Challege in Employment in Development in India

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<p>NCEUS Working Draft for Comments Only</p> <p>THE CHALLENGE OF EMPLOYMENT IN DEVELOPMENT IN INDIA AN INFORMAL ECONOMY PERSPECTIVE</p> <p>NATIONAL COMMISSION FOR ENTERPRISES IN THE UNORGANISED SECTOR16TH, 19TH FLOOR, JAWAHAR VYAPAAR BHAWAN, 1, TOLSTOY MARG, NEW DELHI</p> <p>1</p> <p>NCEUS Working Draft for Comments Only</p> <p>Chapter 1</p> <p>IntroductionIndia is perhaps the first country to set up, at the national level, a commission to study the problems and challenges being faced by what in India is called the unorganised economy - or the informal economy as it is usually referred to internationally and recommend measures to the government to address them. The political compulsion for such a remarkable initiative was thrown up by Indias success in achieving and sustaining a high economic growth since the mid-eighties but one that did not adequately address the livelihood security issue of a majority of its citizens. The euphoria of a shining India created during the 2004 general elections turned out to be a short-lived one when the vast underbelly of a suffering India voted decisively in favour of a programme that focused on the livelihood issues of the common people, the aam aadmi as it is popularly referred to. This programme known as the Common Minimum Programme of the United Progressive Alliance, which formed the government at the national level, stated that "The UPA government is firmly committed to ensure the welfare and wellbeing of all workers, particularly those in the unorganised sector who constitute 93 per cent of our workforce. Social security, health insurance and other schemes for such workers like weavers, handloom workers, fishermen and fisherwomen, toddy tappers, leather workers, plantation labour, beedi workers, etc. will be expanded. "Enhance the welfare and wellbeing of farmers, farm labour and workers, particularly those in the unorganised sector and assure a secure future for their families in every respect." "The UPA administration will ensure the fullest implementation of minimum wage laws for farm labour. Comprehensive protective legislation will be enacted for all agricultural workers." As part of fulfilling this commitment the National Commission for Enterprises in the Un-organised Sector (NCEUS) was set-up by the Government vide Resolution No:5(2)/2004-ICC dated 20th September,2004 under the chairmanship of Dr. Arjun Sengupta as an advisory body to recommend measures considered necessary for enhancing the competitiveness of the unorganised sector in the emerging global environment and generation of large scale employment opportunities on a sustainable basis. The terms of reference given to the Commission are as follows: i. Review of the status of unorganized/informal sector in India including the nature of enterprises, their size, spread and scope, and magnitude of employment; ii. Identify constraints faced by small enterprises with regard to freedom of carrying out the enterprise, access to raw materials, finance, skills, 2</p> <p>NCEUS Working Draft for Comments Only</p> <p>entrepreneurship development, infrastructure, technology and markets and suggest measures to provide institutional support and linkages to facilitate easy access to them; iii. Suggest the legal and policy environment that should govern the informal/unorganized sector for growth, employment, exports and promotion; iv. Examine the range of existing programmes that relate to employment generation in the informal/unorganized sector and suggest improvement for their redesign; v. Identify innovative legal and financing instruments to promote the growth of the informal sector; vi. Review the existing arrangements for estimating employment and unemployment in the informal sector, and examine why the rate of growth in employment has stagnated in the 1990s; vii. Suggest elements of an employment strategy focusing on the informal sector; viii. Review Indian labour laws, consistent with labour rights, and with the requirements of expanding growth of industry and services, particularly in the informal sector, and improving productivity and competitiveness; and ix. Review the social security system available for labour in the informal sector, and make recommendations for expanding their coverage. The Composition of the Commission is given in Annexure XX.</p> <p>Wide ranging consultationsThe Commission sought to address each of the Terms of Reference in a systematic manner through a process of building up as broad-based a consultation as possible especially among the stake holders. The Commission has been aware of the wideranging nature of the Terms of Reference and the formidable challenges in not only studying them but also to come up with clearly formulated recommendations for policy. In addressing these Terms of Reference the Commission, after initial deliberations, constituted Task Forces (or Technical Expert Groups on certain specific themes) to provide a forum for detailed deliberation (see list given in Annexure XX). The deliberations were backed by specially commissioned studies and papers prepared by experts. In addition, detailed computations and analysis of statistical data were carried out within the Commission. Wherever necessary, discussions and interactions with central and selected state governments, academia, civil society organizations, workers organizations, and industry associations were held. Subsequently regional and national consultations were held for discussing the preliminary reports and papers. Discussions were also held with selected state governments, state level academia, civil society and workers organisations. Through such a process of structured interaction, the Commission was in a position to elicit a large number of views and recommendations and build as much a consensus as feasible. It goes without saying that the Commission alone is responsible for the views expressed and recommendations made in its various reports. 3</p> <p>NCEUS Working Draft for Comments Only</p> <p>Past ReportsReport on Definitional and Statistical Issues Relating to the Informal Economy (NCEUS 2008a): One of the first tasks of the Commission, and a challenging one at that, was to define its universe of study. When the Commission began its work, there was no precise definition of the in the informal/unorganised sector not to speak of the informal employment. Through a series of consultations and deliberations, the Commission defined the unorganised sector and unorganised employment. It also decided, by examining the international practices, to use the terms unorganised and organised interchangeably with informal and formal. The definitions adopted by the Commission were subsequently used in all its statistical computations and reports. A detailed report titled Report on Definitional and Statistical Issues Relating to the Informal Economy was then submitted in 2008 containing the results of these new computations on the informal sector, informal employment, GDP emanating from the informal sector and the characteristics of informal sector enterprises and workers. A set of recommendations were also made that will, if adopted by the statistical system, make available highly useful data for policy formulation and implementation with regard to addressing the problems and challenges facing the informal economy. The core of the Commissions recommendation relating to the definition of the informal economy is the following: Informal Sector: The unorganized sector consists of all unincorporated private enterprises owned by individuals or households engaged in the sale and production of goods and services operated on a proprietary or partnership basis and with less than ten total workers. Informal worker/employment: Unorganized workers consist of those working in the unorganized sector or households, excluding regular workers with social security benefits provided by the employers and the workers in the formal sector without any employment and social security benefits provided by the employers. Informal economy: The informal sector and its workers plus the informal workers in the formal sector constitute the informal economy. Report on Social Security for Unorganised Workers (NCEUS 2006) This report on social security was submitted in May, 2006. While deliberating on the issue of social security for informal workers, the Commission recommended a universal social security for all workers and suggested a social security Act for social security as a right. The NCEUS submitted a bill in this regard which was deliberated upon by the media, organisations of informal/unorganised workers, in the Government and finally by the Parliament where a bill was introduced. The final result was an Unorganised Workers Social Security Act 2008 that incorporates a number of, if not all, recommendations of this Commission. Report on Conditions of Work and Promotion of Livelihoods in the Unorganised Sector (NCEUS 2007a): This was submitted in August, 2007 that in fact set the</p> <p>4</p> <p>NCEUS Working Draft for Comments Only</p> <p>agenda for working out a comprehensive strategy for transforming the informal sector into efficient units of production and services and while ensuring decent conditions of employment for the informal workers with income and social security. The report analyzed the conditions of work of farmers, wage workers, women workers, home based workers, as well as the regulations of conditions of work in India of the unorganised sector. In order to protect and promote the livelihood of the unorganised workers in India, the Commission in the report has also suggested a 13 Point Action Programme under four separate packages that should get overriding and immediate priority, for the unorganised sector workers. This report, attracted wide attention and publicity in the official/non-official circles and the media and has become a subject of debate in and outside the Parliament. The main recommendations were followed up by the Commission for detailed deliberation and formulation of implementable action plans and the subsequent reports were the products of such an exercise. Reports on Financing of Enterprises in the Unorganised Sector and Creation of a National Fund for Unorganised Sector (to be called NAFUS)(NCEUS 2007b): These two reports, the second arising out of the first, were combined into one document and presented to the Government in November, 2007. The first report on financing examines in detail the status of financing to this sector and deals with the deficiencies in institutional infrastructure, constraints in financing this sector and provides a set of comprehensive recommendations. The NAFUS proposed by the Commission is envisaged as a development agency with statutory backing and funded by the Central Government and Financial Institutions that will primarily focus on nonfarm micro enterprises. The Fund to begin with, will have a modest corpus of Rs.500 crore going up to Rs.1000 crore in the fifth year. This Fund will be created on the pattern of NABARD or SIDBI and is exclusively meant for meeting the financing and promotional assistance gaps in the development of the Non Farm Unorganised Sector. A Special Programme for Marginal and Small Farmers (NCEUS 2008b): This short report submitted in December 2008 was intended to focus on the agricultural economy in the country which is synonymous with informal economy. While there exists a large body of literature on the problems and challenges being faced by the agricultural economy as well as recommendations of a number of committees and commissions, our idea was to focus on the marginal and small farmers, as distinguished from farming and relating activities, who constitute 84 percent of all farmers contributing to a little more than half the GDP from agriculture. This special programme suggests a group approach to the delivery of various services to the farmer and farming and related activities. Report on Skill Formation and Development in the Unorganised Sector (NCEUS 2009a): [to be inserted] Report on Growth Pole for the Unorganised Sector (NCEUS 2009b): [to be inserted]</p> <p>5</p> <p>NCEUS Working Draft for Comments Only</p> <p>In the course of its functioning, the Commission also submitted a few proposals to the government on selected issues. Prominent among these is the one submitted in November 2008 on the need for a informal-economy focused response to the impact of the global financial and economic crisis on India. The main features of this proposal were (i) to increase pro poor public investment such as JNNURM, (ii) strengthening NREGS, (iii) introduction of urban employment guarantee programme, (iv) increasing the access to credit for micro enterprises and the immediate announcement for creating the NAFUS. Considering the number of reports from the Commission, the government constituted in XXX 2007 an Inter-Ministerial Group to examine the various recommendations and advise the government on appropriate follow up action. It is hoped that such new initiatives as might be taken by the government will contribute decisively to the narrowing of the gap between the suffering and shining India. This Report This Report in a sense is an overarching one encompassing the entire agenda set out in our Report on Conditions of Work. At the same time, it goes beyond the specific recommendations by providing a broader framework within which the challenge of inclusive development is examined. Here the Commission has placed employment as the central objective around which the objective inclusion could be realized. In doing so, the Commission has examined the employment implications of economic reforms and the need for an employment strategy to meet the twin challenges of quantity and quality. It then advocates a strategy of leveling up the informal economy to close the widening gap between the formal and informal segments in Indias overall economy. Organisation of Chapters Chapter 2 sums up the argument in the entire report by pulling together the various views and findings based on empirical analysis. It has been written more in the nature of an argument than a technical summary. Chapter 3 discuss the various measures currently in use for measuring employment and unemployment in the economy and puts forward, through practical application, a modified approach to get a better understanding of the intensity of work of the employed and underemployed. Chapter 4 takes stock of the size and characteristics of the labour force by an examination of past trends and points out the structural weaknesses. In Chapter 5 we discuss the likely increase and its regional spread in the labour forces and wonder whether it indeed constitutes a demographic dividend or a demographic burden unless concerted efforts are made to invest in human capital and human development. Chapter 6 is a link chapter between the analysis and the following chapters on recommendations. It recaptures the Commissions work in examining employment and work through the lense of formality and...</p>