Pathway Towards Formalisation of Migrant Labour post-COVID-19

Introduction

The COVID-19-induced lockdown imposed by the government of India has brought to fore some of the country’s harshest realities. The ongoing migrant crisis is perhaps the most prominent illustration of the same, since it uncovers the socio-economic vulnerabilities confronted by a vast segment of India’s workforce and the apathy being displayed by governments in securing their health, well-being and transportation arrangements for the journey back to their homes. 1

Over the course of the lockdown period, lakhs of migrant workers in affluent cities have left – some of them on foot – for their native constituencies after being stripped of their wages and livelihoods amidst an unrelenting battle with hunger and unhygienic living conditions. 2 While none of the adversities faced by the migrant workers are a consequence of the COVID-19 pandemic or the lockdown alone, the magnitude of the crisis must invoke a reassessment with regards to the legislative and administrative framework governing the status of these workers. The focus must shift from ad-hoc and often, poorly implemented welfare policies, towards formalising the labour market and getting migrant workers on the socio-economic map of India.

While Census 2011 pegs the total number of migrants in India at 139 million, the Economic Survey of India 2017 estimates that inter-state migration in India was close to 9 million annually between 2011 and 2016. 3,4 Much of the latter can be attributed to circular or seasonal migration where workers from poor states like Uttar Pradesh, Bihar or Madhya Pradesh migrate to industrialised areas of Maharashtra and Delhi to work as construction and transport workers or even as street vendors and domestic helpers in urban residences. These are temporary workers with no official count or identity and find no place in India’s social security framework.

Their informality can be gaged by the Periodic Labour Force Survey (PLFS) 2018 which estimates that among regular wage/salaried employees in the organised or non-agriculture sector, more than 71 percent had no written job contract and nearly 50 percent were not eligible for any social security benefit. 5 The conditions would be even worse for the estimated 10 million street vendors and 50 million domestic workers in India. 6,7

As stated earlier, the COVID-19 pandemic has reinforced the notion that the migrant workforce is the most neglected strata amongst the Indian electorate. In this context, it is important to evaluate the potential impact of labour law relaxations announced by a bunch of Indian states on the indicated formalisation agenda. Likewise, the proposed labour code reforms by the central government must be scrutinised to assess whether they are comprehensive enough to address the many nuances of labour market formalisation, especially in the aftermath of the COVID-19 crisis.

Finally, it is imperative to locate best practices from selected Indian states where demonstrated success has been achieved with respect to formalisation of migrant workforce across sectors like construction, transportation, inter alia. This would provide useful guidance to follow given that much of the administrative burden in respect of the migrant workers lies with state governments.

Current Issues and Proposed Reforms

The migrant crisis due to COVID-19 poses dual problems for the Indian economy. On one hand, manufacturing establishments in major industrial clusters around the country are facing labour shortages due to the return of migrant workers to their native villages. This state of affairs adds to the economic voes by creating supply bottlenecks in a scenario where aggregate demand conditions have already deteriorated due to the lockdown. 8 Conversely, the native states are not adequately prepared to support the returning migrants given the stressed rural economy and the underwhelming stimulus package announced by the Central government. 9

In consequence, many of the source states of migrant workers, including Uttar Pradesh and Madhya Pradesh, have approved labour law relaxations in order to augment their prospects in attracting fresh investment and with the objective of fiscally supporting the returning workforce.10,11 Meanwhile, many industrial states like Haryana, Rajasthan or Maharashtra have also increased their maximum weekly work hours in factories to limit supply chain disruptions. 12 This is even as corporations have no other option left but to invest on the central government’s labour code reform agenda to provide strong incentives for migrant workers to return to work once the crisis is over.

Labour Law Relaxations Across States

Labour is a subject that falls under the concurrent list of the Indian constitution. This implies that state governments carry the right to amend central legislation, subject to the assent from the President of India. In view of the same and due to the fiscal uncertainty brought about by COVID-19, the states of Uttar Pradesh, Madhya Pradesh and Gujarat have recently sanctioned sweeping moderations to their labour governance frameworks.

The Uttar Pradesh government has approved an ordinance which would exempt all new factories and manufacturing establishments from all labour laws for a period of three years, subject to the fulfillment of a few very basic conditions pertaining to bonded labour and death or disability compensation. 13 Surprisingly, even a leading industrial state like Gujarat has decided to adopt a similarly unsystematic and short-term approach on the issue. 14 In fact, the Madhya Pradesh government has a far more measured outlook with respect to labour law relaxation in the state. While even the latter has relaxed thresholds and requirements on employers with respect to employment conditions and workers welfare, and also amended the Industrial Disputes Act, 1947, it has chosen to retain crucial provisions pertaining to lay-off and retrenchment of workers, as well as closure of establishments. 15

In a scenario where 90 percent of the India’s workforce is employed informally, these changes are deeply problematic in that employers will be freed from even basic obligations with respect to job security, health and social protection of their workers. This will encourage worker exploitation, given that employees will not have access to any grievance redressal mechanisms and also drive down wages sharply, in view of the suspension of the Minimum Wages Act, 1948. 16 It will disincentivise formal employment and is unlikely to spur economic growth, taking into account the excess capacity in the industrial sector and the expected drop in consumer demand due to the imminent suppression of wages.

The state governments could have chosen to extend work hours on the lines of Rajasthan and Maharashtra or partner with the industry in shouldering some of the burden in respect of wage payments or worker welfare. They could have even expedited the central government’s planned agenda on labour law rationalisation, which incorporates meaningful relaxations to India’s labour laws, but in a methodical and well thought-out manner. Instead, they have chosen to adopt what amounts to a huge step backwards with respect to formalisation of the Indian workforce.

The Inter State Migrant Workmen (ISMW) Act, 1979 and the Occupational Safety, Health and Working Conditions (OSHWC) Code, 2019

Currently, there are over 40 central laws and 100 state laws governing various aspects of labour in India. With the objective of reducing compliance costs for industrial establishments and ensuring uniformity for ease of enforcement, the Central government is in the process of streamlining labour laws under four codes. They are (i) industrial relations, (ii) occupational safety, health and working conditions (OSHWC), (iii) wages, and (iv) social security. The code on wages has already been passed by Parliament. The standing committee on labour has also submitted its report on the OSHWC code, which seeks to replace 13 labour laws, including the one governing inter-state migrants i.e. the Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979. 17

The ISMW Act, 1979, was enacted with the purported objective of preventing exploitation of inter-state migrants by labour contractors and to ensure fair and decent conditions of work in establishments where they have been employed. The law carries strict requirements on contractors to get licenced and report to relevant authorities, in both the source and host state of workers, the details pertaining to wages paid, work hours and essential amenities provided to the migrants. 18 The establishments hiring them are also required to obtain a certificate of registration. There are also strict obligations with regards to paying the migrant workers at par with regular workers, providing suitable residential accommodation and even displacement allowance in case of dislocation from host state. 19

The COVID-19 pandemic and the ensuing migrant crisis has conclusively proven that the ISMW Act is not being implemented in the country. Had contractors been reporting the required details, state governments would have possessed sufficient information regarding the size and distribution of inter-state migrants in their territories and could have potentially taken corrective measures during the lockdown. Had residential accommodation or medical facilities been provided or dislocation allowance paid to migrant workers, some wouldn’t have had to undertake the arduous journeys back to their villages on foot. Further, the contractors and the employers who left the migrant workers to fend for themselves would have faced heavy monetary penalties or even criminal action suits.

However, it needs to be acknowledged that the onerous conditions prescribed in the ISMW Act can be a major disincentive for both contractors and industrial employers to comply with the same. It deters the formalisation of the migrant workforce by making the process of hiring them even more burdensome than regular workers. The OSHWC Code was conceived precisely with the stated objective of reducing the compliance burden on corporations and incentivising formalisation of the workforce by prescribing uniform standards for contract and migrant workers employed in sectors like, inter alia, building and other construction, motor transport and plantations. It does so by necessitating only a single licence for contractors, irrespective of the sector and amalgamating or combining certain special provisions pertaining to inter-state migrant workers and contract labour. 20

The OSHWC Code provides that where inter-state migrant labour is employed by an industrial establishment through an unlicenced contractor, the former would be deemed the principal employer. While this provision does address the gaps left between the existing legislation on contract and inter-state migrant labour, the Code has left out certain provisions from the ISMW act which may be detrimental to the formalisation of the migrant workforce. These include provisions pertaining to furnishing details of migrant workers to the two concerned states and providing the workers a passbook with those details in their language of preference. 21  Further, while it retains the provision of displacement allowance, it removes all statutory obligations with regards to maintaining certain health and safety conditions of employees and delegates the concerned rule-making powers to the state governments

The COVID-19 crisis has revealed that migrant workers enjoy no security on employment or wages and are subject to inhumane treatment by their contractor and employers. Their needs are distinct and demand a separate chapter in the Code. The standing committee on labour in Parliament argues the same. 22 This chapter must include the obligation on contractors or principal employers to maintain a digital register on the particulars of inter-state migrants commissioned under them, which would enable better decision-making by state governments. It must also include a clause which provides these workers with the equivalent of an identity card that would make them eligible for welfare schemes run by various governments. Finally, the chapter should provide for certain minimum health and safety standards which employers must maintain in order to ensure welfare for the migrants.

Best Practices on Formalisation of Migrant Labour in India

With the above discussion, we can infer that central legislation on labour is expected to remain inadequate with respect to formalisation and welfare of the migrant workforce in the country. This is while the indicated agenda continues to be kept on the margins of politico-economic priorities of most state governments in India. In this context, it is important to identify those sectors which serve as the largest source of employment for migrant labour and uncover best practices and case studies from across the country where a measurable level of formalisation has been achieved with respect to the same. This would provide much-needed guidance to governments in India on a collection of policies, “institutional innovations and grass-roots intervention which complement each other and jointly contribute to progressive formalisation” of the migrant workforce in the country. 23

Building and Other Construction Workers

The construction sector attracts a large number of migrant workers due to the labor-intensive nature of the industry and low skill requirement. An estimated 50 million workers are employed in the construction industry. 24 The level of informality is high in that workers are made to work at a daily wage rate and often without formal contracts. Besides, due to the ineffectual implementation of the legislation pertaining to working conditions, the workers are usually made to reside on the construction site itself with inadequate safety measures and no provision of essential amenities. The high prevalence of children and women in construction makes it even more important to address the informality of labour in the industry.

The Building and Other Construction Workers Cess Act, 1996, is one of the principal legislations governing the construction sector. It mandates the registration of workers with state-level construction worker boards as well as the usage of funds – collected as a 1 percent tax on the cost of construction – towards their welfare. The estimates from the labour ministry of the central government show that the registration of workers and use of the funds is improving but remains dismally low.  25

However, the success story in this regard can be found in Gujarat where the Self Employed Women’s Association (SEWA) has established itself as a “legitimate representative voice of informal construction workers” in the state. 26 Not only was it instrumental in setting up the workers welfare board in the state but it also got the Gujarat government to accept certificates, which would guarantee welfare access to the construction workers, issued by SEWA as proof of work. Further, it has supported the establishment of construction cooperatives which undertake independent construction contracts, thereby enabling members to access the market and upgrade to skilled workers from mere labourers.

The above example demonstrates that coordinated efforts by civil society and a responsive state government can bring informal workers into the mainstream. In this respect, every state government must endeavor to have a functioning construction workers welfare board and ensure all informal workers, including migrants, are registered with the same. It is important that funds collected under the law are fully utilised in order to ensure welfare of informal workers, especially during times of crisis. Finally, it is imperative that minimum health and safety conditions for construction projects are updated in the context of COVID-19 to ensure physical distancing and monitored strongly to guarantee compliance. Governments can play a crucial role in this regard, by mandating a compliance requirement for all their infrastructure projects being auctioned to private players.

Informal Transport Workers

Informal transport like auto rickshaws or e-rickshaws are critical instruments for last mile connectivity in urban India. Although this market is characterised by a high degree of informality, it often marks the first point of entry for migrant workers into the labour market. 27 The sector is marked with long working hours, irregular payment and intense competition due to the prevalence of a large number of players. The sector is highly diversified with working conditions are arguably the poorest for those at the bottom of the pyramid, i.e. head loaders, rickshaw pullers or porters on railway stations. They are seldom supported by municipal bodies and, in fact, end up skirting safety regulations prescribed for official transport vehicles.

In this regard, two social enterprises, Ecocabs in Punjab and G-Auto Nirmal Foundation in Gujarat, have been quite successful in addressing the informality of transport workers. 28 In both cases, they were given strong incentives to join an external platform and, on joining, were trained on safety regulations as well as service delivery in order to ensure a standard code of conduct. Both these initiatives have not only helped the transport workers transition towards proper legal recognition but has also facilitated a much-improved quality of life with increased income, access to health services and insurance programmes along with a substantial network of peers.

In both cases, government support was extremely crucial in that the requisite infrastructure was incorporated within the urban design plans of municipal councils. The respective governments also facilitated network support through state telecom companies and financial assistance by offering advertisement contracts on the vehicles concerned. 29 The improved service delivery and customer satisfaction has led to a rapid expansion of the initiatives in their respective states.

This example demonstrates that governments, while being an enabler for private sector ingenuity, can produce mutually beneficial outcomes. In the context of COVID-19, well laid out ‘Code of Conduct’ guidelines are going to be crucial in order to ensure social distancing just as much the framework to track the number and distribution of transport workers in any urban conglomeration. The lessons derived from the above examples can be extremely valuable in this respect.

Street Vendors, Restaurant Workers and Domestic Helpers

Occupations such as street vendors, helpers in restaurants or domestic helpers in urban households are prolific job creators for migrant workers and often an easy point of entry into the labour market. As stated earlier, the number of street vendors in India are estimated to be 10 million, while domestic helpers stand at 50 million. In both cases, the actual numbers may be much higher given the lack of recognition accorded to them under India’s legal and administrative system. All these occupations share a high degree of informality with no written job contracts, long working hours and poor implementation of regulations where they exist.

In this context, Aajeevika Bureau, with its presence in both the ‘source’ and ‘destination states’, has achieved a degree of success in helping migrant workers acquire registration cards, legal protection and even written job contracts. An estimated 60,000 migrant workers have increased their income by 50-80 percent due to the efforts put in by Aajeevika.30

Similarly, a few state governments have accomplished formalisation of domestic helpers through a variety of interventions. For instance, Kerala managed to register 35,000 domestic workers in 2012 due to its decision to delegate that responsibility to the direct stakeholders like trade unions, resident welfare associations and even employers of domestic workers. 31 Jharkhand issued nearly 3,000 smart cards to domestic workers in 2012 due to its decision to include them in the Minimum Wages Act, 1948. 32 Finally, Maharashtra introduced a comprehensive piece of legislation exclusively for domestic workers with a mandated requirement of a welfare board. 33

Due to the highly tactile nature of their work, COVID-19 represents an existential threat to this category of workers. It is essential that some of the best practices mentioned above are calibrated upon by various governments before the migrant workers start pouring back to the cities.

Conclusion

The aftermath of the COVID-19 pandemic has demonstrated that migrant workers are arguably the most vulnerable section in the Indian electorate. They are away from their homes and are made to work in unsafe and unhealthy conditions with low or irregular payment. The contractors through whom they are hired and the establishments that employ them face no repercussion on deserting them in times of crisis, without any cash for essentials or travel. Further, poor implementation of laws leaves them without legal protection and precludes them from availing any government compensation or welfare schemes.

In this context, it is important that formalisation of migrant labour is adopted as a priority policy objective by governments at various levels across the country. Given the same, the relaxation of labour laws announced by state governments is an eminently erroneous decision, bearing in mind the subject of the legislation, i.e. migrant workers, are going through their worst crisis. Further, it is imperative that the Central government recognises the plight of the migrants and introduces an exclusive section for them in the new labour code. Finally, considering that state governments are going to be primarily responsible for administering the migrant workforce, it would be useful that relevant case studies with respect to labour formalisation from within the country are identified and adopted into state policies.

REFERENCES


[1] “In Long Walk Back Home, Migrants Battle Hunger, Scourge of Covid-19,” Hindustan Times, May 16, 2020, https://www.hindustantimes.com/india-news/in-long-walk-back-home-migrants-battle-hunger-scourge-of-disease/story-TizRfUz69osJQ0Uqmm6jZN.html.

[2] Sarah Farooqui, “89% Stranded Migrants Hadn’t Been Paid Wages during Lockdown Period: Report,” Business Standard India, April 17, 2020, https://www.business-standard.com/article/economy-policy/89-stranded-migrants-hadn-t-been-paid-wages-during-lockdown-period-report-120041700786_1.html.

[3] “Census of India Website : Office of the Registrar General & Census Commissioner, India,” accessed May 23, 2020, https://censusindia.gov.in/2011census/migration.html.

[4] “UNION BUDGET & ECONOMIC SURVEY,” accessed May 18, 2020, https://www.indiabudget.gov.in/budget2017-2018/e_survey.asp.

[5] Annual Report, Periodic Labour Force Survey, July 2017 – June 2018

[6] National Policy for Urban Street Vendors

[7] “Domestic Workers – NDWM,” accessed May 23, 2020, http://ndwm.org/domestic-workers/.

[8] “Govt Nod for 12-Hour Shifts in Factories Facing Labour Shortage | India News,The Indian Express,” accessed May 24, 2020, https://indianexpress.com/article/india/govt-nod-for-12-hour-shifts-in-factories-facing-labour-shortage-6397633/.

[9] “Overpopulated, Too Reliant On Agriculture, Rural India Can’t Absorb Reverse Migrants,” accessed May 24, 2020, https://www.indiaspend.com/overpopulated-too-reliant-on-agriculture-rural-india-cant-absorb-reverse-migrants/.

[10] “Relaxation of Labour Laws across States,” accessed May 20, 2020, https://www.prsindia.org/theprsblog/relaxation-labour-laws-across-states.

[11] Gautam Chikermane and Rishi Agrawal, “COVID19: Shivraj Singh Chouhan Initiates Reforms 2.0 in Madhya Pradesh,” ORF, accessed June 9, 2020, https://www.orfonline.org/expert-speak/covid19-shivraj-singh-chouhan-initiates-reforms-2-madhya-pradesh-65867/.

[12] “Relaxation of Labour Laws across States,” accessed May 20, 2020, https://www.prsindia.org/theprsblog/relaxation-labour-laws-across-states.

[13] Ibid

[14] Prashant K. Nanda, “Gujarat Offers 1,200-Day Labour Law Exemptions for New Industrial Investments,” Livemint, May 8, 2020, https://www.livemint.com/news/india/gujarat-offers-1-200-day-labour-law-exemptions-for-new-industrial-investments-11588959474848.html.

[15] “Relaxation of Labour Laws across States,” accessed May 20, 2020, https://www.prsindia.org/theprsblog/relaxation-labour-laws-across-states.

[16] “Explained: What Labour Law Changes by States Mean,” The Indian Express (blog), May 16, 2020, https://indianexpress.com/article/explained/what-labour-law-changes-mean-coronavirus-6403611/.

[17] “The Occupational Safety, Health and Working Conditions Code, 2019,” PRSIndia, July 23, 2019, https://www.prsindia.org/billtrack/occupational-safety-health-and-working-conditions-code-2019.

[18] “INTER-STATE MIGRANT WORKMEN | Chief Labour Commissioner,” accessed May 22, 2020, https://clc.gov.in/clc/acts-rules/inter-state-migrant-workmen.

[19] Ibid

[20] Brief Note on The OSH Code 2019 – 5 March 2020 – Swaniti Initiative

[21] Ibid

[22] “Chapter At A Glance,” PRSIndia, accessed May 25, 2020, https://www.prsindia.org/node/844922/chapters-at-a-glance.

[23] Sandra; Kring Rothboeck, “Promoting Transition towards Formalization: Selected Good Practices in Four Sectors,” Report, December 15, 2014, http://www.ilo.org/newdelhi/whatwedo/publications/WCMS_344607/lang–en/index.htm.

[24] “Report of the Working Group on Migration | Smartnet,” accessed May 23, 2020, https://smartnet.niua.org/content/b4f11a35-aa13-4f28-bd71-733ca66fd055.

[25] Ibid

[26] Sandra; Kring Rothboeck, “Promoting Transition towards Formalization: Selected Good Practices in Four Sectors,” Report, December 15, 2014, http://www.ilo.org/newdelhi/whatwedo/publications/WCMS_344607/lang–en/index.htm.

[27] Ibid

[28] Ibid

[29] Ibid

[30] Ibid

[31] Ibid

[32] Ibid

[33] Ibid

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Shubham Jain
Shubham Jain
1 year ago

Nice article

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Despite a brutal second wave with cases peaking in April-May 2021, India’s Gross Domestic Product (GDP) grew at a record pace of 20.1 percent in the April-June 2021 quarter compared to the corresponding period last year. The GDP, in absolute terms, stood at Rs 32.38 lakh crore (constant prices). This was actually lower by 9.2 percent than the numbers seen in the April-June quarter of 2019-20. In fact, as the figure below shows, the April-June 2021 GDP numbers are closer to the levels seen during the January-March 2017 quarter.

Source: MOSPI (Annual and Quarterly Estimates of GDP at constant prices, 2011-12 series)

While growth in the April-June 2021 quarter is promising and reflects recovery from the deep plunge seen in April-June 2020, comparisons are being drawn with the pre-Covid levels. 

But what are these pre-covid levels? Should numbers of a single quarter, say April-June 2019-20 be used as the benchmark, or an average growth seen in the previous few quarters be considered as a benchmark for comparison? 

An alternate strategy

We propose an alternative way through which, we compare the present Gross Value Added (GVA) numbers (in level terms) with the numbers obtained using simple univariate time-series forecasts. These forecasts are obtained by exploring the time-series properties of the variable of interest. In particular, these forecasts are arrived at using the Autoregressive Integrated Moving Average models (ARIMA models). ARIMA is a statistical analysis model that uses time-series data to better understand the facts and to predict future trends. 

This comparison helps in assessing how distant are the current GVA numbers from the levels which would have been achieved had there been no shock in the form of the COVID-19 pandemic.   

Since GDP includes taxes, we look at the activity-based variable after excluding the impact of taxes. The variable of interest, therefore, is the Gross Value Added (GVA). We use the GVA data available from June 2011 till December 2019 and extend it using the projections obtained from a univariate ARIMA model. As mentioned before, in this model previous observations are used to predict future values. Therefore, we have excluded the period post-December 2019 to ensure that the trend is not influenced by the COVID-19 shock. 

The figure below shows the raw data along with the projections for the subsequent six quarters (from March 2020 onwards) based on the ARIMA model. These projections present a picture of the GVA trends under normal circumstances, i.e. if the economy would not have been subjected to the COVID-19 shock.

Adjustment for seasonality 

An economy, over the long term, experiences a concept known as seasonality. These are seasonal fluctuations, movements, that recur with similar intensity in a given period (such as months) each year, thus showing a clear pattern of peaks or troughs over a sufficiently long time period. Broadly, seasonality arises from several calendar related events such as – weather-based factors: monsoon, winter or summer months, agricultural seasons: harvest or sowing season, administrative procedures: tax filings, financial year closure, working days, festivals: Diwali, Christmas, etc., institutional: Annual budgets or Fiscal year ending, social and cultural factors: Statutory holidays, etc.

Such seasonality needs to be adjusted to comprehend the underlying trend, cyclicality, and other movements for a better understanding (Pandey et. al, 2020). 

The quarterly GVA series shown above exhibits seasonality and therefore we seasonally adjust the extended GVA series (GVA values till December 2019 along with the forecasted values) and compare with the seasonally adjusted actual data post-December 2019.  

The difference between the series till December 2019 extended with time-series forecasts and actual series post-2019 (both adjusted for seasonality) would give an assessment of the shortfall in economic activity arising due to the COVID-19 shock. 

Shortfall due to COVID-19

The table below shows the differences between the estimates based on the time-series forecasting and the actual values. We present this exercise for the overall GVA as well as its components. The key highlights of the comparison exercise are as follows:

Table 1: Difference between the Actual values and Estimated values (Rs. Lakh Cr)

*Both Actual and Estimated Values are seasonally adjusted

1. In the January-March 2020 quarter, the difference between the forecasted (estimated) values and the actual values is small. This is due to the limited impact of the pandemic during this quarter. 

2. However, the difference widened to Rs 8.7 lakh crore in the April-June 2020 quarter. This was the period of the nationwide lockdown. As a result, the economic activity was adversely impacted. The major difference was seen in the contact-intensive trade, hotels, and transport sectors. Since agriculture was not impacted by the pandemic, the projected and the actual agricultural GVA is the same. 

3. With the gradual opening up from the July-September quarter, we see that the gap between our estimates and actual values is reduced. However, the financial sector continued to reel under the impact of the pandemic. While some improvement was seen in the GVA of the trade, hotels, and transport sectors in the July-September quarter, there still was a significant shortfall of Rs. 1.4 lakh crore.4. In the October-December 2020 and the January-March 2021 quarter, a distinct improvement is seen in the actual overall GVA numbers. The gap between the estimated and the actual values for the overall aggregate GVA narrowed to Rs 0.8 lakh crore and Rs. 0.3 lakh crore for Oct-Dec 2020 and Jan-Mar

2021 quarter respectively. Except for the trade, hotels, and transport sector, the gap was less than Rs 1 lakh crore for all the sub-sectors. 

5. But, the April-June 2021 quarter revealed that the gap has widened to the tune of Rs. 5.3 lakh crore. This shows that while the recovery was underway, the onset of the second wave and the consequent partial lockdowns pulled back the growth momentum to some extent. The sectoral variations are also worth noting. While agriculture, mining, and manufacturing showed stellar performance despite the second wave, the contact-based services sector (trade, hotels and transport) pulled down the growth. The construction sector also bore the brunt of the second wave.

The above exercise presents an alternative approach to assess the shortfall in GVA numbers due to the COVID-19 shock. There are sectoral variations: while agriculture posted a robust growth and the manufacturing sector was relatively less impacted, it is the contact-intensive sector that primarily got affected due to the shock. Our exercise shows that after the April-June 2020 quarter, the economic recovery was gaining momentum. However, the second wave led to a pause in the recovery process. 

Going forward, with a sustained pick-up in the pace of vaccinations, we should see economic recovery getting back on track. The high-frequency variables such as exports, PMI manufacturing and services, petroleum products consumption, electricity consumption, and GST collection, etc., also suggest a pick-up in economic activity since the beginning of the second quarter. 

The authors are Senior Fellow and Fellow respectively at the National Institute of Public Finance and Policy (NIPFP), New Delhi. Views are personal.

The anthropogenic forcing of greenhouse gases has turned out to be a dominant force propelling sea level rise. Sea levels in the 20th century have been rising at an average rate of 0.06m per decade.¹ The Indian subcontinent is highly vulnerable to threats arising from sea level rise given its demography. The country has a coastline that runs for 7,500 square kilometres. These coastal regions are home to about 170 million people.² Between 1996 and 2016, approximately 236 square kilometres of land was lost to coastal erosion placing people’s livelihoods in jeopardy. Based on a government report published in 2016, around 45.5% of India’s coastline has been affected by erosion of varying magnitudes.³ The coastal erosion problem is a complex effect of various natural processes working in the coastal zone and sometimes beyond it. According to recent scientific predictions, 36 million Indians are likely to be living in areas experiencing chronic flooding by 2100.⁴ Increasing climate-induced calamities and accelerating levels of erosion have called for intervention and support from the government in securing the livelihoods of coastal communities.  Existing policies in the country address displacement from rapid-onset disasters such as monsoons and cyclones under disaster reduction and rehabilitation policies. However, displacement due to slow-onset disasters such as coastal erosion are yet to find a place at the policy level. With the intensity and frequency of disasters increasing in the future, we require a foresighted national-level policy on managed retreat and adaptation in India. This paper analyses existing policies and suggests possible adaptation interventions that will help the nation deal better with the problem of coastal displacement. 

We realize that coastal erosion is an extensive and multi-dimensional problem for a vast country like ours. The Indian government has put in place policies, laws and committees to tackle climate change and climate-induced disasters. The main policy measures concerning coastal protection and management in India include the Disaster Management Act of 2005 that has a section dedicated to coastal protection and disaster management and the west coast policies to tackle coastal erosion. The Act provides for the establishment of several statutory bodies such as the National Disaster Management Authority, State Disaster Management Authorities and District Disaster Management Authorities. It also includes advisory committees, executive committees and sub-committees under the government. The Act lists out the action plan for governments during or post a rapid-onset disaster. It also puts together provisions that allow for the creation of relief funds and their usage during emergencies. The act is inadequate along several lines. The presence of numerous committees and the overlap of duties among authorities mentioned in the Act greatly reduces accountability. Further, the coordination among these bodies appears to be very cumbersome. Disasters cannot be effectively dealt with only through the government’s administrative setup. Even then the role of local authorities and communities in coastal management and protection has been greatly overlooked. The Indian Act also fails to recognize the need for identifying and using traditional knowledge and working together with NGOs.

Efforts are being made to counter the menace of coastal erosion and protect our coasts using both traditional approaches ( hard structures like Seawall, etc.) and the new, innovative soft measures like dune rehabilitation. Policies to curb coastal erosion on the west coast of the country have dealt with structural or hard measures such as the construction of seawalls, revetment, offshore breakwater, groynes/spurs and soft measures like offshore reefs and artificial headlands. Soft measures are usually more effective in the long run when compared to hard measures. Seawalls and other coastal engineering structures end up obstructing the littoral drift of sand and sediment, thus, causing erosion on the northern side and accretion on the southern side of the structure. In the end, they do not prevent erosion as they only transfer the problem further north of the east coast.⁵ The impact of these hard options on neighbouring coastlines create a situation where hard structures are then required in these new areas creating a vicious cycle. An example of such a spiralling effect is the seawall construction in Kerala  (a state government initiative to curb coastal erosion) and its impact on Karnataka’s coastline. The Kerala government has spent around 310 crores building seawalls along its coast.6 Of the 560 km coastline of Kerala, the state has constructed a seawall for 386 km. The government had sought funding assistance to wall the remaining 92 km and demanded INR 2.16 billion from the Centre. Seawalls along the coast of Kerala did help in preventing coastal erosion but as mentioned earlier the littoral drift was obstructed, accelerating erosion rates of the coastline along the state of Karnataka. Groynes suffer from a similar limitation. These man-made structures protruding into the oceans are known to cause accretion on the southern side and erosion on the northern side. Beach nourishment has proved attainable by methods of re-vegetation with temporary offshore breakwaters/artificial reefs. Artificial reefs provide shelter, food and other necessary elements for marine biodiversity to flourish. 

The west coast policies and the Disaster Management Act (2005) focus on mitigation measures mainly undertaken by the government thus alienating local communities from related coastal work. It is important to shift our focus from mitigation to adaptation. Intervention and policies for adaptation are extremely crucial given two main reasons. We cannot mitigate sea-level rise. Even if we drastically cut down emissions, experts concluded that global mean sea-level would rise at least 8 inches (0.2 meters) above 1992 levels by 2100. With high rates of emissions, sea-level rise would be much higher but was unlikely to exceed 6.6 feet higher than 1992 levels. Hence, it is more important to facilitate adaptation than mitigating impacts of sea-level rise. Adaptation policies focusing on alternative livelihoods, social security nets, preemptive retreat and social infrastructure will greatly enhance the resilience capacity of communities thereby enabling better response to a crisis. Existing policies in India address post-disaster management or displacement stemming from rapid-onset disasters but displacement due to slow-onset disasters such as coastal erosion is yet to find a place in Indian policy. Slow onset events are impacting lives and livelihoods leading to the weakening of a community’s resilience. It is important to identify vulnerable areas and build the capacity of local communities to efficiently manage future crises and prevent large scale life and material loss. The second reason comes from the unpredictability that haunts us. Climate change is complex because every system disturbance sets in motion positive and negative feedback. Interactions of various levels create unpredictable events and large scale destruction. The unpredictable nature of climate change and lag is a lesson to build resilience rather than focus on measures that only handle rehabilitation post-disaster. 

Shining a ray of hope on this oncoming crisis is the National Centre for Sustainable Coastal Management (NCSCM), Ministry of Environment, Forest and Climate Change, focusing on better protection, conservation, rehabilitation, management and policy design of the coast. NCSCM aims to support integrated management of coastal and marine environments for livelihood security, sustainable development and hazard risk management by enhancing knowledge, research and advisory support, partnerships and network and coastal community interface. NCSCM has the resources for data monitoring and the mission has started on a good note by tackling the issue of defining High Tide Lines (HTL) and putting forward revised regulations for keeping a check on polluting industries/activities and construction activity along critical coastal areas. Though the vision of this institutional regime is applaudable, little has been done on the ground. The notification though uses terminologies like sustainable development, sustainable livelihood, ecologically and culturally sensitive coastal resources, fails to detail the implementation strategies for each of them.⁷ The mission stands great potential in developing into the institutional setup that India needs in developing and implementing adaptation interventions. However, this is conditional on its alignment with the Millennium Development Goals on environmental sustainability and its focus on the long term impacts of all developmental work in the coastal zones of the country. 

Coastal communities are directly impacted by climate impacts causing declining productivity of fisheries and cultivation lands along the coasts. Existing measures do not help communities in dealing with economic losses. Understanding threats to the economic and social well being of the communities underlines the need for adaptation policies that will help reduce the climate vulnerability of communities and enhance their ability to flexibly adapt to changing conditions. Policies which create alternate livelihood opportunities, social infrastructure, planned retreat, and community involved coastal management need to find a place in India’s climate legislations.

The views expressed in the post are those of the author and in no way reflect those of the ISPP Policy Review or the Indian School of Public Policy. Images via open source.

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How would you define poverty? There are several definitions and each one of them helps us imagine poverty in different ways. One way to define poverty is the lack of resources required to lead a basic life. By this definition, as long as your basic needs of food, clothing and shelter are met, you are not in poverty. The United Nations defines poverty as the “inability of having choices and opportunities, a violation of human dignity.” A more quantitative definition from the World Bank defines poverty as living under $1.90 (Purchasing Power Parity) per day. This is the international poverty line. Amartya Sen’s capability approach describes poverty as “a failure to achieve certain minimum capabilities.” This means that poverty is not seen purely as an issue of economic development but includes measures of human rights and access.

It does not take long to realize that poverty has many faces. In a recent project called One Hundred Homes, researchers conducted a visual survey of India to examine what a household falling under a particular income or consumption level as per a standard government survey (IHDS, NSS) would look like in real life. The result was a collection of hundred visual essays showcasing the living conditions of families to understand the connection between wealth and poverty visually. A key insight is that it is almost impossible to predict which household is wealthier just based on the appearance of living conditions. We cannot simply look at assets owned to determine who is better off or worse off. Surveys usually measure poverty through consumption spending in a given period of time on a fixed category of things. This does not account for the value of the house, credit borrowed, subsidies received from the government, etc. In addition to this, the poverty line in itself is based on several assumptions such as calorie requirements and ignores indicators of education, health and wellbeing.

Figure 1: A snapshot from the One Hundred Homes project website (Source: One Hundred Homes)

Poverty, through its appearance and measurement, presents several puzzles. Some obvious facts about poverty may not be true. On the other hand, results from experiments to understand the lives of the poor may be counterintuitive.

For example, one knows about the vicious nature of poverty. But why do the poor remain poor? Do bad decisions cause poverty or does poverty cause people to make bad decisions? Sendhil Mullainathan and other researchers ran a series of experiments to understand how scarcity affects cognitive capability and decision making. For an illustration of how poverty affects thinking, they asked people to memorize a list of words similar to the one below in 20 seconds and asked them to recall as many as they can from memory.

Figure 2: List used by researchers in the experiment to determine effects of poverty on cognitive capacity (Source: Chicago Booth Review)

What’s interesting is that, although “money” was not on the list, people with low income are more likely to remember seeing money in the list than people with high income because words on the list are related to financial concerns. This portrays that money occupies a significant part of the cognitive load of the poor. Further, experiments also depict that people under financial stress perform poorly in cognitive tests such as Raven’s matrices and cognitive control tasks compared to those who are not. This implies that poverty in itself impairs sound cognitive performance. 

A more realistic experiment conducted on Indian sugarcane farmers tested their cognitive abilities pre-harvest and post-harvest. Sugarcane has one harvest cycle per year. Before the harvest, farmers are relatively poor and uncertain about their finances whereas post-harvest, the same farmer is relatively rich. A random sample of small farmers was tested pre- and post-harvest on Raven’s matrices, a measure of fluid intelligence and the traditional Stroop task, which gauges cognitive control. Controlling for other fixed effects such as nutrition, work effort, etc., the experiment showed that being poor reduces cognitive capacity. Farmers post-harvest performed better on cognitive tests compared to pre-harvest.

This research suggests that the poor are less capable not because of their inherent capabilities but because poverty in itself imposes a cognitive load. Imagine if you were to make a decision after staying awake an entire night. Would you be able to make the right decision? The effect of poverty on cognitive function is comparable to losing a full night’s sleep. The poor constantly make important decisions of education, health, consumption and saving in this state of mind. The implication of this is that policymakers need to be aware of the psychological nature and cognitive tax of poverty. Welfare programs with complex ordeals aimed at better targeting may be counterproductive. The timing of welfare policies is also critical. Cognitive aids such as nudge can go a long way in offsetting the effect of poverty on cognition.

This also begs the question, why do the poor have to make more decisions than the rich with regards to essential utilities like savings, healthcare, insurance and so on? A poor person, who may not have access to banking services or formal employment, must decide to save for his or her retirement. On the other hand, the decision is already made by the organization of a rich person through the provident fund. The same goes for insurance, healthcare and even water. A rich person in an urban area can simply open a tap in the comfort of their home and clean water flows out, whereas a poor person has to choose where to procure water from, uncertain of whether it is clean or not, and decide what to do if it is not clean. Poverty impedes cognitive function and affects decision making. Above this, the poor make a significantly greater number of decisions amidst a lot of uncertainty. Both these facts are detrimental to leading a good life. Human beings have bounded rationality and self-control problems, hence fewer the decisions, the better. This is the reason why in developed countries like the United States, essential utilities such as insurance, savings are left to institutions and not the individual. If a poor person has to consistently choose to save every month for his or her retirement, they are bound to run into self-control problems. It is unfortunate that despite evidence on this, policymakers have made little effort to minimize the decisions taken by the poor. What, if not this, is an indication of inequality?

Another puzzle is that of risk and entrepreneurship. More number of poor people are self-employed and own businesses compared to the rich. Entrepreneurship involves risk and uncertainty. If the rich are better at managing risk due to their endowments and safety net, why is it that more poor people start businesses than the rich? This is the mystery of self-employment. That a person for whom it is easier is less likely to do it whereas a person for whom it is harder is more likely to do it.

A possible explanation for this is that the poor are natural entrepreneurs. But the question to ask is whether poor people are creative or does poverty force them to find creative ways of earning their income? This is not to say that poor people cannot be creative. An average poor person is probably as creative as the average rich person. However, there is an overrepresentation of entrepreneurs among the poor. The poor are entrepreneurs not because they want to be, but because they have to be. 

Economics teaches us that people are generally risk-averse. So, they must prefer a salaried job to starting a business. A survey question asking parents regarding their ambitions for their children confirms this belief. The results from rural Udaipur and around the world are that most poor parents want their children to be in a salaried job. Only 7% of parents want their children to run businesses. For the poor, a job is a means to achieve stability and move up the social ladder. However, public policy does not seem to understand this. The policy view is that poor people are more entrepreneurial in nature and several policies have been created to encourage the poor to turn into entrepreneurs. Rural areas have the RSETIs (Rural Self Employment Training Institutes), which focus on providing training for rural youth on entrepreneurial development. There is no such equivalent for urban areas. However, for the urban poor specifically, there is a Self-Employment Programme (SEP) under the NULM, which provides financial assistance to set up self-employment ventures.

From my field experiences of visiting and working with SHGs (self-help groups) of Maharashtra and Madhya Pradesh, the thrust has been for SHGs to begin businesses. NABARD, NRLM and civil society are invested in this idea, providing loans and market support. It is likely that most of the SHGs are not even interested in business but have to involve themselves in order to take advantage of the credit and market support. Even in the recent COVID relief package by the Government of India, the specific relief measure for SHGs was to increase the collateral-free loan limit to Rs. 20 lakh so as to meet their business needs. This differential focus on self-employment for the poor is concerning. 

Additionally, the traditional investment theory of risk-reward ratio does not work for the poor because of capital and technological constraints. Most businesses owned by poor people are not profitable. Different occupations are filled with different amounts of risk and uncertainty. Agriculture is one of the riskiest, yet least profitable occupations. Agriculture is subject to whether uncertainty, price uncertainty, market uncertainty, credit uncertainty, government uncertainty and what not! Hence, a poor farmer is not the same as a poor plumber and public policy needs to give attention to this fact. A reason why agriculture is one of the most intervened sectors by the government is not just populism but also the level of uncertainty tagged with the occupation.

There are many more such puzzles in the world of poverty. To unearth these puzzles, we need to rigorously test the traditional theories we hold about the poor. In a developing world, everybody is undergoing a transformation, with the poor transforming at a faster rate at the margin. Thus, we not only need to ask the right questions but also revisit the existing answers to update our understanding of poverty. Each piece of evidence gives us insights into the lives of the poor and incorporating these insights helps us create better poverty alleviation policies.

The views expressed in the post are those of the author and in no way reflect those of the ISPP Policy Review or the Indian School of Public Policy. Images via open source.