Sectoral Imapct and Fact n Figures

8/8/2019 Sectoral Imapct and Fact n Figures

1/80


2/80

Global Economic Crisis: Impact on the Poor in India |

Global Economic CrisisImpact on the Poor in India

A Synthesis of Sector Studies


3/80

| Global Economic Crisis: Impact on the Poor in India

Disclaimer:The views in the publication are those o the authorsand do not necessarily reect those o the United NationsDevelopment Programme.

Copyright2009

by the United Nations Development Programme (UNDP) India The articles can be reproduced in whole or part with relevantacknowledgement to UNDP and the authors in the ollowingmanner:

Name o Author, Year o Publication, Published by UNDP India.


4/80


Contents

Introduction 5

Overview o the Selected Sectors 0

Key Findings 9

Conclusions 40

Recommendations 4

Data rom Sample Surveys 54

Appendix 1

Reerences 75


5/80

4 | Global Economic Crisis: Impact on the Poor in India


6/80

Global Economic Crisis: Impact on the Poor in India | 5

1

CHAPTER

Introduction*

There is now considerable evidence (NCEUS 009, Mahajan009, Kumar 009) to show that the global economic crisishas had a signicant impact on developing economies.

The initial idea that developing countries are decoupledrom the global crisis is no longer accepted as valid, as it isclear that multiple channels have transerred the crisis to

these countries.

The nine percent decline in world trade during the year008-09, the biggest decline since World War II, hasled to a huge all in exports rom developing countries.

Similarly, the crash in the equity market, emanating romcapital outow rom developing countries has resulted ina severe nancial crunch, with credit or small producersin the inormal sector having almost dried up. It has beenestimated that the capital outow rom the developingcountries, in Asia, was about US$ 0 trillion by the endo 008 (Chhibber et al. 009). This is the equivalent to

roughly one years GDP, in this region. The pressure on theexchange rate coming rom the capital outow, decliningreserves o oreign exchange, decline in exports, etc,reduced the value o national currencies, which in turnmade imports o raw material and intermediate goodsexpensive1 . This has hit the industries dependent on these

* This synthesis document has been prepared by Pro. Indira Hirway;

who is the coordinator o the UNDP sponsored studies on the Impact othe Global Economic Crisis on the Poor in India. The author is thankulto Nandini Oberoi or editing the document and to Tarun Pokiya or

research support.

For example, raw diamonds have become expensive or the gems

and jewellery industry, and with the decline in the prices o polished

diamonds, this industry is acing serious problems regarding its

survival.


7/80


imports very hard. Finally, the decline in oreign directinvestment (FDI) and in tradable services like tourism and

Inormation Technology (IT) services has led to a urtherdecline in growth and employment rates in developingeconomies.

The International Labour Organization (ILO) has described

the impact o the crisis as a global catastrophe (ILO 009).

It has estimated that about 9 million jobs have been lostalready at the global level and that this gure may go upto 59 million, in the worst case scenario. This number is inaddition to 90 million new entrants in the labour market,who are unlikely to nd jobs in the prevailing recessionarysituation2. Estimates made by the Food and Agriculture

Organization (FAO) show that the number o hungry

people has increased rom 95 million people in 008 to.0 billion people in 009 (FAO 009). Similarly, WorldBank estimates say that there is an unoreseen increase inthe number o poor, with about 0 million people beingpushed into poverty by 009 and 00 million likely tobe pushed into poverty by 00, in Asia alone (Chhibberet al. 009).

The Indian economy has been quite adversely aected bythe global crisis, through the channels mentioned above.Indian exports crashed in the second hal o 008-09,showing a decline in the quantum o exports o about 4

percent. The decline was more than 50 percent in somesectors like gems and jewellery, textile and garmentmanuacturing and leather goods. On the nancial side,the capital outows as well as decline in revenue resulted

in a severe liquidity crisis. Decline in remittances romabroad, as well as in the FDI put severe constraints onthe economy and on the Government. The depreciation

This reers to the period when the recessionary trends were stillpre-dominant and beore the encouraging signs o revival appeared.


8/80


o the Indian rupee has adversely aected the growth oindustries that depend on imports o raw materials and

intermediate products, both o which have become more

expensive.

The impact o the crisis in India, has been observed in

the slowing down in the growth rate o the economy,

between August 008 and March 009, by about our

percent (Gangopadhyay 009), and in the increase inunemployment (Labour Bureau Reports 009).

This phenomenon is not merely a slow down, but it is

denitely a crisis or the aected sectors and workers, as

there has been a sudden all in production, employment,

wages and earnings.

The rst survey o the Labour Bureau, Government oIndia, stated that the employment in the economy ell by

500,000 jobs during October-December 008. The next

survey, reported that one million jobs were lost, during

January 009. Though a slight improvement is observed

in employment during January-March 009, it is not clear

whether this is sustainable (Labour Bureau 009, Economic

Survey 009).

Macro data, however, does not tell the ull story. Since

exports account or only percent o the Gross Domestic

Product (GDP), in India (NCEUS 009), the decline in

exports appears to have created a small direct impact on

the economy. However, this impact is a matter o serious

concern because rst, the aected workers and small

producers are largely in inormal employment (they are

thereore unprotected in a crisis like this) and second, the

indirect impact and continuing impact in the subsequent

rounds is likely to be signicant and widespread.

Inormal workers constitute 9 percent o the total

workorce in the country. There are about 58 million


9/80


non-agricultural inormal enterprises in the country,accounting or percent o the exports rom the country

(NCEUS 009). Any decline in exports impacts both theproducers and the workers in these labour intensive sectors.Given the inormal nature o their work (i.e. temporary,scattered, sporadic and short term), they are not likely tobe represented in the quick surveys o the Labour Bureau.

Thus, the macro picture hides more than it reveals withregard to the impact o the global crisis on the economy.

Approach o the Study

In April 009, UNDP India, supported a quick survey insome o the major aected sectors, in selected states oIndia, to get a better understanding o the impact o the

global crisis on small producers and inormal workers. The sectors or the quick surveys were identied on thebasis o emerging reports that highlighted the impacts onspecic sectors, viz., agriculture, auto parts, Chikan crat,

engineering industry, home based garments and gemsand jewellery.

All the sector studies have used a common approach, with

some modications to meet sector specic requirements.

The common approach consists o the ollowing basic core:

An analysis o the available literature and secondarydata to understand the impact o the global crisis onthe selected sector. This included in-depth discussions

with concerned Government ofcials, sector (industry)leaders, ofce bearers o associations and labourleaders.

Selection o a centre or two, or an in-depth empirical

study in the selected sectors; and to prepare aprole o the selected centre (s) to understand theimpact o the crisis at the local level. This involveddiscussions with sector leaders, ofcials and labour


10/80


leaders in the selected centres, as well as ocus groupdiscussions (FGDs), with men and women workers,

small entrepreneurs and sel employed / own accountworkers and household members (including womenmembers) o workers.

Sample survey o a selected 00-50 workers and

small producers. The sample was selected purposively,

on the basis o the inormation o typologies oworkers and location o workers. Though the samplesize is small, the sample survey does provide a goodunderstanding o the impact o the global crisis onworkers.

Two questionnaires, were prepared, one or theselected workers and their households and the other

or small producers, in each o the sectors.

Case studies were undertaken in order to understandthe impact o the crisis, at the household level.

The quick study covered ,085 workers and producers,

across six sectors, in ve major states, in India (Table ).Even though some impact o the global crisis was evidentas early as July 008, when the exports started to decline,the larger decline in demand or export products (leadingto the closure o units or a decline in production andemployment) was observed ater the estival o Diwali, inOctober 008. Thus, in all the sector studies, October 008has been taken as the cut-o date; and the terms beore

the crisis and ater the crisis reer to this date.

The specic objectives o the study are (i) to examine the

impact o the crisis on the workers and small producers,working in the selected sectors, (ii) to draw inerences

or interventions to address the adverse impacts on theworkers and the sectors in the short and medium termsand (iii) to examine and recommend measures to mitigatethe impact o similar crises.


11/80


2

CHAPTER

Overview o the Selected

Sectors*

Gems and Jewellery Industry: India is responsible or

about 80 percent o diamond cutting and polishing in the

world (Surat Diamond Association 008). Raw diamonds

are imported, polished and then exported all over theworld. The average annual production o this diamonds

is around 8,000 carats (005-00). O this amount, on

average, about 80 to 85 percent o diamonds are exported

and the rest is consumed at home (Centre or Monitoring

the Indian Economy [CMIE] 008). The export o nished

(cut and polished) diamonds has increased dramatically

ater the adoption o trade liberalization policies; rom US$,5.4 million in 999-000 to US$ 9,.0 million in

00-08, which works out to an annual compound growth

rate o about percent. In 00-08, just beore the crisis,

exports o gems and jewellery constituted . percent

o the total commodity exports rom the country. O this,

about 5 percent o the output was exported directly to

USA and another 5 percent indirectly to USA, in the orm

o jewellery (produced in Belgium, Japan, Australia and Thailand, using Indian diamonds). USA is, thus, a major

buyer o diamonds rom India, and the crisis in USA has

impacted this industry quite severely.

* Studies were conducted by teams o researchers, located at dierentplaces and working with a number o organizations. These are: Centreor Development Alternatives (Pro Indira Hirway), EntrepreneurshipDevelopment Institute, India (Dr. Santosh Kumar and Dr JignasuYagnik), Gujarat Institute o Development Research (Pro. Amita Shah,Dipak Nandani and Hasmukh Joshi) and Sel Employed WomensAssociation (SEWA Teams in UP, MP and Gujarat). See Appendix .


12/80


The global diamond industry is organized in a value-chain,which covers exploration and mining, sorting, cutting and

polishing, jewellery manuacturing and retailing. Diamondcutting and polishing, which is labour intensive anddistributed among the developing countries, contributesonly around eight percent o the value added. India is amajor country involved in this process, but is integrated

at the lowest end o the value chain. The country is highlydependent on the global market, both or raw materials as

well as or marketing. The crash in the US markets reducedthe demand or diamonds by hal, and the traders cutback demand production even urther as a precautionarymeasure. As a result, this sector has been severely aectedby the global crisis. The crisis has also impacted the sectorthrough the nancial sector and the all in the exchange

rate.

It is estimated that there are about 8,000 diamondcutting and polishing units in the country, that provideemployment to between 800,000 to ,000,000 workers. (RBI009, Government o Gujarat 009 and SDA 009). Thoughall diamond units are required to be registered under the

Factories Act3, according to Government records, there

are only 5 registered units, employing ,000 workers.About 80 percent o the total diamond manuacturingunits are in Gujarat and more than hal o these are inSurat. Hence, the study was conducted in Surat and inBhavnagar (to meet with workers who had returned totheir original villages ater losing employment in the

diamond centres).

Engineering Industry: The Engineering Industry producesa variety o intermediate goods and capital goods and

Since even the smallest diamond unit uses power and employs morethan 0 workers, all the diamond units should be registered under theFactories Act (Government o Gujarat 009).


13/80


has signicant backward linkages with a number o vitalsectors in the economy. Heavy engineering goods cater to

power; inrastructure including real estate development,steel, cement, petrochemicals, oil and gas, reneries,ertilizers, mining, railways, automobiles, textiles, etc.Light engineering goods are inputs to heavy engineeringindustry. This industry, which has shown a rapid growth in

the post reorm period, exports a variety o goods. In 008-09, the sector accounted or percent o manuacturing

exports, o which .5 percent was rom machine tools,machinery and equipment, . percent was rom transportequipment and about nine percent rom manuacture ometal primary and semi-nished iron and steel (CMIE, 009).The engineering sector is highly ragmented at the lowerend (e.g. unbranded transormers or the retail segment)

and is dominated by smaller players, who use medium tolow-end technology, and manuacture low-value addedproducts. According to available estimates there werenearly 5,000 units employing about 840,000 workers inthe machinery and equipment industry (NIC code 9). Othese about 95 percent o the units and 58 percent o theworkers were in the unorganized (non-actory) sector.

This sector, which was already acing several constraintssuch as unstable input prices, power shortages,inrastructure gaps, etc, coupled with increased importsand appreciation o the rupee, aced another set back, dueto the nancial crisis and the consequent dip in its exports. The decline in oreign investment and the devaluation

o the rupee against the strengthening US dollar createdadditional problems. The industry has suered a doublesqueeze- a decline in the demand in the global marketand the subsequent decline in the domestic demand. (GoI009). The sector study covered two predominant centreso the engineering industry; Coimbatore in Tamil Naduand Rajkot in Gujarat.


14/80


Auto parts Industry: The Indian auto component industryhas done remarkably well in recent years, recording 8

percent growth during the period rom 00-0 to 00-

0. Its exports also grew at a compound annual growth

rate (CAGR) o .5 percent during 00-0 to 00-0,

and the share o the exports in total production increased

rom .9 percent in 00-0 to 8.48 percent in 00-

0, accounting or exports worth Rs.. billion (US$ 0.0billion) in 00-0. In spite o the commendable growth

o this industry, however, the working conditions, income

levels and social security o the workers, particularly in tiny

and small rms, have not improved as expected.

There are 400 large rms in the organized sector in

this industry, and about 0,000 rms operating in the

unorganized sector, manuacturing low-tech auto partsand components. The entire industry is organized in

about 0 major clusters in the country, located in Haryana

(Gurgaon), Punjab (Jalandhar, Phagwara and Ludhiana),

Maharashtra (Aurangabad and Pune), Madhya Pradesh

(Pithampur), Bihar (Jamshedpur), Tamil Nadu (Chennai)

and Karnataka (Belgaum). These clusters account or over

9 percent o the output.Since the rst quarter o the last scal year, Indias auto

component makers are in the grip o one o the biggest crises

ever. The entire supply chain o auto companies has been

impacted by the economic meltdown. Units, rom large

companies to small-scale units, are acing a all in demand

o between 0 to 0 percent and a sti liquidity crunch.

The impact o the US crisis has aggravated the constraintsthat the industry was already acing (particularly the small

enterprises); such as problems related to prices o raw

materials, access to credit and markets, etc. The liquidity

crunch, inventory pile up and re-scheduled export orders

have taken the sheen o the auto component industry,


15/80


and or the rst time in a decade, the sector has clockedsingle-digit growth and registered a all in earnings, The

Auto Component Manuacturers Association (ACMA),

projected a six percent growth in turnover and 5.5 percent

growth in export earnings during 008-09 as against 0

percent and 4 percent respectively, in previous years

(ACMA Newsletter, January 009). Ludhiana, one o the

biggest auto parts centres in the country, was selected orthe in-depth study.

Textiles and garment Industry : The textiles and garment

industry is one o the important industries in the global

economy, as well as in the Indian economy. It has shown

rapid growth in the global economy and has grown rom

US $ billion in 990 to US $ 9 in 00 and urther to

US $ 500 billion in 008-09 (beore the crisis). In India, theindustry is responsible or 0 percent o the total export

earnings and provides direct employment to about 8

million people. India is ranked in seventh place among

countries that export textiles. The garment industry is a

relatively new industry. With a modest beginning in the

90s, it has grown into a gigantic industry, and is spread

all over the country. This industry received a big push aterthe expiry o quota restrictions in 005, and produces

about 8,000 million pieces o output valued at US$ 8

billion (00-0). The garment industry is largely in the

unorganized sector and 9 percent o the employment

in the sector is inormal employment. Sub-contracting

and out-sourcing o production is a common practice as

is home based production. About hal the workers are

engaged in home based production and this segment was

the ocus o the survey.

Women workers are dominant in the garment industry.

However, highly skilled tasks within the sector such as

cutting o abrics and stitching o nal garments, especially


16/80


in the mens clothing segment, is oten done by men.Women workers in the sector are usually engaged to carry

out the basic stitching o garments made or women and

children.

The export demand or garments started alling in the

later hal o 008 and continued to decline thereater. Two

important garment centres, Indore in Madhya Pradesh and

Ahmedabad in Gujarat, were selected or a detailed study

o the impact o the crisis on this sector.

Chikan Crat4: Handicrats are a unique expression

o the culture, tradition and heritage o India and the

handicrats industry is an important sector o the Indian

economy, providing employment to a large section o the

population.

Though exports o Chikan crat, like other handicrat export

products, have been seeing a decline in their markets

during the last 5 years or so, there has been a sudden

and huge all in the exports ater the global nancial crisis.

According to the gures released by the Export Promotion

Council o Handicrats (EPCH), exports o embroidered and

crocheted goods, which amounted to Rs. 5,450 million in00-08, declined to Rs. 9,0 million in 008-09; a decline

o more than 40 percent. Since a majority o the Chikan

workers are inormal workers, who work at home and are

paid very low wages, and do not have access to any social

protection, this crisis has meant the loss o livelihoods or

a number o people. Lucknow is a major centre or Chikan

crat and was thereore selected or this study.

4 Chikan work reers to the embroidery that is done with white untwistedyarn usually on ne abric, (ne cotton, voile, silk, cambric, georgetteor teri-cotton). Designs are printed on the cloth with washable coloursand then dierent stitches and designs are used or the embroidery.This is largely a home based industrial activity, undertaken usually bywomen artisans and workers.


17/80


Agriculture: Indian agriculture as a whole is not aglobalized sector. However, some pockets, which grow

crops or export and export a signicant proportion otheir output, are integrated with global markets and arethereore vulnerable to global uctuations in demandand price.

The sector study covers our export crops, namely, cotton,

castor, cumin and sesame. The global prices o these cropsrose substantially in 00 and in the rst hal o 008,raising the incomes o the armers engaged in growingthese crops. However, due to the global crisis, these pricesdropped dramatically in the second hal o 008. Forinstance, the price o castor in March 009 was Rs.,990

per quintal (a quintal is equal to 00 kgs) as against Rs.

,85 per quintal in September 008. The price o cottonhas also come down to Rs.,00 per quintal, rom a peak oRs.,5 in July 008.

The total exports o cotton ell rom 8.50 million bales in00-08 to .8 million bales between August 008 andJune 009. The plummeting international cotton price hasled the Government o India to hike the minimum supportprice by 40 percent, resulting in a steep rise in domesticprices, and a steep all in the demand or domestic cotton.Similarly, the exports o castor seeds declined rom,5,000 metric tonnes (a metric tonne is equal to ,000

kgs) in 008 to a mere 0,000 metric tonnes during the rstseven months o 009 and went down even urther, later.As a result, armers, who planted these cash crops in thehope o earning well, were adversely impacted when the

time or harvesting the crops came.

This sector study has selected regions where these cashcrops (castor, cotton, cumin and sesame) account ora substantial part o the production and a signicantportion o the output is exported. Growers o these crops


18/80


in ve districts, namely, Mehsana, Vadodra, Kheda-Anand,Surendrangar and Patan rom Gujarat have been selected

or an in-depth study.

Thus, the six sectors broadly represent the range oaected sectors in the economy. Gems and jewellery is asector that is highly integrated with the global market. It

depends almost totally on imports or raw materials and

exports or markets; the home based garments and Chikancrat industries export a signicant part o their output,but also have a huge domestic market; auto parts andengineering industries also export a signicant proportiono their output and have a well-developed domesticmarket. Agriculture is the least globalized sector, with only

some regions exporting selected agricultural produce.

The sectors vary in organization o production, withChikan crat and garments being signicantly home based,agriculture carried out on amily arms with participation

o amily members; while auto parts, engineering anddiamond cutting and polishing have small productionunits outside the homes. The home based garments andChikan crat sectors employ a large number o women.Agriculture also has signicant participation by women;while in the remaining three sectors, women constituteless than ve percent o the workorce (Hirway 009, Shah009, Kumar 009).

Wages and incomes o the workers dier considerablyacross the sectors. The average monthly income beorethe crisis was the highest in the engineering industry(Rs.,888) ollowed by the gems and jewellery industry

(Rs.5,84) and in third place by the auto parts industry(Rs.,850). The average monthly income in the othersectors was much less, Rs., in agriculture, Rs.,8 inhome based garments and Rs.98 in the Chikan crat sectorIt is important to note that that most workers in home


19/80


based garments and Chikan crat industries were pooreven beore the crisis. However, their condition became

much worse ater the crisis.

The eatures that are common to all the sectors are (i) allthese sectors have grown rapidly in the last ew years,largely due to growing export markets. (ii) small producers

or inormal units are predominant in all these sectors and

(iii) most workers engaged in these industries are inormallyemployed.


20/80


Key Findings

The key ndings are based on the data collected, interviews

conducted and the available reports across the six sectors- gems and jewellery, the auto parts industry and the

engineering industry, home based garments industry,chikan crat and agriculture. Discussions with industryleaders/ associations, policy makers and experts; FGDs;ormal surveys and case studies are all part o the analysis.

Prole o workersThere are certain characteristics that are common to theworkers, across the six sectors (Tables -4):

The workers in all these sectors are young. The averageage varies rom 0 to years, in the six sectors. Onlyabout percent o workers are above 50 years old.

The level o literacy is quite low or these workers. The share o illiterate workers (without any ormaleducation) is signicant, varying rom 0 percent inagriculture to less than 0 percent in engineering,

gems and jewellery and home based garmentssectors. About 40 percent o the workers have studiedup to Standard X and only about six percent workershave studied beyond Standard X. The percentage ograduates is less than percent and they are employedmainly in the auto parts industry and engineeringindustry. Many workers are school drop-outs and havereceived on the job training in the specic sectors.

Almost all workers, with a ew exceptions, are notpermanent workers (they are regular workers5 or

3

CHAPTER

5 Regular workers are not permanent workers because they do not getbenets o Provident Fund, medical benets, leave salary but they dousually get paid on a monthly basis and may even get leave with payand certain other benets depending on the employer.


21/80


contract workers). They do not receive any socialsecurity benets.

The share o women workers is less than ve percent,in the auto parts, engineering and the gems and

jewellery industries, these three industries happen tobe primarily male dominated industries. In the otherthree sectors, women are predominant, 99 percent in

home based garment industry, 84 percent in Chikancrat, 8 percent in agriculture.

The majority o workers in the gems and jewelleryindustry and auto parts industry live in pucca(permanent) houses, while the proportion o workersliving inpucca houses is much less in the Chikan crat,agriculture and home based garment industries.

About one th o the workers in these sectors live inkutcha (temporary) houses.

The majority o workers (more than 0 percent) live in joint amilies, 0 percent live in nuclear amilies andthe rest live in single person amilies6 .

Impact o the Crisis on Employment, Wages

and Incomes The impact on the crisis on employment was observed

in a number o ways: workers had lost jobs and wereunemployed, workers got much less work than beore inthe same sector, some workers had shited to other work,oten less remunerative and with lower productivity, suchas petty services (domestic service, helpers to drivers or

masons, ofce peons, etc), petty trade (vegetable selling,street vending, etc), home based work (manuacturing

Single person amilies are usually those o migrant workers who otenrequently migrate without their amilies and live alone, especially inthe initial years.


22/80


incense sticks, spices, ood items like papads and pickles,etc). There are some workers, however, who did not

experience any change. Table 5 shows that 44 percent oworkers in the engineering and percent o workers inthe auto parts industry, did not experience any change inemployment, ater the crisis.

The gems and jewellery industry was among the worst

aected sectors, as 0 percent o the workers wereunemployed, 49 percent o workers had shited to similarwork with lower income and percent had shited to otherless paying activities like petty services and petty trade. Those who remained in the industry also experienced adecline in employment and income.

In the auto parts and engineering industries, the impact

was relatively smaller, the unemployment gure inthese sectors was less than ve percent. The rate ounemployment however was low (around 5 percent) in

home based garments, Chikan crat and agriculture, wherea large number o workers continued to remain in thesector but with much less work.

A number o workers who remained in the same sector,

experienced a decline in employment and wages. Thisgure was more than 90 percent in agriculture, 80 percent inhome based garments and more than 55 percent in Chikancrat. The gure was around 50 percent in engineering andauto parts industries.

The highest percentage o workers who let one sectoror employment in another sector was in Chikan crat (8

percent) ollowed by gems and jewellery ( percent), thispercentage was lowest in the auto parts and engineeringindustries (only one percent each).


23/80


Unemployed at presentUndertaken similar work with lower wageShited to another sector/ workNo change

Impact o the Crisis on Employment o Workers

A large number o skilled workers in the selected sectorshave been orced to shit to unskilled work. The percentageo such workers is 8 percent in the Chikan crat sector, percent in gems and jewellery industry and eight percenteach in the auto parts and in the engineering industries.

On an average, about percent o skilled workers haveshited to unskilled work, implying waste o their skillsacquired over the years. The higher percentage o suchworkers in Chikan crat is due to the huge loss o demandor these products in the global market. Such a shit canresult in deskilling o the workers in the long run.

There has been a signicant deterioration in the

employment status, even o these inormal workers, romregular to casual or temporary status, implying lessregularity o work and increased employment insecurity. This deterioration rom regular to casual status is

signicant in all the industries, though the percentage ocasual workers varies rom 5 percent in the engineering

Diamonds

AutoParts

Engineering

Homebased

garments

Agriculture

Chikancrat

No.oHHs

0

0

40

0

80

00

0


24/80


ReducedwoRkandReducedincome

Prakashbhai Hunbar, is 20 years old and has studied till

Standard IX. He is a skilled worker and has been working on the

lathe machine or the last three years. There are our persons

in his amily his parents, his brother and himsel. His athers

ill-health pushed Prakash to take up work, his brother joined

him later.

Prakashbhai lives in a one- room house. The impact o the crisis

on him is apparent in his reduced work hours rom 12 to eight

hours per day, which means he does not earn any over time.

Two other workers in the actory, where he works, have already

been laid o and another three are called only when needed.

The average income has reduced rom Rs.160 Rs.175 to Rs.90

Rs.100, per day. The number o days he works is usually 25 days

per month. There is an income loss o approximately Rs.1,500per month, or each o the two brothers.

The consequences are that their ather has had to go back to

working as an auto rickshaw driver. Prakash has taken a loan o

Rs.10,000 but is still unable to bear the medical expenses or his

ather. He has begun to buy ood grain rom the air price shop.

In the uture, the brothers want to buy an auto rickshaw, by

taking a loan, which they hope to get by pledging their mothers jewellery. They hope it will enable them to put down the rst

installment o Rs.45,000 required or the auto rickshaw. This

will make the two brothers less dependent on employment

in the industry. They hope to nd alternative employment

opportunities in the city, and i that does not happen, they plan

to return to their home village. Prakashbhai says he expects the

Government to help the industry to get out o the recession.

Prakashbhais story is an ot-repeated tale, in which the

characters keep changing.

industry, to percent in the gems and jewellery industry,to as much as 0 percent o workers in the auto parts

industry.


25/80


The average monthly income o workers has declinedsignicantly in all the sectors. About 9 percent o the

workers in the sample pertaining to the gems and jewelleryindustry experienced a decline in their incomes. This gurewas much lower in the engineering industry (55 percent).In terms o percentage decline in income, the monthlyincomes o the workers in the respective samples declined

by about percent in the home based garment industry,by 4 percent in the gems and jewellery industry, by 4

percent in the auto parts industry, by percent in theChikan crat industry and by percent in engineeringindustry.

The daily earnings/wages o workers in the samples have

also declined in all the sectors. The decline is the highest in

the gems and jewellery sector - as much as 44 percent; 4percent in home based garments industry, percent inChikan crat and less than 0 percent each in the remainingthree sectors. In Chikan crat, where the monthly incomewas only Rs.98, the income has declined by percent,coming down to as little as Rs. per month. The averageloss o income across all sectors was around percent

(Tables & ). While all the workers experienced a decline

in their earnings, the workers in the engineering sectorsample were least impacted.

Similarly, the household incomes o the workers also

show a signicant decline, although the decline is not asmuch as in individual incomes. This may be because othermembers who work in other sectors did not experienceas much decline, or because non-working members

(i.e. women, children, relatively older people) also joinedthe labour market.

Thus, workers have been adversely impacted in terms oemployment, employment status, wages and incomes, aswell as in terms o productivity and skills.


26/80


Help Received rom Dierent Agencies

In crisis situations like this, workers require support otwo kinds: support to meet the consumption needso households and assistance in accessing alternateemployment or re-training to nd new employment.Agencies like the Government (both Central and StateGovernment), employers, industry associations and

chambers o commerce, trade unions or civil societyorganizations may be expected to come to the aid oworkers, in such situations.

Help rom the Government was orthcoming in the case

o gems and jewellery industry, where percent o theworkers have received some assistance (though notadequate) to meet their consumption needs, in the orm o

distribution o ood grains and other essential ood itemsor cash. About six percent o workers received Governmentassistance in the auto parts industry. Apart rom this ratherinadequate assistance in these two sectors, no other

help was provided to tide over the crisis. Employers andindustry associates extended some marginal help in thesetwo industries. Assistance came largely rom relatives and

riends; rom private channels that the workers managedto access (Table 8). Assistance in trying to nd new jobs orwork has been almost absent, partly because there werehardly any jobs available in any sector. Some assistance

o this nature was extended to workers in the auto partsindustry but even this was rather limited.

Decline in Remittances Sent Home

A large number o workers in many o the export-basedindustries in urban centres send remittances to theiramilies in the villages. In act, these remittances provideconsiderable support to those at home as well as to thelocal economy o the village.


27/80


Table 9 shows that sending remittances home was

common in three sectors - gems and jewellery, auto partsand engineering industries- the percentage o workerssending money home varied rom percent in the autoparts industry, to a little under 40 percent in the gemsand jewellery and engineering industries. Ater the crisis,however, the number o people who sent remittances

HaRdwoRkandlittleRewaRdfoRkammu

Kammu Idrishi is a traditional Chikan crat worker. Her late

husband was a cratsman, who also worked in this crat. Kammu

does very ne work and works largely on orders. She buys her

own material, does the cutting with the help o her daughter

and even does the tailoring at times. Earlier, she also used to do

the printing, a job generally carried out by men. Despite being aseasoned Chikan crat worker, Kammu has only a kutcha house

with a leaky roo, and also has to tend to a handicapped son; or

whom she is nds it hard to get any medical attention. Kammu

believes that the wages earned in Chikan crat work are not

commensurate with the eort and labour involved in doing this

work. Even ne karigari (cratsmanship) etches a maximum o

Rs.50 per day, while ordinary work etches only Rs.8 to Rs.20 per

day.

According to Kammu, the present recession has caused urther

deterioration in her economic condition. She earns much less

than beore. She complains that even in the present crisis, the

Government is not doing anything to support Chikan crat

workers. She is getting old and it is now physically impossible

or her to work or more than ve to six hours a day, especiallyin executing ne and intricate embroidery. Her health has been

adversely aected, her eyesight is poor, and she suers rom

constant headaches, backaches and neck-aches. Her ngers are

sore rom doing Chikan work. The uture oers little hope.


28/80


home declined by more than hal in the case o the gemsand jewellery industry and by a little less than hal in theengineering industries. Remittances also declined orthose engaged in the home based garments industry.

Dis-savings, Pawning Jewellery and Sale oAssets

Keeping in mind the huge decline in incomes and the

inadequate assistance received, the aected householdshad three alternatives: (i) dis-saving, pawning and sale

lossofjobmakessuRvivaldifficult

Kalpeshbhai Narsibhai Vaghani (age 23 years) studied up to

Standard IX and let his native village Pipaldi, Bhavnagar in 1999

or Surat, to join a diamond unit. Beore the crisis, his monthly

income was Rs.3,500. Both his brothers are also working in the

diamond industry. The monthly income o the household was

around Rs.12,000.

Ater the crisis, during Diwali, his elder brother lost his job and

was aicted by paralysis. Kalpesh took a loan o Rs.50,000, rom

his relatives, or the treatment o his brothers illness. Beore

the crisis they used to send Rs.5,000 to their grandparents in

the village, but now they are unable to send any money. Since

they stay in a rented house, they have to pay a monthly rent

o Rs.2,000. Kalpesh now earns only Rs.2,500. His household

income has declined substantially.

Kalpesh and his brother are really worried about their elder

brothers health and the expenditures that they have to bear

during this crisis. They are planning to take up part time jobs,

in addition to diamond polishing. There has been no change in

their ood habits so ar, but they have reduced the expenditure

on transport by using bicycles. Their main worry is that they are

not able to send any money to their grandparents and mother,

who are dependent on them.


29/80


o assets, (ii) borrowing rom dierent sources and (iii)reduction in consumption.

The aected workers in all the six sectors used their pastsavings as well as pawned and sold some o their assets tomeet their immediate needs (Table 0). Dis-savings was animportant coping strategy. The gures or the percentage

o workers in the sample who used dis-savings, were about

50 percent in the gems and jewellery sector, 55 percent inthe auto parts industry and 0 percent in the engineeringindustry. The gures were percent in the agriculturesector, 5 percent in Chikan crat and percent or homebased garments. Similarly, pawning and sale o assets wasa strategy used by workers in all the six sectors. Between

0 to 0 percent o households resorted to pawning and

sale o assets. More than 0 percent o households usedthese three ways to survive the crisis, the percentagewas as much as 9 percent or workers in the auto partsindustry and 4 percent in the case o the workers in gemsand jewellery industry. It was lowest among the workers inthe home based garments industry ( percent).

Borrowing rom Dierent Sources

Once dis-savings and sale o assets were exhausted, the

afected workers resorted to borrowing as a coping strategy

(Table ). The percentage o households that needed to

borrow to meet household needs increased rom percent

to 50 percent in the gems and jewellery industry, rom

percent to 8 percent in the auto parts industry, and rom as

little as .5 percent to 4 percent in the engineering industry,

rom percent to percent or home based garments, androm 5 percent to 9 in agriculture and declined rom

percent to percent or the Chikan crat sector.

The sector studies show that the main reasons or

borrowing have been to meet day-to-day consumption


30/80


needs and to meet health related expenditures. A smallnumber o households also borrowed or social unctions

and to meet education expenses. Since institutional nanceis not available or consumption needs, the main sourceso borrowing have been riends and relatives, ollowed bymoney-lenders. In a ew cases, employers and banks havealso extended credit to the workers.

The burden o debt has been too high on these householdswhen the incomes have allen and uncertainty hasincreased. The average amount o debt per household inthe six sectors varied rom Rs. 4,0 in gems and jewelleryto about Rs.0,000 in Chikan crat and the home basedgarments industries.

Reduction in Consumption Expenditure The main strategy o survival o most households,however, was to reduce consumption, mainly on ood andother consumption goods, and on education and health.Almost all households those that experienced a declinein income as well as those that did not have reduced theirconsumption expenditure, due to the overall uncertaintyregarding employment in the immediate uture.

Food Consumption: The most common ways o cutting

down ood consumption have been (i) stopping or reducing

eating out, (ii) stopping or reducing consumption o quality

ood (oten expensive ood) like milk, ruits, vegetables,

eggs, meat, chicken, etc (iii) skipping a meal every day.

About 88 percent o workers households in the gems

and jewellery industry said that they had reduced theirood consumption, about hal the sample had reduced

eating out and 9 percent reduced the consumption oquality ood at home (i.e. the cash-poor households wereeating cheaper ood at home and had excluded milk,ruits, vegetables as well as eggs, meat, etc rom their diet)


31/80


(Table ). This reduction in ood consumption including

consumption o quality ood items is bound to have anadverse impact on the nutritional and health status oworkers. Since data on the extent o the reduction in the

consumption o quality ood is unavailable, it is difcultto estimate the impact. The percentages o householdsreducing ood consumption by reducing eating outand by reducing consumption o quality ood are 8.40

percent and .0 percent respectively, or householdsin the auto parts industry, 4.5 percent and .5 percentor the workers in the engineering industry, 9.50 percentand 48.50 percent or the home based garment industry,

percent and 4 percent or agriculture and percentand 45 percent or households o workers in Chikan crat. The percentage o households that reported skipping a

meal every day (usually morning breakast) ranged rom percent in the auto parts industry to three percent eachin the engineering and home based garment industries.

joblessandstilllookingfoRemployment

Radheshyam (age 38 years), from Bhagalpur, Bihar, shifted to

Punjab in 2004, leaving behind his parents, wife and children, to

earn his livelihood here. He worked on making motor cycle parts.

He knew that the company where he worked was facing some

problems and some of his friends had already lost their jobs. They

suggested that he look for alternative work, but he felt that as

he was a senior worker, he would not lose his job. However, one

evening, he was asked not to report for work, the next morning.

He was shocked. He has not received his dues and he is still looking

for alternative employment and is supporting his family by

undertaking sundry jobs, mostly as a daily-wage earner. He is not

very hopeful of getting his dues from the factory owners.

Radheshyam knows he will not be able to get a job now and

wants to start a small business - selling vegetables and dailyprovisions - but he does have the capital required to start such

a venture.


32/80


Expenditure on Education and Health: Reduction in theexpenditure on education and health was another coping

strategy used by the workers.

Expenditure on Education: Roughly hal the householdshave reduced their expenditure on education by(i) withdrawing children rom school (ii) shiting children

to cheaper (government/municipal schools) (iii) not

paying ees (iv) reducing expenditure on books, uniorms,educational materials etc (Table ). There is no clearpattern that emerges in the use o these dierent copingmechanisms. The percentages o households in the sample,that have reduced their expenditure on education wereas high as 8 percent in the gems and jewellery industry,

5 percent in the auto parts industry and 0 percent in the

engineering industry (Table ).A high percentage o the households have been orced toreduce their expenditure on education impacting adversely

on the uture o their next generation. The percentage ohouseholds shiting children to cheaper schools varies rom8 percent in auto parts to six percent in the home basedgarments industry. Another coping mechanism that hasbeen used is to withdraw children rom school. In the gemsand jewellery industry, about 0 percent o householdshad withdrawn their girls rom school and the gure wasabout three percent in the home based garments industry.

Not paying ees is the third mechanism used to reduceexpenditure on education. Many households did not paythe ees in the hope that they would get some supportrom the Government or other agencies, sooner or later. It

appears that households used these methods dependingon their specic situation and constraints.

Expenditure on Health: Households in India do nothesitate to spend on health, when there are serious healthproblems. Studies show that people preer private health


33/80


services to public health services, though the ormer aremore expensive, because the latter is usually not accessible

and dependable.

Households have reduced their health expenditure by (i)going to doctor/hospitals only in the case o emergencyand (ii) using home remedies and medicines as ar as

possible though some households reported that they

would like to shit to cheaper public services in the currentsituation. However, poor health o children and sicknessin earning male members are treated as being importantenough to warrant paid medical services.

Table 4 shows that households in all the sectors havereduced their expenditure on health, as many as percento the workers in the auto parts industry sample and 9

percent in Chikan crat reported that they had reducedtheir expenses on health care, the gures or the gems and jewellery industry and the engineering industry were

percent and 44 percent respectively.

Impact o the Crisis on Women

Womens contribution in helping the amilies in crisis has

been signicant. They have contributed as producers (asown account workers or sel employed workers), as wageearners (including in piece rated and home based work)and as home makers.

Womens Work in the Labour Market: As the sectorstudies have shown, the work women have taken up ishome based work like making incense sticks, grinding

spices, embroidery work or have taken jobs in services likedomestic service; construction work, mainly as helpers

to masons and other manual labour, etc. The highestpercentage o households reporting non-working womenjoining the labour market was in the gems and jewellerysector, which is one o the worst aected sectors in the


34/80


economy. More than hal o the households in the gemsand jewellery sector have reported women taking up ull

time work while percent households have reportedwomen joining part-time work. The percentages are percent (or part-time work) and our percent (or ull timework) in the auto parts industry, 5 percent and percentin agriculture, percent and percent in Chikan crat

(where young girls below 4 years o age have taken upChikan work) and nine percent and two percent in the

home based garment industry ( Table 5).

Sel employed women ace several constraints that prevent

them rom expanding their work into successul enterprises.

These constraints have only become more magnied since

the crisis. The major problems that they ace are (i) poor

access to credit, which has almost dried up ater the crisis(ii) low level o inrastructure support (iii) poor access to

markets, especially ater the crisis and (iv) inadequate

support in technical up-gradation, skill training, etc.

Unpaid Work by Women:There is evidence that womensunpaid work has increased ater the crisis. This unpaidwork includes domestic work such as cleaning, washing,sweeping, etc (as domestic hired help is dispensed with),care work (caring o sick, o children) and collection ovegetables, leaves, ruits, etc rom common lands andcommon properties. Roughly a third o the households

in the sample, reported an increase in the unpaid worko women. It appears that the unpaid work has increasedbecause (i) cash poor households have brought manymarket oriented activities within the purview o domestic

work, (ii) paid medical services have turned into unpaidservices, (iii) unemployed /under employed men at homeneed more work / caring rom women and (iv) women have

increased the collection o ree goods - odder, vegetables,leaves, ruits, etc particularly in the rural areas, as evidentrom the experience o return migrants ( Table ).


35/80


The lowest increase in the percentage o women enteringthe labour market as well as in the percentage o increase

in domestic work o women is observed in the engineeringindustry. This calls or an in-depth investigation. It ispossible that the relatively high wages o workers in thisindustry do not encourage households to send womeninto the labour market or socio-cultural actors may be

responsible or this trend.

Increased Tension, Confict and Domestic

Violence

The sudden drop in income and employment, the absence oany assistance and the uncertainty about the uture caused

a lot o tension in these households, leading to conicts

and violence. Sector studies or the gems and jewellery andthe engineering industries reported some cases o suicides,in a ew depressed and rustrated workers.

About 40 percent o households have reported increasedmental and physical illness caused by the crisis, about45 percent o households reported increased domesticconict and violence and percent o households across

sectors, reported an increase in smoking and drinking,caused by increased tension and rustration. This impact ishighly signicant in all the sectors, but is signicantly high

in the gems and jewellery industry, among engineeringworkers and in agriculture and Chikan crat workers.

Return Migration to Villages

Since many urban workers in export-oriented industries

have migrated rom villages, and some rom small towns, amajor coping strategy o the aected workers has been togo back to their villages and to their amilies. It is difcult tosay whether they want to settle down in villages or wouldlike to go back to the cities when the situation improves.


36/80


In the case o the return migration o diamond workers, itis observed that about hal o them want to go to back to

Surat city, when the situation improves, while the otherswant to settle down outside the diamond industry, as theyconsider employment in the export-dependent diamondindustry to be uncertain employment.

The main reasons or going back to the village as stated

by the members o the sample households were: (i) costo living in the village was cheaper, in terms o house rent,cost o energy/uel, ood, etc, (ii) they can live with theiramilies - parents, relatives, etc, which works out to be veryeconomical and (iii) oten there is some land, which they canall back on. Return migration has been taking place in all

the industries covered in this study.

The workers have been orced to adopt several copingstrategies, which will have a long term impact on their lives.These are: (i) they have incurred huge debts to meet their

minimum consumption needs, (ii) several non-workers-women, children and the elderly - have been orced to enterthe labour market and in the absence o remunerative jobsthey have been orced to take up low skilled, low productivitywork with very low wages, and (iii) these households havereduced their consumption on ood, health and education.

Women have been the worst suerers o the crisis, as theyare pressurized to contribute to household incomes. Theyhave take up whatever activities are available, to supporttheir households. As the study o the gems and jewelleryindustry shows, many women earn as little as Rs. 5 per day,making incense sticks, working as helpers to masons, etc.

Impact on Small Producers and Micro

Enterprises

The non-viability o small and micro enterprises is a majorissue and the crisis has highlighted the extreme vulnerability


37/80


o these units. The sector studies draw attention to the actthat small producers and micro enterprises are the most

vulnerable group o producers and they have been mostadversely impacted by the crisis. The major reasons orthis are: (i) their survival oten depends on job work, andthe moment orders stop, they have no option but to closedown, (ii) they have limited access to credit (iii) they usually

deal with low quality products, the demand or which hasdeclined much more than the demand or high quality

high value added products, and (iv) since they do notimport raw materials directly or export nished productsdirectly, the burden o the crisis is requently passed on tothem by big traders and exporters.

declinein incomemeansa cutin education expenses

Mukhadbhai, who lives in Piprali village in Bhavnagar, has been

working as a diamond polisher in Surat or the last nine years.

He was a daily wager and worked almost 10 hours each day. His

monthly income was Rs.5,000. He is the only earning member in

his amily, and has to support his wie and child.

In October 2008, he lost his job due to the global crisis. As he

could not nd any suitable work in Surat, because o his lack oskills in other elds like embroidery, he ound it difcult to live

there. Ultimately, he decided to return to his home-town. He

now works or about 15 to 16 days a month, as a wood-cutter

and earns Rs.60 per day. He manages to earn only Rs.1,000 a

month rom this work and is unable to pay the tuition ee and

meet other education related expenses or his son. He just does

not know how to manage with this small income.

Having no alternative, he has taken a loan o Rs.50,000 rom

a bank, at ve percent interest. Like other diamond workers,

Mukhadbhai has not received any help rom the Government

or any other organization. His only hope is the revival o the

diamond industry.


38/80


Discussions with industry associations, industry leadersand small producers indicate that the major problems o

small enterprises are:

Access to Credit: Though small and micro enterprisesaccount or more than 0 percent o national exports andprovide large scale employment, their share in institutional

credit is only two percent (or the units with investment

o less than Rs 500,000) and 4. percent (including theunits with investment o less than Rs .5 million) (NCEUS009). In spite o the eorts made by the Government,access to credit or these units has remained extremelypoor. The liquidity crunch under the present crisis hasmade the situation much worse, as nancial institutions

are most unwilling to lend to the aected sectors, in

general, and to small enterprises, in particular. In the caseo gems and jewellery sector, or example, even ater therecommendations made by the Reserve Bank o India (RBI) Taskorce to lend to this sector and particularly to smallunits, the access o the units to credit has remained poor. Inthe auto parts and engineering industries too, the demandor credit by small producers is largely unmet.

The producers interviewed during the survey eel thatinstructions rom the Government or rom the RBI is notlikely to change the situation, as banks are not willing tolend to them, particularly in the crisis. There is an urgent

need to improve this situation by creating a special undor these units, at the all India level, to take care o theircredit needs.

High and uctuating prices o raw materials: Another

major problem o these enterprises is that the prices o theraw materials and intermediate good are highly unstable.The depreciation o the rupee during the crisis has raisedthe prices o imported raw materials and intermediategoods, making it more difcult or these units to manage.


39/80


Low technology and low productivity: In spite o thedecline in the global demand or exports, there is stillsome demand or high value added, high quality products

in the global market. However, this demand cannot bemet by small enterprises, due to their low technology andlow scale o operation. It is clear that i these units have to

survive, they will have to be helped in taking a quantumjump in technology and productivity.

cRedit neededfoR business expansion

Rajesh Singh (age 32), was born and brought up in Motihari,

Bihar and migrated to Surat in 2001. He lives in Surat with

his wie (30 years) and three children, who are studying in an

English medium school. Earlier, Rajesh used to work as a sweet

maker in Mumbai and was settled there. His brother worked

in a diamond unit in Surat, and Rajesh also decided to moveout rom Mumbai and join him in Surat. He was trained by his

brother but the stipend he received was not sufcient or him to

support his amily. He shared a house with his brother.

Beore the crisis, Rajesh used to earn between Rs.8,000 to Rs.9,000

per month. Now he earns Rs.5,000 to Rs.6,000 per month. He has

taken a loan o Rs.25,000 rom his riend or the education o his

children. Beore the crisis, he used to send Rs.2,000 to his parents

but now he cannot do so. This really pains him. He has had to

cut down his own expenses drastically: or example, he comes to

the unit by bicycle instead o in an auto rickshaw. He says he will

never allow his wie to work outside their home.

Rajesh has taken up a part time job, where he sells spare parts

or mobile phones. Due to the lack o nances, he cannot

expand his business. He says that i his present business does

well, he can discontinue with working in the diamond unit, eveni the situation improves. He needs a loan to expand his present

business, which he is unable to get.


40/80


41/80


42/80


and the high level o school drop-outs among the inormalworkers is a productivity loss or the economy.

Those employed in the home based garment industry andin the Chikan crat industry were the worst aected, as theirlow incomes declined even urther, during the crisis. In theabsence o any possibility o dis-savings or even incurring

debt, these workers have had to cut down their expenditure

on ood, implying their immiserization into poverty. Theirlow health and low educational achievements have gonedown urther during the crisis.

The conditions o those workers who have returnedto their original place o residence is another aspectthat needs looking into. In the absence o adequateemployment opportunities, most o them have taken up

manual work on arms or in non-arm activities. To copewith the drastic reduction in wages and incomes, thehouseholds o the workers have pressurized non-workers

(women, children and the old) into the labour market,to take up work in low productivity employment and atvery low wages. These households have also experiencedsevere depletion in ood and nutrition, as well as ineducation and health. The return o migrant workers hasalso depressed the local economy due to the drop in theremittances on the one hand and the downward pressureon the wages on the other.

Small producers, who have always lacked adequatesupport in technology and skills, credit, inrastructure, etcare acing a severe liquidity crunch as well as a decline inbusiness. Their problems, which have not received enough

attention o policy makers or so long, have now come intothe open.

Thus, the impact o the global crisis appears to be quitewide-spread. Its direct impact is elt by the diamond

industry, which is highly integrated with the global market


43/80


as well as in the relatively less integrated industries like theauto parts industry and engineering industry. The coping

strategies, such as (a) reduction in household expenditure,(b) incurring debts, (c) withdrawal o children rom school,(d) women and children entering into the labour marketand (d) migration back to the native place, have madethe situation o the present generation as well as uture

generation o the aected workers worse than beore.The crisis highlights a number o weak points in our policiesand in our growth path.


44/80


Recommendations

The adverse impact o the crisis can be attributed totwo sets o actors, globalization and the weaknesses odomestic policies, which have paid inadequate attention

to the critical needs o our workers and producers. Therecommendations address both these aspects.

1. Universal Social Protection to Workers

The experience o the crisis has shown that the workers,who contribute to exports and to the rapid growth othe economy, have been thrown into the volatile global

market without any saety nets or social protection.

There is an urgent need to design and institutionalize a

package o universal social security, consisting o some

minimum critical social protection to all the workers in the

economy. Such a package should include (i) unemployment

insurance and assistance, (ii) health insurance, (iii) old age

pension, (iv) maternity benets, and (v) compensation

against injury, disability or death. The Social Security Bill othe NCEUS designed in May 00 is very relevant here. To

provide social security in the inormal sector, a National Fund

or the Unorganized Sector (NAFUS) has been proposed..

There is an urgent need to include all these critical social

security measures and take suitable legal, nancial,

institutional and administrative steps to institutionalize this

minimum package o social protection or all workers in theeconomy.

2. Ensuring Employment Services to Workers

The study has shown that when skilled workers lose their

jobs they do not get any support to nd new suitable work

5

CHAPTER


45/80


and are requently orced to take up unskilled petty work(where their skills are wasted) or remain unemployed.

There is a need to institutionalize assistance and supportto workers, to acilitate their movement rom one (skilled)job to another (skilled) job.

This requires well organized employment services

which includes (i) labour market inormation service,

(ii) counselling o workers on what kind o work is suitableor them and how to get it, (iii) providing training andre-training to workers and linking them with suitabletraining institutes and (iv) help in moving to new jobs. Thereis thus a need to scale-up the employment exchanges toset up employment services.

3. Ensuring Food, Health and Education or All The adverse impact o the crisis on the workers/small

producers can be somewhat mitigated i critical gaps in

social goods such as health, education, skills provisioning are

met. The study has shown that the large number o

programmes and schemes that promote education and

health o people/workers are not able to help in crisis

situations. For example, there are no institutionalized

acilities to ensure that children are not withdrawn rom

school and are not pressed into the labour market, till they

have completed Standard VII or Standard X. Similarly there

are no provisions to ensure basic health or all. The provision

o both education and health acilities is a basic requirement

and must be the primary obligation o the Government.

The respondents in the various samples said that thoughSSA (Sarva Shiksha Abhiyan), NRHM (National Rural HealthMission), ICDS (Integrated Child Development Services)PDS (Public Distribution Scheme), etc exist, they are limitedin scope and in coverage. There are several gaps in the

public health and education schemes in operation, with


46/80


the result that are unable to help people during a crisis.There is a need to ll in the gaps by building inrastructure,

allocating adequate unds, ensuring adequate stafng andputting in place the required systems.

A rights-based approach or basic health and elementaryeducation is required. The recent Right to Elementary

Education Act is an important step in this direction. The

Right to Food Act should also be enacted soon. A specialund needs to be created, preerably though WelareBoards7 to provide sot loans with subsidies to workers totake care o their educational and health related needs.Access to health services, at aordable prices or ree (orthe very poor) should be made universal. For the sectors

where there is no Welare Board, a relie package o the

basic acilities must be designed or workers in the evento a crisis.

4. Addressing Problems o Small Producers /

Micro Enterprises

The study has shown that small producers, the sel emp-loyedor own account workers are the worst hit group among

the producers. This is largely because they have poor accessto advance technology, credit, markets, raw-materials and

to inrastructural acilities, and have low staying power.

Under the crisis, they sufer rom declining markets as well

as high and uctuating input prices. They have been almost

pushed out rom the credit market as a result o the liquidity

crisis and the crisis in their own sectors.

Such welare boards have been set up by the Central and StateGovernments or sectors like bidi making, plantations, constructionwork, where inormal employment is high, to take care o the well beingo the workers. These boards have tri-partite representation (romworkers, employers and the Government) and they design schemesand policies related to wages, working conditions, social security, etcor workers and supervise the implementation o the same.


47/80


Non-viability o small and micro enterprises is, as it is, amajor problem in the economy, and the crisis shows that

their position becomes worse in crisis. Once again, there isan urgent need to create a special und or them at the allIndia level.

Instead o addressing the sectoral problems through

bail-out packages, special packages should be designed

to strengthen small producers. This is an opportunity toundertake this task on a priority basis.

The ollowing recommendations have been made in this

context:

In order to ensure their access to credit, it isrecommended that small producers should (i) beincluded in priority sector lending, (ii) have reduced

rates o interest on their credit, (iii) be aced witha more lenient process o debt recovery, (iv) beprovided with export credit, (v) access to microcredit to help them to run their business, and (vi)sot loans to tide over a crisis as well as to remainin business. The importance o the creation o aspecial und the sector, the National Fund or the

Unorganized Sector (NAFUS) as recommended bythe NCEUS, is reiterated in this context, to ensurethe ollowing:

Price regulation or raw materials and nished goods,as well as the provision o a subsidy in electricity

charges.

Inrastructural support, particularly regular supply o

electricity, and acilities or storage and warehousing.

Technological support to upgrade technology, so asto be competitive in the market.


48/80


5. Skill Training and Skill up-gradation

Skill training / retaining o workers is important during acrisis or several reasons: rst, the poor, who have beenbadly hit by the crisis in low-skilled activities, cannotbe helped adequately without their skill up-gradation.Second, skill training / retraining is important even orskilled workers, to enable them to move upward in the

value chain or to acquire new skills when the demand orold skills decline. There is, thereore, a need to design skill-training programmes.

Education up to Standard X is required or skill acquisition,

as it enables students to acquire new skills and newlearning much aster. The best way to impart skills isthrough technical institutions, ater students have acquired

a sound basic general education. This prepares workers toshit rom one skill to another, easily. Universalization oeducation up to Standard X is thereore very important.

6. Giving visibility to workers and to small

producers

A problem highlighted by the crisis is that there is no reliable

data on inormal workers and producers (particularly smallproducers) in the economy. In act, in the absence o suchdata, policy makers ace a serious problem, as they cannotidentiy the aected producers and workers and cannotallocate adequate unds to assist them.

There is an urgent need to have complete records o theseworkers, by giving them identity cards (and by insisting on

registration or units) so as to enable the workers to accessbenets o relie packages as well as social protection.

7. Bail out packages or women

The study has shown that women are among the worst


49/80


suerers o the crisis. They suer (i) as producers / ownaccount workers / employers, (ii) as wage earners at homeor outside the home, (iii) as home makers. In the process

they have taken upon themselves a disproportionate

burden o the crisis. There is a clear male bread-winnerbias on the part o the employers (women are the rst

ones to lose jobs) as well as the Government (which does

not address womens employment specically). Thoughwomen provide saety nets or become shock absorbersby taking on the burden o paid and unpaid work, there

are no policies that address their concerns.

Womens burden o unpaid domestic work has increased

because i) cash poor households have brought manymarket oriented activities within the purview o domestic

work, (ii) paid medical services have turned into unpaiddomestic work o care or the sick (iii) un/under employed

men at home need more work / caring rom women. Inaddition, many women have either entered into the labour

market or petty work or have increased their economic

work to supplement alling incomes.

As producers / employers women should get an access to

credit, technology, inrastructure acilities and markets. Aspecial stimulus package should be designed or them,keeping in mind the specic needs o women producers

/ own account workers. The male bread-winner bias mustchange, because women also are bread winners, and oten

the only bread winner in many amilies. There is a need to

ensure that women are adequately covered in any policypackages that may be designed or small producers.

In this context, the ollowing recommendations are made:

There should be separate employment targets,

including skill training targets or women, so that theiremployment is not sacriced due to the male bread-

winner bias.


50/80


The Government should ocus on provision o socialinrastructure to reduce womens (increased) burden

o unpaid work. Social services should be expanded

to take care o health, education and well-being o

children and adults.

Womens increased work also calls or universal child-

care acilities to release women rom the burden o

work, and more importantly to ensure healthy earlychildhood development o children.

The crisis should be seen as an opportunity to encourage

gender equity in the economy.

8. NREGS and Urban Employment Guarantee

Programme (EGP)

A major coping strategy o many o the urban workers

aected by the crisis has been to go back to their native

villages, where their amilies live and where the cost o

living is lower. This has been observed in all the sectors.

The National Rural Employment Guarantee Scheme

(NREGS) can play an important role in the present crisis.

Eective implementation o NREGS can help to provideemployment at minimum wages to the workers, who

have come back to their respective villages, without

depressing the wage rate in the village. Workers can

help to build productive assets in the village that could

expand employment opportunities in other sectors such

as agriculture, animal husbandry, horticulture, etc. the

provision o jobs under NREGS will also keep up the sel

esteem o the workers, who could otherwise all into

depression.

The impact o NREGS was not evident in some o the

survey villages. Consequently, the returned migrants have


51/80


not beneted through this very important programme. Itis thereore strongly recommended that:

Focused eorts are made to design NREGS or thoseregions where workers have migrated back. Eortsshould be made to use the skills o the returnedworkers.

Eorts should also be made to promote overalldevelopment and employment opportunities in thevillage.

State Governments should be directed to pay specialattention to NREGS in the aected districts and oraected workers.

There is also a need to extend NREGS in several ways:

(i) incorporation o skill training as well as use o skilledpersons under NREGS, (ii) inclusion o social services inNREGS, (iii) exibility with respect o selection o assetsunder NREGS and (iv) increase in the number o days owork, rom 00 days per household to unlimited number

o days.

There is a strong demand emerging or an urban

employment guarantee programme. Our study has shownthat most workers are not willing to migrate back to theirvillages. They also nd it difcult to live in urban centres

when their wages all drastically. They were, thereore,willing to take up work i it was made available to them. The urban EGP could ocus on urban inrastructure andurban services such as drinking water, sanitation, etc. The specic characteristics o an urban EGP could be (i)

inclusion o skilled work in the programme, (ii) inclusiono skill training, (iii) improving social services and (iv)

improving the quality o lie.

Considering the act that (i) the urban poor, particularlythose living in slums, need enormous investment to


52/80


improve their access to inrastructure and basic services,and (ii) small and micro enterprises in the inormal urban

sector require sound inrastructural support, urban EGPcan play a useul role in the context o the crisis.

Looking ahead

The study has serious implications or the growth path thatthe country has chosen. The rst question that arises in thecontext o our growth path is about the gains o globalizingat the lowest end o the value chain, where the work islabour intensive, the value added is low, the employmentgain is positive, but the quality o employment is verypoor, and the control or the decision making power is inthe hands o Global Production Networks (GPN), located

in developed countries. This is the case o all our exportintensive industries like gems and jewellery, textiles,garments, engineering and auto parts. The quality oemployment that was low, has become much lower, dueto the pressure o competition rom the global market.

This kind o globalization does not really help eitherin terms o gains in employment (because the qualityo employment is miserable) or in terms o stability o

employment and incomes o workers. There is a need totake a resh look at the globalization policies.

One option is to move up in the global value chain andacquire a place in the GPN to acquire some stability aprotection against the volatility o demand in the globalmarket. For example, in the case o the diamond industry,manuacture o jewellery will give a larger and more

stable place in the global market. Similarly, by integratingvertically and by creating global brands, the textile andgarment industries can stabilize their position in the globalmarket. However, experience has shown that this task isormidable, as it involves changing the global structure oproduction in avour o developing countries.


53/80


The adverse impact o the global crisis on the workers oexport industries emanates rom the non-integration o

the labour policy with the trade policy and the industrialpolicy that aims to promote growth o exports. Forexample, the Ministry o Textiles, Government o India andthe Ministry o Commerce, Government o India, workedvery closely together to take maximum advantage o the

post-quota regime in textiles and garments. However,labour policy is not examined when the industry and the

trade ministries work together, with the result that thequality o employment is sacriced.

This raises undamental questions about the validity othe strategy o depending on exports as the main driver o

economic growth and promoting industrialization through

producing goods or the global market. To put it dierently,by treating exports as a goal in itsel, rather than a meansto increase employment and well-being o workers,reduce poverty and promote human development, thereal developmental goals are kept outside the purview othe globalization related policies including trade policy. Inorder to integrate developmental goals with the growth

process, it is necessary to ensure well-being o workers

through universal social protection, on the one hand andto produce goods or the masses in the domestic market,on the other. Clearly, there is a need to rely more ondomestic markets or economic growth.

Focusing on expansion o domestic demand helps inmultiple ways. To start with, it ensures relative stability ogrowth, as growth is located within the domestic economy.

It also ensures poverty reduction, since domestic demandincreases with the increased purchasing power o people,particularly the poor. And nally, it acilitates achievement

o human development goals and sustainability o growth.In the nal analysis, the study has clear implications or the


54/80


development paradigm being ollowed in the Indup-ianeconomy.

Finally, some argue that since the Indian economy ismoving back on the growth path, with the rate o growtho GDP beginning to pick up gradually, there is no longerany need to worry about the temporary impact o the crisis

on the economy.

This view is rather short sighted. This is not to recognizethe high vulnerability o our exports to global marketsand to the protectionism o the developed world; this is

not to remember the severe impact o the crisis on ourworkers; and this is not to accept the non-inclusiveness oour development paradigm. It also means a reusal to learnany lessons rom the global crisis.


55/80


Data Compiled rom Sample

Surveys in the Six Sectors


56/80


Table

1SelectedSectors,Centresan

dSampleSize

Secto

r

State

/s

Locationo

Study

Sample

Total

Organization

Work

ers

Small

enterp

Documents

Sectoral Imapct and Fact n Figures