How Many Governments Does it Take to Fix a Light Bulb?

In a series of surveys conducted over the last five years, the Lok Foundation and the Centre for Monitoring the Indian economy have been attempting to understand the attitudes that the Indian people hold from everything from jeans to caste and privatisation. Some interesting and counterintuitive attitudes have come up, pointing to a need for policymakers to re-prioritise the problems they aim to tackle, and re-evaluate possible solutions.

(This is the first in a series of blog posts in which I will aim to unpack some of these attitudes).

Privatisation, especially for key utilities, seems to be catching on – with three cities in Maharashtra announcing earlier this year that they will privatise power supplies. Consumers, though, are likely to be less than overjoyed. Here are results from a January 2016 survey on a nationwide sample of 158,624 households:

 

Two interesting takeaways: on average, a whopping 65% of Indians prefer that the Government provide electricity – and the richer they are, the more likely they are to say so. I suspected that this may be due to the fact that richer Indians tend to be urban and are thus used to larger amounts of affordable electricity with relatively few interruptions. It turned out that this was indeed the case. Here are responses for urban Indians:

And electricity is hardly an exception: the exact same pattern appears in responses to the question of who should provide piped water. But note that poor and middle-class respondents are around 3% less optimistic about the government in this question:

Why is there such a high degree of trust for the government? Here’s my theory: perhaps the State is perceived as a paternalistic and essentially benevolent (if not exactly efficient) institution, thanks to its decent track record in expanding the provision of basic services. And if a government isn’t able to provide affordable utilities, it can always be replaced by one that will (long-term effects be damned!) On the other hand, Indians who are more exposed to government inefficiencies – especially rural Indians – prefer that the private sector take over instead. This may not necessarily reflect an actual awareness of how the private sector operates, but rather a case of “if A couldn’t provide it, and we voted them out in favour of B, and they couldn’t do it either, maybe C will.”

Not convinced? Check out this article that I wrote a while back. Next week, I’ll look at attitudes towards government jobs to support the case that the “government” is seen as a magic wand which will solve India’s knottiest problems despite its patchy record at actually doing so.

UDAN May Come Crashing Down

The government’s low cost, regional connectivity scheme is facing massive turbulence on route (Do excuse the terrible airline puns). Though it initially led to the development of a few airports and the introduction of new routes, three out of the four airline carriers relying on UDAN are set to shut shop.

Except TruJet, the other three regional airlines – Zoom Air, Air Deccan, and  Air Odisha – are in a terrible financial state. While Zoom Air has not flown a single passenger since July, Air Deccan and Air Odisha have managed 3,000 and 1,000 passengers, respectively, in these four months. This is despite the government providing viability gap funding – a fancy term for subsidising low fares.

Unfortunately, the seeds of destruction were sown in 2016 itself, when the scheme was announced and the 4 companies started operations. Since established commercial airlines deemed it commercially unviable to fly on the routes that were proposed by the government, UDAN tried to bring in newer airlines. A company with paid up capital of Rs 5 crore could apply for a regional airline permit. Further sops followed- airport charges and taxes on fuel would be waived off and the government would even pay the airlines to sell half of the seats at Rs 2,500. The 4 airlines in question were enticed by this offer and decided to take up on the offer.

These regional airlines were quite aggressive when bidding for routes. Air Deccan and Air Odisha bagged 84 routes- 60 percent of those on offer. However, just one year later, these airlines are operating in only 10 out of the 84 routes. Basically, though it was easy to enter the sector, operating and sustaining business in it was really hard. The ecosystem was just not conducive.

This excellent piece in Business Standard by Arindam Majumdar explains why the scheme failed for the regional airlines:

Start-up airline operators in India, without any credible background, pay around 10 months of lease as a security deposit. Then the aircraft remains grounded for at least 2 more months waiting for clearance from DGCA and other regulators.

ZoomAir had to wait 5 months for the required license and lost out 6 crores in the process. Also, as the government had put a deadline for registering under the scheme, the airlines did not have the required time to plan the routes and choice of aircrafts. They bought small aircrafts (19 seaters), though it is much more expensive to run. Add to this the problem of finding pilots who are trained to fly these outdated smaller aircrafts and the entire thing is an operational mess.

The smaller the plane, the more expensive it is to operate. Cost of pilot, crew — everything remains the same. If you divide that over a lower number of seats, it becomes more expensive.Without pilots and spare parts planes are frequently grounded leading to high cancellation. Data from aviation regulator DGCA shows that the two airlines had an average cancellation rate over 50 percent since starting operations.

Then, there was the problem of infrastructure. Large airports in the metros did not want to waste precious real estate on the small regional flights and the airports in rural areas did not have the adequate infrastructure to be functional, even though they were inaugurated with pomp and show.

But electoral compulsion meant that the first flight could not wait. After all, an airport gives a government bragging rights in election season.

So, Bastar Airport in Chattisgarh was inaugurated by PM Modi in June. Nothing like getting air connectivity to a Maoist hit area in a poll bound state. Except that the airport was not ready for a landing in monsoon. Bastar is a VFR (Visual Flight Approach) airport meaning if visibility drops below 5,000 metre, landing is cancelled. “We used to prepare every day for take-off from Raipur and then cancel it as Bastar was not ready for landing,” said an Air Odisha executive. Then the aircraft remained grounded for maintenance which meant more cancellations. “Imagine the loss of revenue and public confidence in the service”.

Since July, the airline has cancelled flight for at least 30 days. It flew only 45 passenger in entire July- that’s barely one per day.

The entire scheme seems to be in shambles for the regional carriers. Some of the big carriers who have the ability to scale and can take advantage of the scheme are doing well though. However, they will still not fly on all the routes that the government wants them.

Cities and their names

We, the people of India, have been in a flux over the recent proposals being made to change the name of our beloved cities based on their historical or religious past. There are various sides and nuances to the conversation. In the past decades, the names of the cities were changed either to reclaim the names they had before the colonial rule or based on the linguistic preference of the local community. The argument against the recent change of names is that it has religious connotations and is biased towards one majority community’s preference. Although an interesting conversation, as someone who has been studying urban governance for half a decade now, I wonder how does it help the cities.

I have a proposal. Let’s allow the person who grants the largest amount to the city municipal corporation to name the city. This would not only make the process immune to the religious and linguistic impositions but would help the cash-strapped urban local bodies raise money to provide better public service. For instance, if a rich businessperson can afford to pay for it, she should have the option to rename one of our metropolises to her parent’s name. This would be a classic win-win situation.  

The municipal corporations that have been highly reliant on union and state governments to make the ends meet would gain significantly from the grants for a small price of changing the city’s name. The grants would have a provision for the grantor to provide a pre-defined amount to cover for the administrative costs that may be incurred in the process of changing the name. While the city would make financial gains, the grantor would be able to give one of the most significant forms of homage to an individual or an institution of their choice. This won’t be very different from the schools and institutions being renamed based on the wishes of the grantors.

To keep the cost of the transactions to a minimal, cities can restrict bidding to once every 25 years. This way the cities can plan large scale expenditures based on when the next grant would be flowing in. Of course, the large-scale expenditure can range from building a statue or creating a robust public health system. The final decision will be with the city municipal corporation or the state government, that oversees most of the significant urban functions. I believe this proposal would be appealing to all sides as it caters to none and the final winners would be the real underdogs, the cities.

Consent by Default

Trello, the project management app, updated its terms of service recently. This is the notification it used to convey the change to its users:

We’ve replaced the Trello Terms of Service with the Atlassian Cloud Terms of Service. Learn more about the changes here.

By clicking “I Agree” or otherwise continuing to use Trello, you agree to these new terms. If you don’t want to agree to the new terms, you may delete your Trello account. [emphasis supplied]

The highlighted portion assumes consent by default. This is an admittedly loose usage of the term consent because it is questionable if what is being assumed here can even be called consent. For example, would such language be valid if the draft Personal Data Protection Bill, 2018 were to be in effect in its current form? The Bill says that for processing of personal data based on consent to be valid, the consent must have five features. It must be free, informed, specific, clear, and capable of being withdrawn. Are these features present in the language used? The answer is no.

Would this be covered under any of the other grounds for processing data that do not require consent under Chapter III of the Bill? The answer is no again. Besides, a company’s claim of relying on a different ground for processing will be undermined by the fact that they are also providing users with the option of providing their consent. A larger question that needs to be asked here is how often should an individual be required to provide her consent after she is already subscribed to a product or service.

For now, the clumsy framing of the highlighted language might land a company using it in a tricky situation when the law comes into effect. This only goes to show that the data protection landscape is still hazy and much care and foresight will be required when drafting the legalese to govern it.

India’s Defence Production Optimisation Problem

The Caravan has an excellent in-depth story on the Rafale controversy. Beyond the specifics of the current controversy, the investigation throws light on the problems in defence production that continue to haunt India’s strategic ambitions.

On the face of it, defence production suffers from an acute case of what I had referred to earlier as hyper multi-objective optimisation. My argument was that the reason some government policies in India fail is because they try to optimise several objectives simultaneously, ultimately creating a solution that meets none of the objectives.

Now defence procurement is essentially an oligopsony i.e. it is a market where only a few buyers exists — only a few nation-states in the world have the financial muscle to buy 10 submarines or 100 multirole aircraft for example. My argument is that this oligopsony makes the optimisation problem even worse. The government believes that because it has more weight in the market, it has the luxury of optimising many more objectives in the process.

Let us look at what the government is optimising when it sets out to purchase defence equipment today.

  1. defence preparedness: primarily determined by the end users i.e. the armed forces
  2. costs: both explicit and opportunity costs
  3. strategic value: every defence purchase from foreign players raises the question that should we buy from existing trade partners or not
  4. creating an indigenous defence-industrial complex: this is further divided into two sub-goals. One is sustaining the ailing government-owned public sector companies. The second one is spurring investment from private Indian entities.

Now, even without any prior background, optimising all these objectives appears to be a herculean task. But even while India’s procurement processes were notoriously lethargic, new objectives were being added. The fourth objective was explicitly added  through an offset policy in 2005 and more recently through a strategic partnership model in 2016. And quite naturally, it is this fourth objective that has become the main sticking point in the Rafale controversy.

So with the government’s flagship reform failing, we are back to the starting point: what should be the mechanism to address India’s defence requirements? What principles should govern procurement and purchase?

One of the ways to resolve hyper multi-objective dilemmas is withdrawal. The government could let go of the aim to indigenise when it is looking to make a specific defence purchase. Get rid of the offsets policy altogether for a few years. The indigenisation problem should then be targeted at a later point of time. This is just one method. There could be other variations of choosing objectives that can work better but what is clear is that the current method needs a complete and urgent shakeup.

 

 

Employment Elasticity of Growth in India

Recently, there have been a spate of articles on employment elasticity of income in Indian newspapers and how important that is to job creation in India. The Hindustan Times has a series on India’s job challenge, Mint’s editorial discussed quality of jobs created, and the Economic Times cautions against India mimicking China’s strategy in creating jobs.

But what exactly is employment elasticity? And why is it important?

According to an RBI working paper by Sangita Misra and Anoop K. Suresh, employment elasticity is a measure of the percentage change in employment associated with a 1 percentage point change in economic growth. It indicates the ability of an economy to generate employment opportunities for its population as a per cent of its growth or developmentprocess.

An employment elasticity of 1 denotes that employment grows at the same rate as economic growth. Elasticity of 0 denotes that employment does not grow at all, regardless of economic growth. Negative employment elasticity denotes that employment shrinks as the economy grows.

This is crucial as it is commonly believed that economic growth alone will increase employment. However, as we examine the data, we see that despite India’s impressive economic growth, employment has not grown alongside. Ideally we would like to see an employment elasticity >=1, but, from the Misra and Suresh paper, we see that employment elasticity in India declined from 0.44 in the first half of the decade 1999–2000 to 2004–05, to as low as 0.01 during second half of the decade 2004–05 to 2009–10.

YearsEmployment Elasticity
1999-2000 to 2004-050.50
2004-05 to 2009-100.01
2009-10 to 2011-120.18

Similar trends have been witnessed at the sectoral level. In agriculture and manufacturing, employment elasticity between 2004-05 and 2009-10 has been negative.

Sector1999-2000 to 2004-052004-05 to 2009-102009-10 to 2011-122004-05 to 2011-121999-2000 to 2011-12
Agriculture1.09-0.39-0.44-0.41-0.08
Manufacturing0.80-0.271.740.100.33
Mining & quarrying0.870.20-1.76-0.140.34
Utilities0.67-0.277.601.421.17
Construction0.881.63-0.251.121.01
Trade, transport, hotels0.45-0.020.540.130.25
Finance, real estate1.400.34-2.32-0.450.06
Other services0.46-0.112.960.480.47
All sectors0.500.010.170.060.20

The negative employment elasticity in agriculture indicates movement of people out of agriculture to other sectors where wage rates are higher. This migration of surplus workers to other sectors for productive and gainful employment is necessary for inclusive growth. However, the negative employment elasticity in manufacturing sector was a cause of concern particularly when the sector has achieved 6.8 per cent growth in output during Eleventh Plan. It did bounce back during 2009-10 to 2011-12, but the average employment elasticity in manufacturing between 2004-05 and 2011-12 was still only 0.10.

 

References:

Misra, S., & Suresh, A. K. (2014). Estimating Employment Elasticity of Growth for the Indian Economy. Reserve Bank of India.

Planning Commission, India. (2013). Twelfth Five Year Plan, 2012-2017. Sage Publications, India.

The Opportunity Cost of Counter-terrorism

Today marks seventeen years since 9/11 happened. If terrorism is theatre, all its shows have been running full house since that fateful day in September 2001.

India has of course been dealing with the threat posed by terrorism long before 9/11. But that attack made the rest of the world take notice of the dangers posed by terrorism. In the US for example, new strategies were made, new intelligence organisations were setup, and armed forces were retrained for counter-terrorism in the aftermath of 9/11.

Similarly, India underwent a change to add teeth to its counter-terrorism strategy and the question that I want to focus on in this blog post is: at what cost have we achieved counter-terrorism effectiveness? Let me explain.

The cost of terrorism is a subject that’s been discussed in great detail. But lest we forget, a cost is incurred for countering terrorism as well. By cost here, I mean the economic cost and not merely the explicit accounting cost. Economic cost is the sum of accounting cos and opportunity cost. And the opportunity cost of a choice is the value of the opportunities lost (Cowen and Tabarrok). So, is the value of the opportunities lost by India in choosing to focus on counter-terrorism significant enough that we should lose our sleep on it?

To be sure, counter-terrorism requires spending money and deploying resources. At a macro-level, every resource spent by the government on counter-terrorism could’ve instead been used on something else. But because the threat of terrorism is so potent, it probably makes sense to incur the cost of letting other opportunities slip by. But is there any component of this opportunity cost that needs a relook?

I believe there is one component that needs some rethinking – the opportunity cost of getting R&AW involved in counter-terrorism. Because we probably will never have solid data to understand the resources diverted from R&AW to focus on counter-terrorism, my claim is only based on statements made by intelligence officers.

One such statement I came across was in a recently televised interview of two highly respected retired intelligence officers Tilak Devasher and Vikram Sood. At 10:25, Mr Devasher paraphrases from Mr Sood’s book The Unending Game, saying:

The focus is on terrorism and immediate actionable intelligence. What everybody is looking for is an instant coffee book report. So nobody is looking at the longer-term picture. What happens six months or six years down the road, where is that country headed, what are the vulnerabilities of that country which will affect us, those capabilities have been diminished.

Assuming this is how R&AW has actually transformed itself for countering terrorism, the opportunity cost is not at all trivial. This is because R&AW is a small organisation with limited resources at its disposal.  On the other hand its mandate is huge – it is perhaps the only Indian organisation that is tasked with collecting intelligence and conducting operations in other countries. If such an important organisation is disproportionately focused on counter-terrorism, it means that there is diminished focus on extremely critical questions such as: what will happen in China over the next six months? What should India’s stance be with respect to persecution in Xinjiang? How should India influence political events in Afghanistan? What will be the security implications of a water crisis in Pakistan?

This is a huge opportunity lost. Particularly so because terrorism is not just the only threat facing India. The conventional threats of an arrogant China and an irreconcilable Pakistani military-jihadi complex are just two others in a larger list of long-term threat vectors that India needs to be worried about. The US can afford to focus on counter-terrorism disproportionately because probably it really is the largest threat, given its geography and relative power. But India’s threat matrix looks very different and hence an assessment of opportunity costs of counter-terrorism is necessary.

PS: I suppose the same case of high opportunity cost applies to the Indian army. With its focus on countering terrorism in J&K, one needs to ask, what is the value of other opportunities being lost.

 

 

A Test with Imran Khan

If India wants to have a stable and constructive engagement with the Imran Khan government, it must temper its enthusiasm for a quick breaking of ice and totally avoid any attempt to secure a “big” breakthrough.

That’s because dealing with Pakistan is playing cricket simultaneously against two distinct teams on the other side, each of which has a different interest and expection from the game. The Imran Khan government might well have been helped to power by the Pakistan Army, but the military-jihadi complex is a distinct entity and has interests of its own. Based on historical experience, whenever there is an expectation of an upswing in bilateral relations, we should expect the complex to throw a spanner in the works. This usually takes the shape of a military adventure, cross-border terrorism or some other ugly rabbit out of the khaki beret. This creates an impasse and an inevitable downswing in relations.

The way to avoid this is for New Delhi not to demonstrate any eagerness for new beginnings. Don’t try for quick wins. Don’t create expectations. Don’t even fall for photo opportunities. Prime Minister Khan has made sensible statements on dialogue and trade. Let these be worked out at the staff level in the ministries concerned…not by high profile political leaders and government functionaries.

(As an aside, I do think the Pakistan Army will realise they got more than they bargained for by promoting Imran Khan. They don’t learn from their previous experience. From Junejo to Jamali, the army has found that once in office prime ministers develop backbones and don’t always yield to the generals’ diktats. If Junejo could stand up to Zia, imagine what a personality like Imran can do.)

What New Delhi does need to think about seriously is having an official outreach to the military establishment. Diplomatic protocal and normative policies are one thing, but if the Army calls the real shots and will do so for the foreseeable future, realism demands that we find a way to engage the generals directly. We should stop pretending that dealing with foreign ministers and foreign secretaries of Pakistan is an effective way to deal with that country on political and security issues.

As for how to deal with Imran Khan and his government, New Delhi should adopt the temperament of playing a test match. If you play with a Twenty20 or one-day international mindset, you’ll come to grief.

Quotable Quotes from Le Guin

Ursula K. Le Guin’s The Dispossessed is an intellectual tour de force. While there are enough ideas in the book to write a full-blown thesis, I will restrict this post to highlighting two quotes that are reflective of the state of the country today, in the light of the recent spate of mob lynching.

The first quote goes thus:

Coercion is the least efficient means of obtaining order.

And the second one:

You can’t crush ideas by suppressing them. You can only crush them by ignoring them.

What do these passages tell us about tackling mob lynching?

First, is a new law, as the Supreme Court recommended in its order last week, the best way forward? A law is a blunt instrument and is coercive more often than not. Amit Varma has already written about this in a recent post, where he mentions the lack of a rule of law as being of more concern than the absence of a legal provision.

Second, are there more subtle solutions for addressing the rumours that spark a lynching than restrictions on services like WhatsApp or a blanket shutdown of internet in a region? The second passage might hold the key here. However, I would argue that the ignoring that is mentioned there cannot be passive. This is a case where there might be merit in fighting fire with fire, instead of being a firefighter.

Scott Alexander, Bryan Caplan and Nitin Pai on fighting crime (feat. Matt Levine)

The basic idea is that coming down hard on a small number of high-profile crimes can have disproportionate effects in terms of curbing crime

It all started with the pseudonymous blogger Scott Alexander, in what seemed like a justification of outrage. Or maybe it started earlier – with a post by Bryan Caplan deploring outrage. Caplan was commenting about the propensity of people to jump on to bandwagons deploring seemingly minor crimes while not caring enough about worse crimes that were not in the public spotlight already. Caplan had then written:

I can understand why people would have strong negative feelings about the greater evil, but not the lesser evil. But I can’t understand why people would have strong negative feelings about the lesser evil, but care little about the greater evil. Or why they would have strong negative feelings about one evil, but yawn in the face of a comparable evil.

Now, while “Alexander”‘s response seems to justify outrage (and I’m no fan of online outrage), he did so with an interesting analogy, on how to curb crime when the police has limited resources. He writes:

[…] the police chief publicly commits that from now on, he’s going to prioritize solving muggings over solving burglaries, even if the burglaries are equally bad or worse. He’ll put an absurd amount of effort into solving even the smallest mugging; this is the hill he’s going to die on.

Suppose you’re a mugger, deciding whether or not to commit the first new mugging in town. If you’re the first guy to violate the no-mugging taboo, every police officer in town is going to be on your case; you’re nearly certain to get caught. You give up and do honest work. Every other mugger in town faces the same choice and makes the same decision. In theory a well-coordinated group of muggers could all start mugging on the same day and break the system, but muggers aren’t really that well-coordinated.

The police chief’s public commitment solves mugging without devoting a single officer’s time to the problem, allowing all officers to concentrate on burglaries. A worst-crime-first enforcement regime has 60 crimes per day and solves 10; a mugging-first regime has 30 crimes per day and solves 10.

And then it is again Caplan’s turn to respond. I’m bad at detecting satire, so I’m not sure if he is being serious (I don’t think he is). But he proposes a “sure fire way to end all crime”:

Step 1: Credibly announce that all levels of government will mercilessly prosecute the first crime committed in the nation each day.

Step 2: There is no Step 2.

But then, I’m sure that Nitin Pai is being serious in proposing a similar method to curb the spate of violent crime in India based on WhatsApp forwards. In his piece for the Quint, he writes:

the Home Ministry ought to use its considerable powers to tackle the problem. It’s not hard either. One well-advertised arrest, prosecution and sentencing will deter the cowards that comprise lynch mobs. Three high profile arrests and prosecutions – and see how quickly lynchings stop. The smallest police station in the remotest village can stop lynchings if the local sub-inspector has received clear political messages against it.

Finally, the reason why I figured Caplan’s “solution” is satire is because of this passage from Matt Levine’s excellent Money Stuff newsletter (likely it’s behind a Bloomberg paywall, but it’s free if you subscribe by email). Commenting about high frequency trading, Levine writes:

But the answer in actual U.S. market structure is, come on, there is no such thing as “the same time.” Do you know how many nanoseconds there are every single second? (A billion.) The odds that each of us would hit the “Buy” button at the exact same nanosecond are infinitesimal. So if I put in my order to buy the stock at 10:45:06.543210876 a.m., and you put in yours at 10:45:06.543210987 a.m., then I got there first and I win.

Is this a good answer? It has a simple appeal. It just gets rid of the question “who gets the stock if we put our orders in at the same time?” It replaces an economic question about how to allocate the stock with an empirical question of who got there first.

So the problem with fighting the first crime of the day, or year, or whatever, is that a criminal will know fully well, given a reasonably high enough crime rate, that the probability of his crime being recorded as the first in the year or day or whatever is less than one. And the higher the crime rate, the lower the probability that his crime will be recognised as the first one. And so there is a high chance he can get away with it.

And that is where Nitin’s idea scores. Rather than going after the “first crime”, pick a few crimes arbitrarily and “go after them like hell”. Since in this case most of the people who are forwarding dangerous forwards are “ordinary people”, this will likely shake them up, and we’ll see less of these dangerous forwards.

 

Which States are Financially Underdeveloped in India?

Which states are the least (most) financially developed in India? To answer this question, I construct a Financial Deprivation Index (FDI); the higher the FDI, the less financially developed a state is. FDI is based on three dimensions: branch coverage, deposit mobilisation and credit disbursal. The first dimension relates to the financial infrastructure, other two are the variables relevant for the long-term saving, consumption smoothing and investment.

To construct the FDI, deprivation scores are calculated by dividing the population of each state by the number of reporting branches, total deposits and credit outstanding as on 31st March, 2017, respectively. A simple average of these scores would be misleading as they carry different units. To get around this problem, the scores are centred about the mean and normalised by dividing by the range. Finally, a simple average of the normalised score is calculated which serves as the Financial Deprivation Index.

So much for the data and methodology. As for the results, they are depicted in the map shown above. The least financially developed states in India are Manipur, Bihar, Assam, Nagaland and Uttar Pradesh.

The most financially developed states/UTs in India are Chandigarh, Goa and NCT of Delhi. Given the level of urbanisation, this is hardly surprising. Among the larger units, Punjab, Kerala, Haryana, Karnataka and Maharashtra are the most developed states. Somewhat surprisingly, hilly states such as Uttarakhand, Sikkim and Himanchal Pradesh have fared well.

One surprising finding of the analysis was the extent of heterogeneity in the North-Eastern states. Assam, Manipur and Nagaland figure among  the least financially developed states in the country; Arunanchal Pradesh, Mizoram and Sikkim show decent performance in terms of FDI. Understanding the reasons of uneven development may provide valuable lessons for policy formulation.

Vulnerability in jobs in India

India has been infamous for the magnitude of informal jobs in the country. Though a significant issue, informality is just a part of the bigger issue, i.e, the increase in the number of highly vulnerable jobs. Vulnerable jobs usually include own-account workers and family members working informally. Basically anyone who does not have a stable contract or flow of income, and are open to exploitation. All informal workers are vulnerable to an extent since they aren’t on any payroll or have a formal contract.

This long standing problem has become significant as the number of vulnerable employees has been increasing in the past few years. As per International Labour Organisation (ILO), 77 per cent of workers in India will have vulnerable employment by 2019. In a country where 92 per cent of the employed population is in informal sector, it is a concern if the ratio of vulnerable jobs increase.

 

Source: World Employment Social Outlook2018, International Labour Organisation

The ILO report also pointed out that

“a significant portion of the jobs created (in India) in the services sector over the past couple of decades have been in traditional low value added services, where informality and vulnerable forms of employment are often dominant.

It is no solace that the problem is global in nature,

Globally, the significant progress achieved in the past in reducing vulnerable employment has essentially stalled since 2012. In 2017, around 42 per cent of workers (or 1.4 billion) worldwide are estimated to be in vulnerable forms of employment, while this share is expected to remain particularly high in developing and emerging countries, at above 76 per cent and 46 per cent, respectively. Worryingly, the current projection suggests that the trend is set to reverse, with the number of people in vulnerable employment projected to increase by 17 million per year in 2018 and 2019.

This is not a surprise as 80 per cent of the casual workers and 31 per cent of the regular/salaried workers in 2016 earned less than the national minimum wage of Rs 66 / day. If looked at on the basis of gender, 95 per cent of women working as casual labour got less than the minimal wage as against 74 per cent men. Lower wages make workers more susceptible to being caught in the low income trap. With income not enough to save and invest, people earning low wages are unable to earn or multiply their money and get stuck at living at basic sustenance levels. The only way to move from the equilibrium is by earning a higher amount and saving it.

With low income levels in the country and substantial number of informal workers, India needs to look at vulnerability within jobs as a criterion in itself while assessing jobs problem. In order improve the conditions, the jobs created in the country need to assure a certain level of stability and redressal mechanisms. More than skilling, the government needs to create avenues for job creation. A good starting point would be to modify the labour laws and reduce the cost of doing business in the country.