this. Though the share of workers’ wages in gross value added has risen to 12.7 per cent in 2016-17, up from a low of 9.2 per cent in 2007-08, it remains well below levels seen in the early 1980s. But it must be asked whether, for serving the goals of equity and justice, a high minimum wage is the best way forward. Lowering the costs associated with formalisation, creating more flexible labour laws, might be a more prudent approach.
(Source: Indian Express)
- Budget does well to focus on investment and infrastructure rather than propping up consumption to boost the economy:
Relevance: mains: G.S paper III: Government Budgeting.
The 2019 Economic Survey’s focus on investment as a key driver of economic growth is very welcome. It changes the alarming paradigm that business and media have been working with — since investment is not happening, in order to bolster slowing economic growth the focus of policymaking should shift to boosting consumption, with cash transfers, reduced excise duties, decreased interest rates on retail loans and so on. Why investment has slowed down and how to revive it has not received even a fraction of the public attention that consumption has.
There are few takers for the notion, despite data, that for most of consumer India, unless incomes grow there is no way consumption can or should grow. Only the richest 20 per cent of Indian households (R20), which incidentally is the so-called middle class (based on most people’s mental models of the middle class) have surplus money (income minus expenditure) to grow their expenditure faster than their incomes. The rest have virtually no surplus even in good times.
Consumption growth when economic activity is slow can only come from more consumption by R20, of the things that they consume, much of which is discretionary. Consumption growth from the rest can’t happen unless their incomes grow. This can’t happen if investment is slow resulting in slow economic activity, and hence lower earning opportunities. This problem is even more pronounced given that the majority of Indians, including R20, are self-employed and don’t get a regular income. It is not prudent to say “let them eat cake” by lowering interest rates and encouraging more people to borrow to consume. Most will be hard pressed to pay their EMIs, even at lower interest rates. Economist friends patiently explain why getting a GDP growth number on the back of an unreal, propped up consumption is a good thing to do. “Think of it like a glucose booster shot for the economy,” they say. But are booster shots the best way to deal with a body weakened by ailments?
From this perspective, it is very reassuring that the Economic Survey and Union Budget have stayed away from administering such booster shots as the mainstay of the economic revival strategy, and have focused instead on addressing the fundamental problem of increasing economic activity. Through the mantra of “investment-led growth”, the Economic Survey puts the highest priority on strengthening the supply side to rev up economic activity. Through the planned massive infrastructure push in the Budget and the focus on what the Economic Survey calls behavioural nudges, the life-foundation of consumer India, the goose that lays the golden egg of consumption is sought to be strengthened.
It is well known that every unit of improvement in living infrastructure and human capital creates a disproportionate and sustainable jump in consumption over time. The Economic Survey does mention stimulating consumer demand but more in the context of better administration of the minimum wage system. It mentions, in passing, the link between the minimum wage for the poorest sections of citizens and strengthening the middle class, but that is a leap as wide as the chasm that exists in income and social distance between them. It, however, stopped well short of suggesting additional money for the purpose of directly stimulating consumption.
It is also time for the media and India Inc. to buy in and shift the narrative around corporate financial performance from what the government should do to make the macro environment less hostile and more supportive, to what individual companies can do by way of strategy, ability and efforts to improve their performance when consumer incomes are growing slowly. The government of India is not India Inc’s marketing director in charge of making top lines grow.
Growing revenue and profits in times of slow consumer income growth can come from competing across categories for a larger share of the enormous household consumption expenditure that already exists, even after removing around half of it for essentials. In tough times, summer holiday travel and new two-wheelers compete, as do premium toiletries and new clothes. Market share growth is another obvious route available. The last quarter of 2018-19 underscored these two points. Even as the media yelled “doomsday, consumption slows down”, there was a wide variation in levels of performance across different product categories and companies.
Slowdowns in consumption are perceived when expectations based on past growth rates are not met. Fundamental changes are afoot in consumer India, which may require an adjustment of expectations.
Consider televisions. Recently, a stock market analyst said that the macroeconomic scenario is really worse than what we thought because of poor television set sales, despite the World Cup. From the consumer point of view, the answer is clear. The 30 per cent of Indians who are yet to own a TV are seriously low income and will buy one as soon as they have a steady income. The replacement and upgrade demand that had fuelled the category in the past is now more discretionary than ever because the quality and features and service levels of existing TVs are pretty good. Many people are choosing to upgrade their mobile phones instead. Home theatres, once a favourite upgrade category for the rich, are not so hot any more because going to England to watch the match (as you can see from the crowd shown on TV) is the new cool thing.
Let’s take the case of cars: Creating a more favourable macro environment for car companies to do well isn’t necessary. Car sales are restricted to R20 households (a chunk of whom are in rural areas) and ownership in R20 is still so low that there is plenty of room for growth. There’s plenty of surplus money with these people to buy a car and banks love to lend to them. However, if they are choosing not to buy then stimulating consumption by the government is just tapping into their greed and giving money to the poor will not help. It has to be the car companies who tempt them to buy, making long term-short term trade-offs.
The two-wheeler story is different. Two-wheeler buyers come from all income groups across the board, in both rural and urban India, and in the absence of a humming investment-led economy offering plenty of work, and with rising fuel prices, significant buy, replace or upgrade sales aren’t going to happen even with stimuli. Two-wheeler buyers are the heart of the Indian consumer and revving up the economy will make them immediately upgrade their foremost productivity tool.
Indian consumers are dying to consume more. Consumption growth will follow income growth, which will follow more available work. That’s why the push for investment and public goods in this budget, rather than a push for propping up consumption, is so important.