The Narendra Modi-led NDA government had in November 2016 announced demonetisation of specified high value banknotes; GST, a comprehensive indirect tax that subsumed various central and state levies, came into effect in July 2017.
While the government is drawing flak for high unemployment, the last four years saw an unprecedented momentum in formalisation of jobs, a process that enhances the legally enforceable rights of workers as well as their prestige, emoluments and social protection.
All’s not been bad with demonetisation and goods and services tax (GST), after all. These two steps by the Modi government 1.0 have played a big role in the formalisation of jobs — cumulatively over 28% of 7.06 million jobs formalised between 2015 and 2018 were due to them, according to a study commissioned by Indian Staffing Federation (ISF).
Only about 16% of India’s estimated 500 million workforce is in the formal sector. The rest are in the informal sector. The Narendra Modi-led NDA government had in November 2016 announced demonetisation of specified high value banknotes; GST, a comprehensive indirect tax that subsumed various central and state levies, came into effect in July 2017. The government has drawn flak for the haste with which both were implemented and the consequent problems faced by large sections of industry.
The report, “Impact of Key Reforms on Job Formalisation and Flexi Staffing”, says that a total of 1.08 million jobs were formalised with the introduction of GST. Note ban contributed around 0.87 million into the formalisation of jobs. Reform initiatives in Employees’ Provident Fund (EPF) and Employees’ State Insurance (ESI) contributed the most in the formalisation of jobs at 1.28 million and 1.25 million, respectively, during 2015-2018. Initiatives like Pradhan Mantri Rojgar Protsahan Yojana (PMRPY), under which the government shouldered employers’ burden for mandatory EPF contribution for an employee earning up to Rs 15,000 a month, paid off. The scheme stands withdrawn now.
Braving industry’s opposition, the government had in 2016 raised monthly wage threshold for enrollment under ESIC at Rs 21,000 from Rs 15,000 earlier. The introduction of fixed-term employment, initially for the textile and garment sectors and later for all sectors, also contributed significantly.
The study further said around 11.03 million jobs will be formalised in 2018-2021 as a result of current and imminent policies and reforms. Reforms in EPF and ESIC will drive formalisation of jobs the most. The report revealed that flexi staffing industry has witnessed acceleration due to government’s reforms since 2016. It said flexi workforce is expected to go up to 6.1 million by 20121 from 4.1 million in 2019. In 2015 and in 2018, the number of flexi workforce in the country stood at 2.1 million and 3.3 million, respectively.