Barefoot Entrepreneurs
The self-employed
forms almost half the country’s workforce. In a deglobalised, tech-roiled
world, the government’s challenge will be in increasing formal wage employment
and turning bad self-employment into good self-employment
Every morning, in front of the DDA park in Delhi’s
Mayur Vihar, she loads her cart with fresh vegetables. Tomatoes and peas,
cucumbers and radishes, and bunches of coriander leaves. Her regular customers
trickle in, calling her Amma.
Her cart almost empties out by evening. The
50-year-old, feisty vegetable vendor can be temperamental with her haggling
customers. Unlettered, she often fumbles with her calculations. Then the buyers
help her out, adding this and multiplying that. What they don’t know is her
name: Lalita Devi. And her story.
She grew up, poor and unschooled, in Azamgarh, Uttar
Pradesh. She got married in her early teens and moved to Delhi, but life in the
capital turned out to be hard. Her husband left her when she was in her 30s,
leaving her to take care of her two daughters and a son.
“I started a tea stall,” she says. It didn’t bring
her enough money and she began selling vegetables. “God is kind. I have a
decent life. Who would have given a job to an unskilled, illiterate person like
me? I can now manage my family,” she says. Her daughters, aged 20 and 25, are
at home. Her son, 22, helps her out with the vegetable cart. How much does she
earn? She doesn’t know but she says it is enough to feed her family and pay the
rent of ₹3,000.
A long way away in Tripura, Abhishek Saha has another
story to tell. The 33-yearold was a sales executive with the pharmaceutical
company Cipla in Bengaluru. Two years ago, he returned to his hometown Agartala
to set up Babuana Tea Stall. He sells sandwiches and three types of tea,
charging ₹10-40 a cup,
and tops it up with great service. “I have junked a regular job to be an
entrepreneur. It gives me freedom to do things my way,” he says. Saha, who gets
400-plus customers daily, has big plans: “I want to expand first to Guwahati
and then to Bengaluru.”
Self-employment is common in India. Sometimes, it is
out of choice, like Saha’s. But more often, it is out of compulsion, like
Devi’s. They represent two ends of the spectrum of India’s self-employed, which
is 47% — almost half — of India’s 470 million workforce. Based on government
data, about 215 million people are self-employed. They include street vendors,
rickshawpullers, carpenters, plumbers, chaiwallahs, grocers, taxi drivers,
doctors, accountants and pakorawallahs.
Most of the self-employed are below the economic
radar. They are homeless, office-less and unbanked. They are vulnerable and
footloose and live on the fringes. They rarely figure in government policies or
statistics, or even statements.
Economics Wrapped in Politics
Now, change is afoot. Prime Minister Narendra Modi
wants India’s self-employed to be visible, counted and strengthened. Last
month, selfemployed pakoda sellers made headlines when Modi said, “Youth
selling pakora outside… and earning ₹200 a day also means creation of jobs.” Never mind the political
storm it created. For millions of self-employed workingliving on the fringes,
getting on the nation’s radar is a good start. If India has to progress,
mainstreaming its self-employed will be an important stepping stone. In the
second most populous country with 470 million workforce, employment today is a
hot button issue. A year away from the general election, Modi knows that
confronting it head-on rather than sidestepping it may be a smarter strategy.
Modi’s statement on pakora sellers wasn’t a random
remark. It was seconded by BJP president Amit Shah in Parliament. The backdrop
is a growing realisation that the government or, for that matter, any future
government, will not be able to create formal jobs for over 6-7 million joining
the country’s workforce annually. In 2016-17, actual jobs created were 4.1 lakh
as against the BJP’s electoral promise of creating one crore jobs annually.
There is an attempt in the NDA government to look at
the problem from a different angle. From demonetisation to GST, formalisation
of the economy has been a constant theme for the Modi government. With 80% of
the workforce engaged in the cash-heavy informal sector, the attempt has been
to integrate them into the country’s economy. And, while in transition, why
shouldn’t this huge chunk of the workforce get counted on the economic map? Why
shouldn’t a domestic help earning ₹15,000 a month or a cab driver with a monthly income as high as ₹50,000 figure in the
government’s job statistics?
This begs the question: what constitutes a formal
sector? The Economic Survey 2018 defines formal employment as, one, where the
employers are providing some kind of social security (like EPF and health or
life insurance) to their employees, and, two, where firms are part of the tax
net. Pakora sellers find no place here. Not yet. According to the first
definition based on social security, 31% of India’s non-agricultural workforce,
75 million out of an estimated at 240 million, have formal employment.
According to the employers-in-the-tax-net definition, 54% (or 127 million) of
the non-agricultural workforce is in the formal sector.
Counting self-employed among those having jobs may
become contentious, but this line of thinking is likely to dominate the
political discourse before the next Lok Sabha elections. Some government
officials in the know say that the Union labour ministry is contemplating a
formula under which 40-50% of the 104 million beneficiaries of the Pradhan
Mantri Mudra Yojana) could be statistically bracketed as employed if an ongoing
survey demonstrates that people have become self-employed after availing of the
loan. Mudra loans (up to ₹10 lakh) are
disbursed for non-agricultural activities, including dairy, poultry and
beekeeping.
Technology, the Job Slayer:
Creating jobs is India’s biggest worry and it will
only get worse. The NDA government is coming to terms with it.
According to a Bloomberg News analysis, India is
expected to have a billion people aged between 15 and 64 years of age by 2027,
which means the world’s largest — and youngest — workforce. As the economy
progresses, millions of people employed in lowproductivity farm sector will
have to be moved to higher-productivity non-farm jobs. Barring China, this
scale of migration has no precedent in history. Unfortunately, the opportunity
that China had – to turn into the world’s factory that could absorb millions of
the country’s agri-workers — may not be available for India. This is the age of
Brexit and deglobalisation championed by US President Donald Trump and export
barriers are set to rise.
Meanwhile, technologies like robots and 3D printing
has jump-started a re-shoring of manufacturing facilities back to the developed
world. India’s IT industry is in a crisis, with technological changes forcing
them to pivot or perish. While experts disagree on the degree of disruption
technology will cause, the automation wave is certain to cull jobs across
geographies and sectors.
Amid all this, the sharing and gig economy is growing
by leaps and bounds, forcing a debate on the fundamental question of who is an
employee. In the US self-employed workers today stand at 34% and are forecast
to touch 43% by 2020. This trend is already playing out in India, with
cab-hailing apps like Ola and Uber employing 5,50,000 and 3,50,000 drivers
respectively in India as of July 2016, according to Statista.
These convulsions of change notwithstanding, India
historically has had a problem creating jobs. Its employment elasticity –
number of jobs created per percentage of GDP growth — has been among the
lowest. It is now declining – from 0.3% between 1991 to 2007, it has halved
today. Partly, this is because India’s growth, dominated by the services sector
and not labour-intensive manufacturing, has had a bias for skilled workers.
With little options, a majority of India’s workforce is engaged in informal,
unorganised, low-income, low-productivity jobs. Says Manish Sabharwal,
cofounder, Teamlease: “This is not self-employment. This is self-exploitation.
They need to be moved up from subsistence-based livelihood.” He makes the
distinction between good self-employment and bad self-employment: “Policy
makers in India should focus on increasing formal wage employment and good
self-employment.”
Entrepreneur vs Self-employed
Often, “self-employed worker” and “entrepreneur” are
interchangeably used. But there is a difference. “Self-employment in advanced
countries is different from that in developing countries,” says Delhi-based
Majid Nomaan, senior employment specialist, ILO. In developed countries where
social security is available, self-employment is more about entrepreneurship.
“In societies with high poverty, self-employment is more about seeking
livelihood for survival,” he adds.
According to PRICE (People Research On India’s
Consumer Economy), of the 281 million households in India, 108 million are
selfemployed of which 55 million (20%) are engaged in farm-related activities,
10 million (4%) are petty traders like street-side vendors, 26 million (9%) are
shop owners or traders, and 14 million (5%) are non-professionals like cab drivers
and carpenters. Just 3 million or 1% are well-paid professionals like doctors,
architects and accountants. “Self-employed isn’t a homogeneous group. Income
instability is their biggest problem. One serious illness can set them back by
years,” says RK Shukla, director, PRICE.
Gurbachan Singh, visiting faculty at the Indian
Statistical Institute, gives another reason why some people opt for
self-employment. “It is linked to the country’s financial infrastructure. A
more developed financial sector leads to less self-employment,” he says. Poor
avenues for financial investment or little knowledge of how to go about it
makes many opt for self-employment. The scope of tax evasion makes it even more
attractive.
Mainstreaming the Margin
India’s self-employed will remain humungous. A KPMG
report expects micro, small and medium enterprises (MSMEs) to play a critical
role in creating jobs. It forecasts them chipping in 15% to the GDP by 2020, up
from 8% today, BUT creating half of the total new jobs. This will more than
double the current MSME workforce of 106 million. This won’t be an aberration.
Globally, developed economies lean heavily on a strong MSME to chase growth and
create jobs. In countries like Germany, US, UK and Singapore, MSME contributes
over 40% to the GDP. It is also an employment engine — creating 67% of total
jobs in Brazil, 62% in Germany, 53% in the US and 52% in the UK.
The Modi government is tackling the job issue with a
four-pronged strategy. Investments, policy initiatives and sector focus will be
evaluated on the basis of their job-creating capabilities. A new industrial
policy is likely to be unveiled in April-May (See “A New Industrial Policy is
On the Job”). If government officials in the know are to be believed, the focus
of the policy will be on finding ways to gainfully employ the youth who enter
the workforce every year, apart from checking job losses triggered by Industry
4.0, the global phenomenon of automation in manufacturing.
Formalisation of the informal sector is another area
where the government is focusing. The intention is to widen tax base. Under the
new GST regime, the number of indirect tax payers rose by 50% or by 3.4
million. The government is pushing for digital transactions including the UPI
even as it is incentivising employers to hire staff on rolls. Under the Pradhan
Mantri Rojgar Protsahan Yojana, employers are incentivised to register in the
EPFO: the government will pay 8.33% (it is 12% in labour-intensive textiles
sector) of PF contribution for all new employees enrolled in EPFO in the first
three years. Post demonetisation, the Ministry of Labour held 1.5 lakh camps
over six months, opening 49.6 lakh bank accounts for workers, nudging employers
to transfer wages electronically. On a base of 80 million employees’ provident
fund subscribers, a recent report expects the count to rise by 7 million in
2017-18.
“If we want growth with jobs, the push has to be on
small industries, and not on the middle or the top,” cautions Arun Maira,
former member of the now disbanded Planning Commission, who last week attended
a roundtable on the draft industrial policy. Adds Prantik Ray, professor
(finance), XLRI: “The difficulty to access financial products is one of the key
reasons why the self-employed are not able to move ahead.” This is where Mudra
scheme fits in. “The biggest beneficiary of initiatives like ease of doing
business will be the MSMEs. They bear the biggest brunt of the inefficiencies
in the system,” says Nitin Atroley, office managing partner (north), KPMG
India. The government is said to be looking at measures to tackle the NPA and
insolvency issue in the MSME sector as well.
A host of schemes has been rolled out to improve the
quality of life of the self-employed: the National Health Protection Scheme,
which will cover 10 crore poor households, the low-cost Pradhan Mantri Jivan
Jyoti Bima Yojana (life insurance) and the Pradhan Mantri Suraksha Bima Yojana
(accident insurance), and the Jan Dhan Yojana aimed at financial inclusion.
Will this help? India’s job problem is huge and
complex with no easy answers. The NDA government, in its last year, is short on
time. And India’s jobseekers short on patience.
In politics, perception management is as important as
the change on the ground. Expect the Modi government to lean on both as it
braces for the next general elections.
Malini Goyal & Shantanu
Nandan Sharma
ET18FEB18
No comments:
Post a Comment