Covid-19: Govt should focus more on pension/old-age benefits for workers

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June 15, 2020 6:15 AM

Industry will have to offer facilities like housing for workers, govt too should focus more on pension/old-age benefits.

Naturally, any GDP growth that is dependent on these industries—including the consumption demand from those employed in them—will take a big hit.

Even the optimists projecting a strong post-pandemic FY22 growth are clear that several things won’t be the same for quite some time; the numbers going to restaurants to eat or flying or taking distant holidays, for instance, will come down dramatically. Naturally, any GDP growth that is dependent on these industries—including the consumption demand from those employed in them—will take a big hit.

What is more important, as ex-TCS vice-chairman S Ramadorai points out (, there will be a new normal for most of India Inc. The old model of low-cost workers living cheek-by-jowl in cramped conditions as in Dharavi and other slums in Mumbai, for instance, is likely to be history now. Certainly, workers with few jobs in the places they come from will probably come back; but many will not, given the trauma they have been through. Ramadorai talks of the need to build accommodation for them, and even relocating part of the work closer to where they live.

This is going to be costly, and will be done over a few years, but just as companies manufacturing out of China are looking to countries like Vietnam and even India to diversify, Ramadorai argues, India Inc will need to de-risk itself; producing part of their output nearer where workers live will be part of this. Building accommodation will also be costly, though it is not necessary that each industry has to build this; there can be shared facilities, it can be rented, it can be created by the state.

But, as costs rise and the number of workers get restricted, India Inc will need to get more productivity out of them. That, in turn, means greater automation in some cases and reskilling workers; a lot of this, as it happens, may need to be done in rural areas where the workers are. Delivering training online, again, will require a totally different mindset and, in all probability, the government will need to pay for this in the way it spends on MGNREGA right now. In other words, we are looking at a near-complete reimagining of production and service delivery over the next few years.

While India Inc needs to prepare for this transformation—that it has so quickly embraced work-from-home is testimony to how fast it can adapt—the government too needs to completely retool itself. Mindless policies such as the one that insisted employers mandatorily needed to pay wages even if they had no revenue streams during the lockdown—fortunately, the Supreme Court struck it down—can no longer be tolerated. Indeed, if policies are not in keeping with what industry wants (especially global firms), they will gladly move somewhere else; just see how hard firms like Apple have negotiated with the government before committing to moving some part of their mobile phone assembly operations here.

In the case of education, where India has huge gaps, online is clearly the way forward. While online classes are being tried in even schools, we saw that, till recently, even accredited universities—who are trusted to deliver quality offline education—were not allowed to use online methods. It is only now, as part of the post-pandemic response that finance minister Nirmala Sitharaman announced that online options would be allowed for everyone. How long the government will take before it reverses direction is not clear, but keep in mind that while the Institutions of Eminence scheme was to free up universities, they never got freed and this is what resulted in some of them slipping in global ranks recently.

Online tools, similarly, are critical to fix the gaps in India’s delivery of medical services. In this case, too, a pandemic-struck government has allowed telephonic consultations with doctors for now, this needs to become normal practice, but with more diagnostic tools. A good beginning has been made in the ‘contactless’ facilities that have been set up in Mumbai to deal with Covid patients; doctors are keeping patient visits to a minimum even within the facilities, and are monitoring them remotely through oximeters, BP instruments that are hooked on to monitors, etc.
We need even more. As leading health practitioners like Narayana Hrudayalaya’s Devi Shetty and Srinath Reddy (of Public Health Foundation of India) argue (, India’s bigger problem is ‘over-medicalisation’. Nurses in India, for instance, spend the most time looking after patients, but aren’t even allowed to prescribe painkillers whereas, as Shetty puts it, “even in litigation-happy US, 67% of anaesthesia is given by nurses, not doctors”. Reddy emphasises the need to train nurses to become ‘nurse practitioners’ and ‘nurse anaesthetists’.

There are, Shetty says, 35 medical colleges in Cuba training doctors for the US in just 50,000 square feet of space. The over-engineered medical colleges in India, by contrast, require 140 teachers to train 100 students! In a report for the Planning Commission in 2011, Reddy had recommended setting up of nursing schools in under-served states, and linking medical colleges to district hospitals to dramatically lower costs of medical colleges, and ensure greater supply of doctors in rural areas.

With joblessness going to be a recurring feature now, government spending also needs to reorient itself. Gautam Bhardwaj and Sanjay Jain (, for instance, argued that a well-executed pension scheme for the unorganised sector workers would have stopped the migrant exodus. A toolkit ( Bhardwaj has helps understand how this works. Assume a worker saves Rs 20 per day from the age of 18 and his contribution rises by 5% a year to adjust for a 5% inflation; the government makes a Rs 5,000 per year contribution for five years. This will give the worker a corpus of over Rs 20 lakh at the age of 60; and that, in turn, gives a monthly pension of Rs 14,760 in the first year, rising to Rs 29,222 at the age of 75, assuming a 5% annual pension indexation as well.

Allowing pandemic-struck workers to withdraw part of this, Bhardwaj argued, could have allowed them to stay on in cities instead of rushing back home. You can change assumptions—a Rs 30 per day saving takes the retirement corpus to nearly Rs 30 lakh—to judge the impact of various options. Such a scheme, as it happens, was actually tried and, under the UPA, an annual co-contribution by the government was announced. For whatever reason, the scheme never took off as the government never really pushed it. But now, with more of the population getting older, it is time the government started spending money for old-age pensions; indeed, unemployment insurance can also be built into the model. In a new India, we need a new paradigm. For all participants.
Twtter: @thesuniljain

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