- Chandrajit Banerjee
Director General, CII
With jobs intact, the spending capacity and demand will also remain intact. In addition, the government must boost spending on infrastructure and MGNREGA
Usually economic growth drives job growth, as jobs and livelihoods are an outcome of economic activity. I believe that the Covid pandemic which has brought economies to a virtual standstill, with jobs and livelihoods amongst its many victims, has turned this equation on its head. Investing in saving jobs and livelihoods now, can be a good insurance policy for our ability to put the country back on a high growth trajectory, quickly.
As India comes out of the lockdown, and economic activity resumes, an important part of the recovery process would be to have consumers available for the goods and services produced. This is possible only if jobs and livelihoods are preserved in the interim recovery period of 3-6 months. With jobs intact, the spending capacity remains intact and so does the demand, speeding up the economic recovery.
The government has a key role to play here. It must come forward and provide wage support to enterprises to mitigate job losses. CII suggests that banks provide additional working capital limits, equivalent to April-June wage bill of the borrowers, backed by a government guarantee, at 4-5 per cent, with a refinance guarantee from the RBI, to all enterprises.
In addition, MSMEs could be extended wage support through ESIC as well. Utilising the ESIC funds under Rajiv Gandhi Shramik Kalyan Yojana and Atal Beemit Vyakti Kalyan Yojana a corpus could be created to provide additional liquidity to MSMEs for meeting their wage liabilities.
Higher government spending on infrastructure is another important step for generating employment, especially in the unorganised sector, through construction activity. The National Infrastructure Pipeline, with projects worth ₹102 lakh crore, to be completed over five years starting FY20, should be front-loaded. The higher spending could be met by increasing the fiscal deficit by a margin of 0.25-0.5 per cent, as infrastructure is a productivity enhancing expenditure, and has an overall multiplier effect on the economy.
Construction sector is the second largest employer after agriculture. Out of a total estimated workforce of 500 million, about 60 million is estimated to be in the construction sector. It would be safe to assume that 90-95 per cent of these would be migrant workforce from rural areas in informal employment. Building infrastructure will recreate many of the jobs lost to the aftermath of the Covid lockdown, in this sector.
Greater expenditure on MGNREGA could be another tool to generate employment in the immediate term. CII suggests an additional spending of ₹6,000 crore, about 10 per cent of the FY21 Budget, on MGNREGA, over and above the increase in expenditure due to increase in MGNREGA wages under the Pradhan Mantri Garib Kalyan Yojana.
The Prime Minister has been emphasising on reforms to enable India to leverage the opportunities that a post-Covid world is likely to present, especially in the manufacturing and export sectors. As India prepares to pitch for attracting large foreign investments, it is important to focus on labour reforms. The issue of jobs and employment, is no stranger to India. Labour reforms will help unlock the employment generating potential of Indian industry.
In additional to the traditional approach to labour reforms, Covid-19 has highlighted the importance of a few other dimensions of labour engagement that need attention.
One of the key challenges that industry is facing is that of getting the migrant workers back to work. It is both an issue of the willingness of the workers to come back and the logistics issues involved. Pandemics can strike in future too. There could be a second wave of Covid itself.
Housing, skill mapping
A long-term solution could be to create worker housing and other amenities in and around India’s industrial clusters to minimise the disruptions to the industrial activity. Some of this can be created through public-private partnership and some by the Central and State governments as part of their plans for creating industrial infrastructure.
A skill-mapping study of the returning migrant workforce can be conducted to try and place them within the States itself. In fact, skill development should become an integral part of the planning for economic growth and attracting investments so as to ensure that as much skills as possible are available to industry locally. Industry may also have to look at locating closer to where the workforce is, for their fresh investments.
Workers at their end should be willing to invest time and effort in upgrading their skills, to be able to meet industry’s demand for better skills and higher productivity.
This article was first published in The Hindu BusinessLine on May 06, 2020
- Chandrajit Banerjee
Director General, CII
Confederation of Indian Industry (CII) poll of about 100 CEOs conducted on May 4 has revealed that most of them expect the economy to contract this year. As per an earlier poll, one-third of firms expect their revenues to contract more than 40% this year. Almost half of those surveyed felt that it would take more than a year to achieve economic normalcy post-lockdown.
GoI’s May 1 decision to extend lockdown from May 4 by two more weeks, with further relaxations in places, is welcome, as it provides for a safe and calibrated opening of the economy while also containing Covid-19’s spread. This also allows governments both at the Centre and states additional time to build necessary medical capacity required, in case there is a spike in the number of Covid-19 cases. Under the new guidelines, all industrial activities in rural areas are permitted, while it is restricted in urban areas to specified areas like industrial estates, special economic zones (SEZs), export oriented units (EOUs) and industrial townships with access to control.
GoI has also divided districts into red, orange and green zones. Economic activities in red, and especially containment, zones continue to be restricted.
The guidelines leave out large segments of economic activities not located in industrial sectors. As a result, this does not cover many business units, including MSMEs, belonging to unorganised sectors.
Providing financial stability to these business units is of critical importance. A focused strategy needed to minimise the adverse impacts of the lockdown without compromising the efforts to restrict the contagion.
The exit strategy should focus on districts with heavy presence of industrial and economic activities, or industrial clusters. The top 100-150 industrial districts could be identified and classified, based on their contribution to the national economy, presence of industrial clusters, and number of registered enterprises.
Second, the focus should be on restarting all economic activities in all parts of an economic district — including in containment zones — with all necessary safety measures in place. The classification of zones into containment zones, orange zones and green zones could be done on the basis of safety precautions required. These zones could be marked in terms of concentric circles around the hotspot.
Identified industrial districts would require a separate working protocol and monitoring mechanism for business operations under various zones. Guidelines pertaining to movement of people and vehicles, sanitisation procedures, door-to-door testing, health and social distancing protocols, etc, should be strictly followed in containment zones.
Given the economic significance of these industrial districts, more should be spent in taking measures to contain the spread of Covid-19 — e.g., free distribution of personal protective equipment (PPE), masks, close monitoring, etc. The benefits from the resumption of economic activities in such districts will hopefully outweigh the additional costs incurred on protective measures for containing the pandemic.
Third, all business activities — essential or non-essential, within specified industrial zones or outside of them — should be restarted in urban areas. Standalone facilities or industrial clusters that are not notified should be permitted to open up at the earliest. This would also enable supply chains to operate smoothly across the country.
Real-time availability of data on all types of zones within industrial districts can help businesses plan better. It is also important to permit public transport for workers and self-employed people with requisite precautions, so that they can travel to work. Standard operating procedures for workplaces and establishments in case of Covid-positive cases are available to avert a start-and-stop situation.
Focusing on the reviving industrial districts may reduce potential loss of industrial activity by around 50%. This, in turn, could provide relief to the national economy, along with providing financial sustainability to business units, preserving livelihoods and bringing relief to all workers.
This article was first published in The Economic Times on May 04, 2020
The humankind is currently witnessing the disastrous effect of COVID-19 on the socio-economic balance of the world. It has toppled economic growth and has risked the lives of millions. The tradeoff between the health of masses and industrial activities has been detrimental to the economy. While no respite seems plausible in the coming months, economists, industrialists are dealing with the challenging task of demand creation, above all, economic revival.
About two-thirds of the respondents expect revenues to fall more than 40 per cent in the April-June 2020 quarter, while for FY21, the expectations of a fall in revenue are staggered, with 33 per cent of the firms anticipating a revenue fall of more than 40 per cent, closely followed by 32 per cent of firms expecting a revenue contraction ranging between 20 per cent to 40 per cent.
The poll also tried to identify key constraints faced by the businesses. Nearly 75 per cent of the respondents identified the complete shutdown of the operations as the major constraint, followed by 53.1 per cent for lack of demand for products.
45 per cent of the respondents felt that it would take more than a year to bring back the economy on track, while 34 per cent expected their own company to recover in 6-12 months timeframe.
Boosting demand in current circumstances is a major challenge before the country. Nearly 37 per cent of the respondents believe the domestic demand to hit normalcy in 6-12 months, while the same confidence for export orders is sluggish, with 41 per cent expecting it to take more than a year to recover.
Securing livelihoods is the prime concern for the country. More than half of the CEOs anticipate job losses in their respective sectors, post lockdown, with nearly 45 per cent expecting 15-30 per cent job cuts.
In a sign of relief for employees, two-thirds of the respondents have not experienced a salary/wage cut in their firms, while nearly 49 per cent of the firms who have witnessed a wage cut said the period of wage cut is ‘undecided.’
There is a need to do a qualitative and quantitative impact analysis of the mitigation efforts to assess the viable economic scenario. CII has suggested a regular review of hotspots to barricade the containment zone and carry-on with the operations in the rest of the area. Bringing back the migrant workers to the manufacturing hubs is also key to reviving industrial processes, which must be coupled with demand creation. CII has been working with the government to bring back the economy on-track and protect the sustenance of millions.
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