Month: October 2013

Social safety net for jobless and sick needed

Even if GDP growth rises, there will be growing inequalities unless there are strong policies aimed at the uplift of the vulnerable sections and the rich are taxed in an efficient and judicious manner. There should be some insurance against unemployment and sickness which will enable low income families to live with dignity”, suggests the author.
The Indian economy is faltering even though there are some rays of hope. Exports are rising again due to the weakened rupee and agricultural growth is poised to be higher after a good monsoon. But one bad news is that unemployment has risen in the last one year from 3.8 per cent to 4.7 per cent, according to the Labor Bureau’s survey. This is hardly surprising because there has been a slackening of manufacturing growth to unprecedented levels and it is the manufacturing sector which creates jobs for the semi-skilled labor force. Agricultural growth has not been high either and it is the paucity of nonagricultural jobs that is causing an increase in unemployment in the villages. India’s unemployment rate, however, is lower than some of the member countries of the EU, such as Spain, Portugal, Greece and France. In India, even part-time workers call themselves ’employed’, so there is always an underestimation involved. Even if unemployment has risen to 4.7 per cent, it is still much lower than the unemployment in European countries, the US or UK. But unlike in the EU, the Indian unemployed do not get any dole.

The unemployed youth in India pose a big problem for the future. There are going to be 423 million jobseekers by 2030. Only rigorous skill training of youth will enable them to get jobs. Unemployment, especially in the lower income groups, is a personal disaster and people with meager savings recede into debt rapidly. One illness in the family can reduce the family to penury and push it below the poverty line. The lack of any kind of social insurance or security is what is lacking in India and has to be corrected. We are wasting millions of rupees on unnecessary expenditure like foreign travel of ministers and dignitaries but we still do not have in place a social safety net that may provide a minimum income to the poorest families to tide over their education and health expenditure. Families with low incomes, and who are without job guarantee or pension, are most vulnerable today, yet no one is talking of a universal social safety net. On the other hand, an increase in unemployment will only widen the income inequalities in the country. Already the inequalities are rising as is evident from an increase in the Gini coefficient (a number between 0 and 1) which has risen in recent years from 0.34 to 0.38 (at perfect equality of incomes, Gini is 0). But according to experts, India’s Gini coefficient is not a proper indicator of rising inequalities because it takes into account the expenditure data rather than income data.

According to them, the Gini coefficient is much higher at 0.54 when it is measured by income levels. Inequalities are rising because in every sector there is wide disparity between the big players and the small ones. In agriculture, 80 per cent are small and marginal farmers and the disparity of income between the big farmers and the small ones is huge. This disparity is increasing further with fall in agricultural incomes and inflation. Also as has been pointed out, the agricultural subsidies like free power and low priced fertilizers are cornered by big farmers rather than the small and marginal. In manufacturing sector too, most units are small or medium scale. There is a profusion of micro units and the small-scale sector contributes to 45 per cent of exports and employs 60 million people. Their productivity and incomes are low. Around 40 per cent of the employees in the manufacturing sector are in the lowpaying food, beverages, textiles, leather, and garment units. The large industrialists have big incomes and capability to invest and earn high profits. Their deep pockets enable them to undersell their products and wean away competitors. In the service sector, too, only 2 per cent are high earners, who are in the finance, insurance or real estate sectors.

Most of the service sector employees are in the informal or unorganized sector and are low-income earners. All domestic servants, guards, cleaners, street vendors, construction workers are in the service sector, but the difference in income between the top earners and the bottom ones is huge. This widening income disparity is evident everywhere – in towns, villages and big cities. The ultra-high net worth Indians are growing at the fastest rate among BRICS. They are worth $30 million and their number is at 7,850 in India. Counting in dollars, there are 69 billionaires and 2 lakh millionaires in India who can afford the lifestyle of the richest in the world. There is inequality in every country and Joseph Stiglitz in his book “The Price of Inequality” describes the growing inequality in the US. But in India, the contrast is glaring and unpalatable. People living without basic needs and human dignity are within a stone’s throw of big mansions of the rich. The fatalistic nature of Indians enables them to tolerate such contrasts with stoic silence. There are few protests in India, considering the way the poor live and how they are treated. In the past, Indian industrialists were known for their simple living and philanthropic acts. Unfortunately, that era is gone and today only 19 per cent of the rich engage in philanthropic deeds. If we go deeper we find that government policies have been somewhat pro poor since Independence but have been diluted over the years.

With the latest food security Bill as an example of equitable distribution, the UPA government can earn kudos for thinking about the poor. But on the whole, the government has not been able to eradicate corruption or establish better governance so that expenditure meant for the poor reaches them. All we hear of is how the middle men have pocketed the food grain meant for the poor or the money meant for the welfare of the downtrodden. Every country has had problems after the global financial crisis but many have tried to provide for the low income population in a humane and efficient manner. Hopefully with the news of rising unemployment there will be some action taken for the benefit of those in the lowest income bracket. Even if GDP growth rises, there will be growing inequalities unless there are strong policies aimed at the uplift of the vulnerable sections and the rich are taxed in an efficient and judicious manner. There should be some insurance against unemployment and sickness which will enable low income families to live with dignity.