Editorial Analysis for 15th September 2020

For a different yardstick: on ‘Doing Business’ report

Paper:

Mains: General Studies-III: Technology, Economic Development, Bio diversity, Environment, Security and Disaster Management

Context:

The ‘Doing Business’ survey needs a revamp as it neglects health and environmental checks.

Key Details:

• The World Bank has paused the publication of its ‘Doing Business’ reportbecause of statistical irregularities.
• The index estimates the cost to business from regulations across areas including dealing with construction permits and paying taxes.
• World Bank’s independent evaluation group (2008) and an external independent panel (2013) together flagged 15 shortcomings in the index, many of which are still relevant.

‘Doing Business’ index:

• The doing business index estimates the cost to business from regulations. Erratic procedures and delays hamper business in India and simplifying procedures brings economic benefits.
• The survey assumes that lower tax ratesare best and it supports lighter rules and regulation to encourage shifts from informal to formal sectors.

Issues:

• The desire for better ranking in the index has encouraged countries to even slash down vital regulations which could have a detrimental impact in the long run.
• Countries like Brazil, India, and the U.S. have slashed environmental standards which are making significant contributions to climate change and threatening the ecological stability.
• Brazil has been opening up the pristine Amazon forests for developmental activities.
• India is considering an Environment Impact Assessment with dilutionsto the existing environmental law.
• Despite the unsustainability of these economic policies, these countries have exhibited higher ranking in the doing business rankings.
• Slack business safeguards may prove to be detrimental to worker safety.
• The states have been relaxing the labour laws to help attract higher private investment in their economies.
• The survey neglects indicators like capital availability, availability of skilled workforce, infrastructure availability and entrepreneurship support systemswhich are as important as the other parameters in the doing business index.

Conclusion:

• The doing business index needs a total revamp wherein aspects such as safety standards, labour rights and environmental performance also find a provision.
• In Indian Context, apart from relying completely on the WB’s ‘Doing Business’ report guidelines, India should also work towards coming up with a domestic policy measureto not only encourage foreign investments but also empower the already existing domestic players with easier business opportunities.

Urban employment as the focal point

Paper:

Mains: General Studies-III: Technology, Economic Development, Bio diversity, Environment, Security and Disaster Management

Context:

Given the structure of the economy and demographic profile, the vulnerabilities of informal jobs must be addressed.

Background:

• The contraction of the economy raises concern on the employment situation as the shrinking sectors are those that create the maximum new jobs.
• The ‘Garib Kalyan Rojgar Abhiyaan’ launched in June(aimed to provide livelihood opportunities in rural India) could be an immediate relief, the ₹50,000-crore employment scheme cannot be a substitute for decent urban jobs.
• Given the structure of the economy and demographic profile, it is important to focus on reducing the vulnerabilities of urban informal jobs in the long run.

Recent data on the contraction of the economy

• The shrinking sectors that have been affected the most are construction (–50%), trade, hotels and other services (–47%), manufacturing (–39%), and mining (–23%).
• According to the International Labour Organization, of the 535 million labour force in India in 2019, some 398.6 million will have poor quality jobs.
• The poor quality of jobs and high informality are key for the high level of “working poors” or those living on incomes of less than ₹198 in a day
• Despite higher economic growth in recent years, working poverty in India also remains high.

Implications:

• In a scenario where each of these sectors is contracting so sharply, it would lead to either a growing number of people losing jobs or failing to get one, or even both.
• There is a possibility of a decline in employment and a subsequent rise in unemployment especially in context of a wave of massive ‘reverse migration’ during the early phase of the lockdown.
• The abrupt announcement of the lockdown exposed the severe vulnerabilities of urban low-end informal jobs as the share of vulnerable employment is higher in India
• Vulnerable employment is characterised by inadequate earnings, low productivity and difficult conditions of work that undermine the basic rights of workers.

Situation in India

• The high and persistent incidence of vulnerable employment are a reflection of the nature of the structural transformation process.

1. The transformation process i.e. capital and labour transfer from low to higher value-added sectors.

• In Indian context, capital and labour are moving from low value-added activities in a sector to another sector, but not to higher value-added activities.

1. This leads to a situation where a large proportion of the jobs being created is of poor quality.
2. The service sector-led growth in recent years has intensified this as there is coexistence of strong job creation in some Information and Communication Technology (ICT)-intensive services, along with a significant portion of the jobs being created in ‘traditional low value-added services.

• The outcome of such a process is the high incidence of informality which continues to undermine the prospects of reducing working poverty’.

Challenges in the policy interventions

• To generate more jobs
• To reduce vulnerabilities by providing decent wages and some form of job security.
• While the move to expand MGNREGA is a welcome move, it is very idealistic to assume that the entire workforce, which has returned to their respective home States, will be accommodated by an expanded MGNREGA or any other similar schemes.
• There seems to be very little attention towards urban employment.

Demographic profile:

• India enjoys a demographic dividend and a large number of people are joining the labour market annually.
• The estimates are thatmore than 10 million people join the labour force annually.
• The lack of adequate job opportunities will turn this demographic dividend to a demographic disaster.

Way forward:

• The emphasis should be to design and implement employment-intensive investment policies.
• The policies should incentivize private entrepreneurs and private investments need to be facilitated. Enterprise formation needs to be an integral part of the strategy.
• The government will need to prioritise urban infrastructure as it accounts for a large share of total investments in the local economy.
• A labour-intensive approachto building municipal infrastructure can be a cost-effective alternative to capital intensive-approach as currently the wage rates are low.
• The government needs to immediately launch an urban employment scheme on the lines of MGNREGA scheme. This has to focus on building large-scale medical, health and sanitation infrastructure in cities and towns across India.
• Given the vulnerabilities of urban informal jobs, apart from ensuring adequate job generation there is also the need to generate jobs which provide decent wages and some form of job security.