A specter is haunting the collective conscience of this nation ever since the national lockdown has been imposed on 25th March. Thousands of migrant workers were thronging the highways, trudging their way back home on foot without proper food, water. Males with children on shoulders, exhausted women trailing behind with whatever they could gather in a day’s notice. These are the faceless people forgotten by us, by governments working for 11-14 hours a day. They are the ‘internal migrants’ contributing massively to the informal workforce.
According to the Economic survey 2018-19, almost to 93 percent workforce is informal. This statistic is tremendously significant compared to formal sector employment at 6.5 percent only. A video of some rickshaw pullers in Delhi was recently making rounds in social media. These workers are a part of daily wage earners who have almost lost their livelihood to Covid-19. We can arrive at similar conclusions for the coconut sellers in Juhu beach or the decorated horse carriage-wallahs near Victoria Memorial in Kolkata. The deplorable condition of theirs is not the result of a single unplanned announcement, rather any discussion on their condition is insufficient without understanding the economic history that has been dominating not only India but the globe for nearly four decades. The economic history that has successfully convinced us that there is no alternative possible (TINA syndrome).
Different studies point out to different estimates of the share of the migrants to the workforce, ranging from 17-29 percent. These are not just statistics, data points there are human stories, lives woven around each of these data points. Lives that matter. The first-ever estimates of internal work-related migration using railways data for the period 2011-2016 indicate an annual average flow of close to 9 million people between the states. In the high growth phase of the Indian economy, the growth rate of migrants rose spectacularly to 4.5 percent per annum, while the workforce growth rate fell raising the migrants’ share of the workforce rose substantially. The decade of the 90s was the time when neoliberalism was on the global stage.
The New Economic Policy
Reasoning macroeconomic instability India too adopted the New Economic Policy (NEP) since 1991 which consisted of removing all controls over the economic activities such as production, investment, consumption, export, import, and cross-border capital flows. The objective is obviously to allow the market forces a free play in the allocation of scarce productive resources.
Consequently, with free-market forces determining the allocation of resources, people with higher purchasing power, i.e., the rich, will secure most of the resources, while the poor will have to make do with very little. In consonance, direct tax rates have been slashed drastically under NEP. This has been done in a country where the top 10 percent owns more than three-fourths of the total wealth. In 2018 for the first time in India, the richest 1 percent has crossed the threshold of owning more than half of the country’s wealth. Obviously, this estimate has been made based on declared assets and is under at best an underestimation.
NEP and Inequality
One of the hallmarks of NEP is an imposition of stringent restrictions on government spending which is famously called a fiscal deficit target. To compensate, the government caters to the private sector with robust purchasing power. The drastic reduction of government’s command over resources under NEP has seriously impaired the government’s ability to invest in the social sector and welfare schemes. It has significantly eroded the government’s ability to invest in education and health care to provide the common people with these services at low costs. It has also substantially reduced the government’s capacity to run a public distribution system to provide the poor masses with the necessities of life at affordable prices. Spending on unemployment allowance is a far cry. The NEP thus becomes pro-rich and anti-poor. The pitfalls of this policy have come under severe glare with the outbreak of the pandemic.
Inequality Sustained Growth
The pace of the sharp rise in inequality since 1990-91 has particularly picked up since the high growth phase of 2003-04 essentially rooted in the globalization of finance and loose monetary policies pursued globally.
All the developing countries have been focusing on export growth models, export demand coming from the core advanced countries. In order to capture the international export market, India had to ensure price competitiveness. The main method for price competitiveness is the reduction of wages below subsistence, elongating work hours and at the same time increasing productivity. Inequality was the factor in keeping the high growth bubble afloat. It leads to ‘predatory’ growth that preys on inequality and reinforces inequality through pro-rich growth. Although India was growing at a rate of 7-8 percent, an increase in employment was less than 1 percent in the organized sector. Thus it must be the unorganized sector who has been contributing bulk to this growth and it must be that output per worker has been increasing. But this growth in output per worker did not accompany a proportional increase in wages and securities of workers; subcontracting to the unorganized sector has increased along with the informalization of labor. Growth has been alluring the workers to leave their homes in the prospect of getting jobs in the megacities and the process has displaced them from their roots, culture, and society.
Government policy and responses
To argue that economic policies since the 1990s have reduced state intervention to the bare minimum, let us take a brief look at the trend in the allocation for important employment generation schemes in India. In the pandemic relief package announced by the Finance Minister MGNREGA wages have increased from Rs 183 to Rs 202 arguably to yield an extra income of 2000 rupees per worker. However, this is possible only with employment for all 100 days which is an extreme overestimation. Also, in the new fiscal year, the scheme has managed to employ less than 1 percent of 12.84 crore registered workers.
The allocation to MGNREGA has been dwindling with successive budgets revised estimates and budgetary estimates in 2017-18 and 2018-19 respectively have remained stagnant at 55,000 crores. The total allocation of the important labor-intensive programs as a percentage of GDP is a mere 0.37 percent in the budgetary estimates of 2018-19. It has snowballed into a serious demand problem and the pandemic has just laid bare the pitfalls of such policy. We can argue the migrants who form a bulk of the workforce, employed mostly as informal workers in the construction, the manufacturing sector has hardly seen betterment in wages, the standard of living simply due to funding dry up. Further, according to the PLFS 2017-18, 71.1 percent of non-agricultural workers in India have no written job contract and 49.6 percent are devoid of any social security benefits. These workers are most likely to be left out from receiving the intended relief.
Lack of Hope
The Economic Survey (2016-17) acknowledges although there exist several schemes on migrant workers, there has been a lack of interstate coordination that can guarantee a safety net for the migrant workers. The Inter-State Migrant Workmen Act (1979) was enacted to safeguard the rights of workers who had migrated out for jobs outside their native states in India. The fundamental proposition of this act is a formal contract between employers and employees. The other basic premises that are displacement allowance, home journey allowance to the migrant workers have become a cruel joke during this pandemic.
No stipulations of this act are being upheld by the state government and the migrant workers are forced to work in miserable conditions, at wages much less than their local counterparts. Corruption creeps in when the State colludes with the contractors, employees and all these acts as an impediment to the real implementation of this act. The Minimum Wage Act 1948 evades most of the workers in most parts of the country (Economic Survey 2018-19).
State Budget Allocations
In the face of this pandemic, the suggested fiscal stimulus through Jan Dhan accounts and ration delivery through PDS implicitly assumes that the worker is registered and has a bank account along with a ration card. This is over expectation given the historic sequence of events. Moreover, all these relief measures are a temporary act of guard against potential starvation.
The bigger question is what happens to the migrant workers once the pandemic is over. At present with an impending deep recession and expected next quarter GDP at 2.7 percent, employment regeneration becomes disturbing and concerning issue raising anticipation of extreme hunger, poverty, and suicides. An immediate requirement is robust state expenditure especially in high in-migration destination states, in social services. However, the state budget allocations are alarming for states like Andhra Pradesh, Maharashtra, Gujarat, and Delhi the largest destination states for migrant workers.
Disheartening Budgetary Scenario
In 2019-20 capital expenditure underwent a decline for Andhra Pradesh, Gujarat, and Maharashtra. Delhi and Punjab experienced a marginal increase of 0.41 percent and 0.08 percent respectively. Infrastructural investment expenditure for social services had hardly improved for states that are home to maximum in-migration. Andhra Pradesh witnessed a sharp fall in revenue expenditure in 2019-20 by 25.14 percent. Revenue expenditure share for social security and welfare has decreased by almost 9 percent in Andhra Pradesh.
It declined for Delhi and Punjab by 0.02 percent and 0.04 percent respectively. Gujarat increased the revenue expenditure by 0.01 percent of GSDP whereas Maharashtra reduced by 0.01 percent. However, budget allocations for labor and labor employment are most disheartening. Except for Andhra Pradesh, all other cited destination states show a revenue expenditure of less than 0.1 percent in 2019-20 budget estimates. Andhra Pradesh shows a less than 0.1 percent increase in revenue expenditure whereas Delhi shows no change. Maharashtra and Punjab show an increase in expenditure by less than 0.1 percent.
A Call for Caution
A strong state budget for social services will be imperative state governments are concerned with the plight of the informal worker. Anticipated 2.7 percent GDP fall is likely to contract labor demand accompanying large scale layoffs. Existing labor laws such as the Industrial Disputes Act of 1947 (from 100 to 300 workers for lay off, retrenchment and closure) poses a glaring threat. To prevent hundreds of informal workers losing their livelihoods, a rambunctious state budget allocation for social services is the need of the hour. Good governance is undeniable to ensure that employers do not resort to random hire and fire policies or drastic pay cuts to compensate for their losses. A temporary burden of losses needs to be and should bear for a while to give room to the economy to buckle up from the catastrophe. Instead of moving in tandem with businesses in calculating profit and loss, it is time for the State to intervene in the most benevolent of ways to stand guard.
It must do away with non- essential expenditure and inject effective demand into the system. For that, a massive investment in capital expenditure and revenue expenditure is needed. This is turn will pull up a sick economy while giving support to numerous invisible workers who relentlessly contribute to keeping the economic wheel going. Otherwise, we lose the battle for a just, equitable world for all.
Debashree Chakrabarty (Assistant Professor at Adamas University Kolkata, Department of Economics)
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of The Eastern Herald.