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GS Paper: Issues relating growth and development, employment

  • [pib] SAKSHAM Portal

    The Technology Information, Forecasting and Assessment Council (TIFAC) has launched SAKSHAM, a dynamic job portal for mapping the skills of Shramiks.

    The name SAKSHAM closely leans towards HRD, Employment and Entrepreneurship developments.  Make a note of it. It can create confusion while revision.

    SAKSHAM

    • SAKSHAM is an acronym for Shramik Shakti Manch.
    • The portal with the demand and supply data uses an algorithm and AI tools, for geospatial information on demand and availability of Shramiks, and also provides analysis on skill training programmes of Shramiks.
    • It would directly connect Shramiks with MSMEs and facilitate placement of blue-collar jobs.
    • The pilot portal originally initiated with two districts is now being launched as an all India portal.

    Key features

    • A dynamic job portal – an opportunity for Shramiks and MSMEs
    • Facilitate the creation of 10 lakh blue-collar jobs
    • Direct connect between Shramiks and MSMEs, no middleman in between
    • Minimise migration of Shramiks – job opportunity in proximate MSMEs

  • Laws that have distorted agriculture and labour markets need to go

    The article suggests the two steps to ensure growth while protecting the poor. The first is the creation of social safety net and next is factor market reforms.

    Issue of farmers’ income

    • An Indian engaged in industry or any aspect of the services sector (this includes a waiter in a restaurant) earns more than an average farmer.
    • This is an anomaly.
    • So, despite all the pro-farmer laws and protection, why do farmers in India earn less?
    • A recent study by RBI showed that across all crops, the farmgate price is 40-60 per cent less than the consumer price.
    • The real challenge is how to encourage growth while protecting the poor.

    Encouraging growth while protecting the poor: 2 steps

    • 1) A social safety net needs to be created to provide direct income transfers to the vulnerable.
    • 2) Factor markets involving labour and agricultural land need to be reformed to ensure productivity-enhancing growth.
    • Only way to ensure growth which benefits the poor is through employment creating in the manufacturing and services sector.

    1) Social safety nets in India

    • Despite a narrow tax base, India has created a comprehensive social safety net, which can cushion growth-enabling market reforms.
    • Accurate targeting under India’s Food Security Act to the bottom 67 per cent through Aadhaar identification and digital ration cards paired with E-POS machines has considerably reduced the leakage of subsidised grains.
    • The National Social Assistance programme intends to provide direct income support to over 40 million elderly landless agricultural workers, poor women-headed households and families with physically-challenged children.
    • India also provides income support annually to 145 million farmers, paying out Rs 75,000 crore.
    • This benefits all farmers while MSP benefits only 6 per cent of farm produce.

    2) Factor market reforms

    • If state support for social safety net has to become sustainable, wide-ranging growth, which will broaden the tax base, is essential.
    • India’s growth itself can be designed to reduce the number of people who need state support.
    • The agriculture and labour reforms recently passed create the conditions for productivity-enhancing growth, benefiting millions of small farmers and unorganised workers.

    Let us take a look at what the farm laws achieve and how they will change the status quo

    1) Amendment to Essential Commodities Act

    • The stock limits under the Essential Commodities Act do not enable large tur or moong and rice processors to procure in bulk for their entire season’s processing requirements.
    • This restricts large-scale processing units which can run throughout the non-harvest season.
    • This draconian anti-farmer rule has now been done away with.
    • This will enable the expansion of agro-processing and supply chains.
    • A larger share of the produce procured for agro-processing increases its shelf life, enabling the farmer to retain a greater value.
    •  30-40 per cent of the post-harvest value, particularly in vegetables and fruits, is lost due to inadequate storage, processing and transportation facilities.
    • Removal of stock limits and the accompanying contract farming act will bring in investments to tap the wasted resource.

    2) APMC regulation

    • The second law, removes another distortion: Only traders registered in APMCs can buy farmers produce.
    • Even though conditions for perfect markets exist, the APMC regulation creates this bottleneck.
    • Intermediaries extract a greater share of value as they are price makers while farmers are price takers.
    • This situation is further aggravated as farmers are restricted to selling within the taluka boundaries or limits of the APMC, and if they have to sell in other APMC, they have to pay the APMC tax.
    • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill 2020 confines the authority of the APMC to levy fees and give trader licences within the boundary of the market yard.
    • Farmers will continue to have the option to sell in APMCs but any private market/non-APMCs registered trader can also set up an agricultural market and compete with APMCs to buy the same produce.
    • Karnataka implemented the Uniform Market portal in 2014, enabling trade across taluka APMC limits without APMC fees.
    • An analysis by researchers at the MIT Sloan School of Management has shown that prices of many agricultural goods increased by 3.5 to 5.1 per cent.
    • Significantly, profit margins of small farmers increased by more than 36 per cent.

    Labour reforms

    • Apart from agriculture, the abundance of labour is the second greatest comparative advantage of India.
    • However, multiple labour laws instead of encouraging employment, have created disincentives for job creation due to high costs of compliance.
    • While India’s employment elasticity with respect to GDP growth is only 0.2, China’s is at 0.44. Even for Bangladesh, the elasticity is 0.38.
    • India’s path-breaking labour reforms leverage the true comparative advantage of the country’s factor endowments to promote growth with higher employment elasticity.
    • The old labour laws protected existing jobs at the cost of preventing new job creation through creative destruction.
    • Bangladesh has shown the way to increase formal jobs by legalising fixed-term employment and banning union activity in FDI industries.
    • Raising the threshold for seeking prior permission for laying off workers will enable capital and land locked in sunset industries to move freely to new sunrise industries.

    Consider the question “An Indian engaged in industry or any aspect of the services sector earns more than an average farmer. What are the factors responsible for this anomaly? Suggest ways to achieve growth that could ensure sustainable safety net?”

    Conclusion

    The need of the hour is to continuously communicate with those unhappy with the reforms to explain how the current status quo is hurting farmers and informal workers.

  • Gujarat’s MICE Tourism Policy

    Gujarat CM has announced the tourism policy for 2021-25, seeking to position the state as the country’s foremost tourist destination, with a focus on investment and livelihood opportunities.

    The policy seeks to make Gujarat a hub of “MICE” tourism.

    Q. Given the vital importance of the tourism industry in the Indian economy, there is a need to address underneath challenges and adopt a suitable policy for overall growth. Discuss the need for a comprehensive National Tourism Policy.

    What is MICE tourism?

    • The acronym “MICE” stands for “Meetings, Incentives, Conferences and Exhibitions”, and is essentially a version of business tourism that draws domestic and international tourists to a destination.
    • The policy aims to make Gujarat one of the top five MICE tourism destinations in the country.

    How does the policy proposals to attract MICE tourism?

    • To incentivise international events, the government has announced an assistance of Rs 5,000 to the event organizer per foreign participant staying overnight, subject to an upper limit of Rs 5 lakh.
    • For domestic events, the policy promises financial assistance of Rs 2 lakh per event, capped at three events per organizer per year.
    • For Gujarat to emerge as a venue of big national and international conferences, large convention centres are required.
    • The policy promises special incentives for building big convention centres, including 15% capital subsidy on the eligible capital investment.
    • The government has also promised land on the lease if required.
    • A precondition to avail the incentive is that the convention centre should have at least one hall that can seat a minimum of 2,500 persons.

    Why is there a specific focus on MICE tourism?

    • MICE events are major tourism generators, and there is significant scope to tap into it.
    • By incentivizing the organising of MICE events and construction of convention centres in Gujarat, we are trying to plug the gaps.
    • The organizer of an international event can prolong the stay of guests by one or two days, and visitors can visit tourist attractions, of which Gujarat has many.

  • Quality gigs, a solution to urban unemployment

    With the lack of NREGA equivalent in the urban area government has to find ways to provide income support and employment. The article suggests ways to do the same.

    Slowdown in employment recovery

    • The Indian economy has been gradually recovering from historic contraction of negative 23.9%.
    • This recovery has shifted focus away from the employment question, considered resolved after a sharp rally following the collapse in employment numbers in April.
    • More recent data from the Centre for Monitoring Indian Economy, however, point to a gradual slowdown in employment recovery.

    NREGA: employment support in rural area

    • For labour coming back to rural India, employment support came in the form of the National Rural Employment Guarantee Scheme (NREGA), which witnessed a 243% increase in person workdays.
    • This increased dependency on NREGA, has seen the Rural Development Ministry spend nearly 90% of its increased ₹86,4000 crore allocation by the month of November.
    • In several Indian cities, however, closed businesses have meant that millions of workers have either had to leave or have had to take up new forms of work.

    Supporting gig workers

    With no urban equivalent to the NREGA on the horizon, there must be an increased impetus on evaluating, regulating and supporting new forms of employment.

    1) Evaluation

    •  Our current understanding of gig work is based on the limited disclosures made by the platforms themselves.
    • Furthermore, most regulators continue to remain in the dark on basic questions surrounding platform labour.
    • As of now, there exists no authoritative estimate on the total number of gig workers in India.
    • The centralised nature of the platforms and the larger platform labour market should make the collating of this data relatively straightforward for the Labour Ministry.

    2) Regulation

    • The next step is significantly more sensitive and involves regulation.
    • The reason for the sensitivity primarily revolves around the varied nature of gig work.
    • While some workers use these platforms as a “side hustle”, for others it continues to serve as a primary source of employment.
    • This dynamic is further complicated by the risk of a one-size-fits-all regulatory strategy.
    • Such regulatory strategies are unintentionally hurting the similar, yet distinct, market for highly skilled (and highly paid) freelancers.

    Way forward

    • A more viable strategy then would involve conditional government partnerships with platforms under some of its flagship schemes.
    • The successful pilot of Swiggy’s Street Food Vendors programme under the PM SVANidhi, or PM Street Vendor’s Atma Nirbhar Nidhi scheme, may prove to be an illustrative example.
    •  Creation of jobs, alongside the voluntary adoption of quality standards, is an example of a mutually beneficial partnership between the state and platforms.
    • Similar collaborations on urban employment, that require labour platforms to comply with disclosure norms and worker compensation standards to access government support, could create jobs while ensuring compliance.
    • Collaborating with platforms to employ workers, would bring down costs significantly (for both the state and their partners)  it would also create an environment where firms would be more likely to cooperate with the state.

    Conclusion

    Limited fiscal space and a growing need to fuel the country’s consumption base, must push the government to build symbiotic relationships with new partners.

  • [pib] SDG Investor Map for India

    Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

    UNDP and Invest India have launched the SDG Investor Map for India, laying out 18 Investment Opportunities Areas (IOAs) in six critical SDG (Sustainable Development Goals) enabling sectors.

    Try this PYQ:

    Q.The Partnership for Action on Green Economy (PAGE), a UN mechanism to assist countries transition towards greener and more inclusive economies, emerged at:

    (a) The Earth Summit on Sustainable Development 2002, Johannesburg

    (b) The United Nations Conference on Sustainable Development 2012, Rio de Janeiro

    (c) The United Nations Framework Convention on Climate Change 2015, Paris

    (d) The World Sustainable Development Summit 2016, New Delhi

    SDG Investor Map for India

    • SDG Finance Facility platform at UNDP in partnership with Invest India, the investment promotion arm of the Government of India has developed this Map.
    • The map will help public and private sector stake-holders direct capital towards IOAs, and White Spaces (Areas of Potential) that can contribute to the sustainable development needs of the country.
    • The map has identified 18 IOAs and 8 White Spaces across 6 Priority Sectors including Education, Healthcare, Agriculture and Allied Services, Financial Services, Renewable Energy and Alternatives, and Sustainable Environment.

    Utility of this map

    • Investing in the SDGs at this point is crucial to ‘Building Back Better’ and making the economy and our societies more resilient and sustainable.
    • With the COVID-19 pandemic, the financing gap for the SDGs in India has only widened further and decades of development progress is nearly on the verge of reversal.
    • Enhanced productivity, technology adoption and increased inclusion are all critical factors that this map uses to identify the most attractive sectors for investors.

    Back2Basics: What are SDGs?

    • The SDGs or Global Goals are a collection of 17 interlinked goals designed to be a “blueprint to achieve a better and more sustainable future for all”.
    • They were set in 2015 by the United Nations General Assembly and are intended to be achieved by the year 2030.
    • They are included in a UN Resolution called the 2030 Agenda or what is known as Agenda 2030.
    • Countries are expected to take ownership and establish a national framework for achieving these Goals.
    • Implementation and success will rely on countries’ own sustainable development policies, plans and programmes.

  • What is the Purchasing Managers’ Index (PMI)?

    The services sector has PMI has signalled first expansion since February this year.

    Try this PYQ:

    Q.Which of the following brings out the ‘Consumer Price Index Number for Industrial Workers?

    (a) The Reserve Bank of India

    (b) The Department of Economic Affairs

    (c) The Labour Bureau

    (d) The Department of Personnel and Training

    Purchasing Managers’ Index

    • PMI is an indicator of business activity — both in the manufacturing and services sectors.
    • It is a survey-based measure that asks the respondents about changes in their perception of some key business variables from the month before.
    • It is calculated separately for the manufacturing and services sectors and then a composite index is constructed.

    How is the PMI derived?

    • The PMI is derived from a series of qualitative questions.
    • Executives from a reasonably big sample, running into hundreds of firms, are asked whether key indicators such as output, new orders, business expectations and employment were stronger than the month before and are asked to rate them.

    How does one read the PMI?

    • A figure above 50 denotes expansion in business activity. Anything below 50 denotes contraction.
    • Higher the difference from this mid-point greater the expansion or contraction. The rate of expansion can also be judged by comparing the PMI with that of the previous month data.
    • If the figure is higher than the previous month’s then the economy is expanding at a faster rate. If it is lower than the previous month then it is growing at a lower rate.

    What are its implications for the economy?

    • The PMI is usually released at the start of the month, much before most of the official data on industrial output, manufacturing and GDP growth becomes available.
    • It is, therefore, considered a good leading indicator of economic activity.
    • Economists consider the manufacturing growth measured by the PMI as a good indicator of industrial output, for which official statistics are released later.
    • Central banks of many countries also use the index to help make decisions on interest rates.

  • Comparison between India- Bangladesh per capita GDP

    In IMF’s latest Economic Outlook, Bangladesh has overtaken India in GDP per capita. This has caught everyone’s attention.

    Do you know?

    • In the 2019 edition of Transparency International’s rankings, Bangladesh ranks a low 146 out of 198 countries (India is at 80th rank; a lower rank is worse off).
    • In the latest gender parity rankings, out of 154 countries mapped for it, Bangladesh is in the top 50 while India languishes at 112.

    Bangladesh surpasses India

    • Typically, countries are compared on the basis of GDP growth rate, or on absolute GDP.
    • For the most part since Independence, on both these counts, India’s economy has been better than Bangladesh’s.
    • This can be seen from Charts 1 and 2 that map GDP growth rates and absolute GDP — India’s economy has mostly been over 10 times the size of Bangladesh, and grown faster every year.
    • However, per capita income also involves another variable — the overall population — and is arrived at by dividing the total GDP by the total population.

    What made India lag behind?

    There are three reasons why India’s per capita income has fallen below Bangladesh this year:

    • The first thing to note is that Bangladesh’s economy has been clocking rapid GDP growth rates since 2004.
    • Secondly, over the same 15-year period, India’s population grew faster (around 21%) than Bangladesh’s population (just under 18%).
    • Lastly, the most immediate factor was the relative impact of Covid-19 on the two economies in 2020. While India’s GDP is set to reduce by 10%, Bangladesh’s is expected to grow by almost 4%.

    How has Bangladesh managed to grow so fast and so robustly?

    • Freshly start: In the initial years of its independence with Pakistan, Bangladesh struggled to grow fast. However, moving away from Pakistan also gave the country a chance to start afresh on its economic and political identity.
    • Diverse labour participation: As such, its labour laws were not as stringent and its economy increasingly involved women in its labour force. This can be seen in higher female participation in the labour force.
    • Textile boom: A key driver of growth was the garment industry where women workers gave Bangladesh the edge to corner the global export markets from which China retreated.
    • Less dependence on Agriculture: It also helps that the structure of Bangladesh’s economy is such that its GDP is led by the industrial sector, followed by the services sector. Both of these sectors create a lot of jobs and are more remunerative than agriculture.
    • Better social capital: Bangladesh improved a lot on several social and political metrics such as health, sanitation, financial inclusion, and women’s political representation.

    Retaining the lead

    • The IMF’s projections show that India is likely to grow faster next year and in all likelihood again surge ahead.
    • But, given Bangladesh’s lower population growth and faster economic growth, India and Bangladesh are likely to be neck and neck for the foreseeable future in terms of per capita income.

  • Urban unemployment in India

    The article discusses the issue of vulnerability of informal jobs in India and suggests the steps to address the problem.

    The urban unemployment in India crept up to 9.83% in August as against 9.15% in July, according to monthly unemployment data released Tuesday by the Center for Monitoring Indian Economy (CMIE). In other words, roughly one in every 10 person in urban areas cannot find work

  • [pib] NIDHI-EIR Programme

    A brochure featuring Entrepreneurs in Residence (EIR) under the National Initiative for Developing and Harnessing Innovations (NIDHI) programme was launched by Dept. of Science and Technology (DST).

    Try this MCQ:

    Q.The NIDHI-EIR Programme sometimes seen in news functions under the:

    a)Ministry of Science & Technology

    b)Ministry of Commerce and Industry

    c)Ministry of Finance

    d)Ministry of Micro, Small and Medium Enterprises

    About NIDHI-EIR

    • DST has announced a National Initiative for Developing and Harnessing Innovations (NIDHI) is an umbrella programme for nurturing ideas and innovations into successful startups.
    • EIR programme is one of the programs introduced under NIDHI to inspire the best talents to be entrepreneurs, to minimise the risk involved in pursuing start-ups, and to partially set off their opportunity costs of high paying jobs.
    • It provides tremendous opportunities for innovative entrepreneurs to expand their networks and get critical feedback on their ventures in order to promote their entrepreneurial career goals and aspirations.

    The opportunities under NIDHI-EIR program include:

    • Guidance from experienced, innovative and highly successful entrepreneurs on the business concept, strategy or venture and insight into specific industries or markets.
    • Best practices for starting a business and broaden the professional network.
    • Co-working spaces for developing the idea into a marketable product.

  • Boosting demand with wage hike

    The article discusses the threat posed to the Indian economy by the subdued demand following the return of the labourers to their urban jobs.

    Rural employment issue

    • About 30 million migrant workers rushed home to their villages during the pandemic.
    • About 60 per cent of out-migration from rural India is aspiration-led.
    • Income earned in urban jobs is 2.5 higher than earned in rural area.
    • Though rural economy has been recovering faster than the urban economy, this optimism could prove short-lived, as eventually the more long-lasting determinants of rural wages could prevail.

    What are the determinants of rural wages

    1) NREGA wages

    • The government has raised the rural employment guarantee programme (NREGA) wages and outlays.
    • Demand for the scheme is outpacing supply.
    • This demand-supply mismatch means that it may not be an effective driver of higher rural wages.

    2) Low construction activities

    • Many rural Indians, especially those without land, have become building labourers.
    • 70 per cent of construction is related to real estate and property developers are dependent on funding from struggling non-banking financial companies.
    • Until this type of lending restarts, construction may not normalise.
    • And that means rural wages may not rise quickly either.

    3) Rising debt level

    • The increase in borrowing and fall in inflation over the last few years has increased the “real” indebtedness of rural Indians.
    • This affected particularly the landowners who pay villagers to farm their land.
    • This is likely to hurt their ability to pay high wages.

    3 Reasons why wage outlook could be dimmer

    • As migrant labours start to return to their urban jobs, their wage outlook appears to be bleak for 3 reasons.
    • 1) As during demonetisation, workers could find jobs again, but at lower wages.
    • 2) There could be a second-round of pandemic-led labour market weakness, driven by job losses and falling wages from the first round.
    •  3) We find that both rural and urban wages are driven by economic growth, India’s post-pandemic medium-term growth falling by one percentage point to 5 per cent does not bode well.

    Way forward

    • Weak wages could keep demand subdued. To offset this policymakers have an important role to play.
    • 1) In particular, policymakers may have to ensure that capital is allocated efficiently.
    • After all, investment is the only way to increase the economy’s capacity to create well-paying jobs.
    • 2) Bringing back investment growth would also involve capital re-allocation.
    • This means taking it away from sectors that are not working and redeploying it in sectors that are.
    • Improving the Insolvency and Bankruptcy Code procedure is a key step here.
    • 3) Another important step is to improve the health of banks as they are the ones allocating capital by giving loans.
    •  Implementation of the 5-Rs — recognition, restructuring, resolution, recapitalisation and reforms — for the banking sector may be particularly useful here.

    Consider the question “After supply-side disruption is over, India’s growth may suffer from the subdued wage growth. Suggest the steps to avoid this from happening.”

    Conclusion

    Supply disruption caused by reverse migration won’t last long, but led by lower wages, demand could remain weak, requiring policy intervention.