Focus on creating more job opportunities for weaker sections

Updated: Feb 7 2002, 05:30am hrs
Economic reforms aim at opening up of the economy to more intensified competition leading to production of goods and services of better quality and at lower prices and thus improve the competitive edge of the country in the global market. Implied in this is the requirement to move towards merit and efficiency as a sole criterion in all decision making. In India, most activities have grown over the years based on support systems—financial incentives, fiscal incentives, reservations based on geographical areas or particular sectors of the economy or in appointment, etc. Thus an upbridgement of these support systems and lessening of rigidities becomes an essential requirement for ushering in increased competition.

In the process of opening up, those with capital or access to capital or with the necessary educational background, training and skills are able to participate in it and benefit considerably. Usually this class of people may come from the upper four, five or six income deciles of the population. While those in the middle income deciles may benefit by the trickle-down effort (for instance, if the IT industry prospers the increased demand for office and residential accommodation would lead to large number of skilled, semi-skilled and unskilled construction workers benefiting in the bargain) the upbridgement of the support systems would seriously affect the interests of the people in the lower four or five income deciles.

Another complicating factor is the ongoing processes of modernisation, enforcement of environment regulations, etc. As the construction industry is modernised, the number of semi-skilled and unskilled workers employed inhouse construction, road construction or bridge construction at the site goes down drastically. The classic example is the construction of overbridges where most of the work is now done by highly skilled workers professionals in a far off factory and only minimum number of semi-skilled or unskilled workers are sent at the actual work site, whereas two decades ago, at least, thousands of workers would have taken, at least, 5 years to complete.

When use of plastic bags was banned in Mumbai on environmental considerations, the newspapers reported that about two lakh workers who were engaged in manufacturing such bags in the small and tiny units were thrown out of employment., When last year, the courts in Chennai passed orders that pavements should be available for pedestrians in certain areas the number of vendors who were using the pavement for selling various items, and who had to be evicted, was reported to be more than one lakh.

While each of these changes is perhaps justified, the fact remains that it results in large number of people who are gainfully employed in these activities and without government subsidies or support at that, being thrown out of employment and being made to seek alternative employment avenues. The availability of such alternative employment opportunities thus becomes important, if such persons are not to become an added burden to the society and to government.

The third complicating factor is the gradual and sharp reduction in investment in rural areas. This has come down from about 4.1 per cent in 1979-80 to about only 1.1 per cent now. As a result, while the contribution of the primary sector—agriculture, fisheries, mining, etc—has come down from over 60% of GDP at the time of independence to about 25% now, the proportion of people in the rural areas dependent upon this sector for their living is still quite large, at over 65%, with a good proportion of them being below the poverty line and not having access even to minimum levels of decent living.

All the three factors taken together, the opening up, the process of modernisation, etc, and reduced investment in rural areas and agriculture do definitely and adversely affect the employment opportunities for those in the bottom four or five income deciles. At the same time, the first two factors do tend to enhance the employment prospects and that too in lucrative manner for those in the top four, five or six income deciles, provided the growth in the secondary and tertiary sectors is not held back by poor quality infrastructure or restrictive government regulations.

The budget must, therefore, consciously focus on improving the quality of life particularly for the weaker sections and on increasing employment opportunities sharply either by direct government investment or through creating a favourable climate for the people in the lower five or six income deciles. The budget should also equally focus on bridging the infrastructure gaps and creating a more favourable climate for faster development of the secondary or tertiary sectors where employment opportunities for those who are highly endowed, skilled or qualified could be maximised. Towards this end some suggestions are set out in the succeeding paragraphs.

A full-fledged programme that guarantees manual wage employment to all adults who seek it in rural areas needs to be put in place. The “guarantee” can be for an average of five days of work in a month or for 60 days in a year, in works primarily relating to improving the productivity of land, like soil conservation, catchment area schemes, desilting of irrigation channels and tanks, greening of areas, etc, provision of basic infrastructure and roads in villages can also be included if the wage component in such works is high, say at least 60-70%. The wage level has to be below the prevailing market rate in the local area so that this work does not compete with the normal agricultural and other activities in the rural areas but only serves as an employment of last resort.

With an estimated 200 million people (40 million families) living below the poverty line in rural areas, the number of adults seeking such employment, as a last resort, may be only 80 million. Assuming that some of those above the poverty level also seek such wage employment, the total number can be placed at 100 million. At an average wage rate of Rs 50 per day (This will vary from area to area and from place to place) the annual outgo on this programme could go up to Rs 30,000 crore (100 million x 60 days x Rs 50 per day). Apart from providing much-needed livelihood support for the weaker sections in the rural areas, this programme by itself would also help to double the investment in rural areas/agriculture from the present abysmally low level of 1.1% to about 2.5 per cent of GDP.

Over the years India has emerged as the world’s largest producer of milk (78 million tonnes) and second largest in fruits (46 million tonnes, i.e., 10% of world’s total production) and vegetables (73 million tonnes, i.e. 15% of world’s total production). In the case of milk, organisation of producers’ groups (cooperatives) and establishment of processing and marketing chains has enabled more than 10 million—mostly women in rural areas—to augment their earnings substantially. Unfortunately in the case of fruits and vegetables there is very little of processing or storage activity (post-harvest losses in fruits are placed at 30-40%) and virtually no marketing activities involving the primary small producers. Thus developments, on the lines of what has happened in the case of milk, could augment and stabilise incomes for a very large number — possibly upwards of 15-20 million of small growers in rural areas.

The stumbling block appears to be the Agricultural Marketing Regulation Acts under which wholesale trading activities are vested in marketing committees set up by state governments. This political stronghold has effectively prevented small growers, corporates and traders from participating in wholesale trade and resulted in non-development of post- harvest mechanisms, seeking of wider markets and establishment of retail net works. While ideally these Acts should be scrapped altogether, the second best option would be to persuade state governments to allow (possibly Karnataka has given such a special exemption in favour of NDDB recently) in a select few districts in each state, agencies like growers organisations, corporates or traders to participate in wholesale trading of foodgrains, fruits, vegetables, etc. with no restrictions either on setting up of processing or storage facilities or in marketing. The participation of small growers in the processing and marketing activities would also result in the growers gradually adjusting their production, both in terms of varieties and quality to suit market requirements. This initiative will not require any funds allocation—these other agencies could be able to come up with the necessary capital—through in deserving cases, free allocation of foodgrain could be provided by way of seed capital, as was done in the case of NDDB in the earlier years, where it was provided with the milk powder and butter oil received from EEC as gift.

Yet another area for increasing/stabilising employment opportunities, particularly for those in the middle income deciles, is tourism. The major emphasis in this sector has always been on foreign tourists. The number of foreign tourists is, however, yet to cross three million. What is more, a good proportion of foreign tourists are NRIs coming to India to visit friends and relatives! On the other hand with the easing of foreign exchange restrictions, the number of Indians going abroad is nearly four million per annum. Thus the possibility of international tourism resulting a net foreign exchange outgo in the near term cannot be ruled out.

On the other hand, domestic tourism has increased three-fold in the last 10 years from 65 million to 190 million. This has happened in spite of inadequate and relatively poor quality of facilities at most tourism centers. Leisure tourism, religious tourism, eco tourism, etc. have emerged as major factors behind this sharp increase in domestic tourism. All efforts should be taken to cash in on this trend by providing better/speedier access to, and better facilities at places of tourist interest. While putting up better facilities—good clean hotel facilities and restaurants, fleet of buses and other means of transport, good tourism operators and local guides can be left to private initiative, government’s role could be focused on facilitating/providing speedier and better communication links, rail links, better roads, etc, and basic infrastructure at the tourist spots. The last mentioned item should engage the special attention of the tourism departments and towards this end this department could be allowed to utilise for this purpose the proceeds from disinvestments of the ITDC chain, in addition to being provided with increased budgetary support. The levies on hotels and restaurants would also have to be brought down to more reasonable levels. Government should move towards the role of a facilitator, instead of functioning as a controller.