Atma Nirbhar Bharat Package offers little to informal sector

Amid the outbreak of novel coronavirus (Covid-19) pandemic in the country, the government of India had announced various economic measures under the Atma Nirbhar Bharat Package (ANBP) in May 2020. Prime Minister Narendra Modi announced on May 12 a special economic package worth Rs 20,00,000 crore (equivalent to 10% of India’s GDP) to make the country self-reliant, particularly in manufacturing and empowering the poor, labourers, migrants who have been adversely affected by the economic fallout of the pandemic.

The prime minister observed that the crisis highlighted the importance of local manufacturing, local market and local supply chains. The country managed its internal demand from local supplies during the extended period of lockdown. The Prime Minister advocated that we should be vocal about local products and help these local products become global.

On many occasions in the last one year, the Union government reiterated the importance of ‘atmanirbharata’, or self-reliance, for the Indian economy. It claims that this approach would benefit the poorer sections of the society including informal labour (includes migrants) that constitute the majority of the country’s labour force. The second wave of Covid-19 hit the country in April, at a time when government believed that the country has successfully tackled the pandemic.

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Even though another national lockdown was not announced, a number of states imposed lockdown-like restrictions. Economic activity was severely hit again and for a brief period country witnessed exodus of migrants from cities too. At this juncture it’s important to examine what ‘atmanirbharata’ holds for the labourers, informal sector labour in particular.

The Atma Nirbhar Bharat Package

Following the announcement by the Prime Minister, finance minister Nirmala Sitharaman announced detailed measures under the economic package in five subsequent press conferences. The key measures proposed under the economic package were as follows:

• Privatisation of Public Sector Enterprise (PSEs): A policy has been announced with plans to privatise public sector units, except the PSUs functioning in certain strategic sectors that will be notified by the government. In strategic sectors, at least one PSU will remain, but private sector will also be allowed.
• Collateral free loans for businesses: Rs 3,00,000 crore earmarked for collateral free loans to businesses including MSMEs. MSMEs can borrow up to 20% of their entire outstanding credit as on February 29, 2020 from banks and non-banking financial companies (NBFCs). A fund with a corpus of Rs 10,000 crore will be set up for MSMEs. This scheme aims to support stressed MSMEs that have non-performing assets (NPAs).
• Schemes for NBFCs: A special liquidity scheme was announced under which Rs 30,000 crore of investment will be made by the government in both primary and secondary market transactions.
• Employee Provident Fund (EPF): Under the PM Garib Kalyan Yojana, the government paid 12% of employer and 12% of employee contribution into the EPF accounts of eligible establishments for the months of March, April and May.
• That was continued for three more months (June, July and August). It was estimated to provide liquidity relief of Rs 2,500 crore to businesses and workers.
• Statutory PF contribution: Statutory PF contribution of both the employers and employees was reduced from 12% to 10% for all establishments covered by EPFO for the first three months of lockdown. This scheme was applied to workers who are not eligible for the 24% EPF support under PM Garib Kalyan Package and its extension.
• Street vendors: A special scheme was launched to facilitate easy access to credit for street vendors. Under this scheme, bank credit was to be provided to each vendor for an initial working capital of up to Rs 10,000. This was estimated to generate liquidity of Rs 5,000 crore.
• One Nation One Card: Migrant workers would be able to access the Public Distribution System (Ration) from any Fair Price Shop in India by March 2021 under the scheme of One Nation One Card. The scheme would introduce the inter-state portability of access to ration for migrant labourers. By August 2020 the scheme was estimated to cover 67 crore beneficiaries in 23 states (83% of PDS population). All states/union territories are required to complete full automation of fair price shops by March 2021 for achieving 100% national portability.
• Free food grain Supply to migrants: Migrant workers who are not beneficiaries under the National Food Security Act ration card or state card would be provided 5 kg of grains per person and 1 kg of chana per family per month for the first two months of lockdown. Rs 3,500 crore will be spent on this scheme, and eight crore migrants are estimated to benefit under it.
• Affordable Rental Housing Complexes (ARHC) for migrant workers / urban poor: The migrant labour/urban poor would be provided living facilities at affordable rent under Pradhan Mantri Awas Yojana (PMAY). This would be achieved by: (i) converting government funded housing in the cities into ARHCs through PPPs, and (ii) incentivising manufacturing units, industries, institutions, associations to develop ARHCs on their private land and operate them.

A total of three Atma Nirbhar Bharat Package worth ₹29.87 lakh crore ($420 billion) were announced by the government on 12 May, 12 October and 12 November 2020, respectively. The second and third economic stimulus packages were labelled as Atma Nirbhar Bharat Abhiyan 2.0 and 3.0. As part of the Atma Nirbhar Bharat Package, numerous government decisions took place such as changing the definition of MSMEs, boosting scope for private participation in numerous sectors, increasing FDI in the defence sector and the package has found support in many sectors such as the solar manufacturers sector.

The labour ministry also issued guidelines for the Atma Nirbhar Bharat Rozgar Yojana, with the clarifications that the government would only contribute to new employees earning up to Rs 15,000 a month as defined under the Employees Provident Fund and Miscellaneous Provisions Act.

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Atma Nirbhar Bharat Package and informal workers

The overarching vision of Atma Nirbhar Bharat envisaged self-reliant economic development via ‘vocal for local’ and ‘make for the world’ approaches. India’s vast informal sector was supposed to play an instrumental role in this vision. But the sector, in its current position, appears severely constrained to play any meaningful role. The size of India’s informal sector is huge (more than 90% of the workforce) and so is the extent of diversity therein. It accounts for about 60% of Gross Value Added (GVA) and a major share in the export basket. However, most of the informal workers have precarious livelihood. How informal workers (that includes migrant workers) would benefit from ANBP is a big question.

For example, informal workers mostly are not beneficiaries of EPFO. Employees’ Provident Fund Act 1952 is applicable for establishments having 20 or more workers. Informal workers are generally not covered unless those contract workers in organized sector having 20 or more workers. Majority of informal sectors don’t get the benefit of EPF. Thus the contributions that the Union government paid towards EPF subscriptions under Atma Nirbhar Bharat Package did not benefit informal sector workers.

Components of Atma Nirbhar Bharat Package that can provide direct benefit to informal sector workers are easy access to bank credits to street hawkers, free foodgrains to migrant workers, one nation one ration card (ONORC) scheme and affordable rental housing scheme. Of these, efforts were indeed made to provide free foodgrains to migrant workers and the scheme of one nation one ration card was also launched.

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Migrant workers in particular are supposed to benefit from the one nation one ration card scheme. Those staying away from their families can partially claim their rations where they are stationed, while their family in their native places can claim the rest. The finance minister informed that the scheme has covered 86% of the beneficiaries in February 2021.

The finance minister also proposed the launch of a portal that will collect all relevant information on gig workers, building and construction workers, among others. “This will help formulate health, housing, skill, insurance credit and food schemes for all migrant workers,” she said. As on 11 March 2021, seventeen states have successfully operationalised the ‘One Nation One Ration Card system’.

However, there are no reliable reports regarding the state of implementation of one nation one ration card scheme among the affected migrant workers in the second wave of Covid-19 pandemic. There is no data available in the public domain pertaining to number of migrant workers who benefitted from this scheme during second wave of prevailing pandemic.

Another scheme which is designed to benefit informal workers is the scheme that provides easy credit to street hawkers. The scheme intends to facilitate collateral free working capital loans of up to Rs 10,000/- of one-year tenure, to approximately 50 lakh street vendors, to help resume their businesses in the urban areas, including surrounding peri-urban/rural areas. So far, as part of the scheme,31,64,367 applications from across the country (except from Sikkim, which is officially not taking part in it) were received. Of the total applications, 16,77,027 have been sanctioned and 12,17,507 have been disbursed.

Presently, Hyderabad has seen the highest number of applications (over 50,000) and disbursement rates. Bengaluru, Mumbai, Chennai, Delhi and Kolkata are ranked next in that order. Telangana, Andhra Pradesh, Uttar Pradesh, and Madhya Pradesh are among the better performing states, which have also provided certificates of vending either before the pandemic or in the past few months.

Another scheme under the one nation one ration card which is supposed to benefit informal workers particularly migrant workers is PMAY Affordable Rental Housing Scheme. The Affordable Rental Housing Scheme was launched with a view to benefit the migrant workers. Under the Affordable Rental Housing Scheme, the Union government will provide houses to the migrant workers at an affordable rent.

The scheme will be implemented under Pradhan Mantri Awas Yojana. Out of all the 36 states in India, 24 states have agreed to enter into an agreement with the Union government to implement the ARHC Affordable Rental Housing Scheme. (https://indiascheme.com/affordable-rental-housing-scheme/). However, this particular scheme is under various stages of implementation and not much data is available to judge the success of the scheme.

Free Foodgrains under Atma Nirbhar Bharat scheme

The department of food & public distribution had allocated a total quantity of about 8 Lakh million tonne foodgrains to states/UTs as on May 15, 2020 under the Atma Nirbhar Bharat Scheme to help mitigate the food-security requirements of migrant/stranded migrants across the country. This scheme specially provided to cover all such persons who were neither covered under the National Food Security Act (NFSA) nor under any other state PDS scheme or were not able to access PDS foodgrains for any reason, during the unprecedented Covid-19 situation.

Exact number of inter-state migrants is not available, but as a matter of abundant precaution, a very liberal estimate of about 8 crore migrants/stranded migrant persons across the country has been made. The intention was to provide adequately for all eventualities so that the allocation did not fall short of the requirement. It needs to be emphasized that no data on actual or estimated number of such persons across the country was available with either the Union government or the state governments.

The Atma Nirbhar Bharat Scheme was announced in the middle of May 2020, and after the identification of such migrants/stranded migrants by states and UTs, a total of about 6.38 lakh tonne foodgrains was lifted by states/UTs based on their own initial estimates that was also liberal and driven by their sense of abundant precaution. Arrangements were made for distribution of free foodgrains to all such persons, not only through the fair price shops (FPSs) but also through special distribution centres across major roads, highways, quarantine centres, shelter homes and labour camps as well as through mobile vans to reach out to maximum number of people.

While this exercise was going on, many states/UTs later informed that a majority of such migrant persons had already moved back to their home states, where they may be having access to either NFSA or state PDS foodgrain. Thus, the lifted quantity of 6.38 LMT of foodgrains could not be completely utilised/distributed. As a result, states/UTs had distributed only about 2.3 LMT foodgrains by the end of June 2020. However, as per requests received from many states/UTs, the distribution period of the already lifted foodgrains was extended by another two months to August 31, 2020.

As per reports available up to August 17, 2020, out of total 6.38 LMT lifted foodgrains, a total of about 2.49 LMT (39%) was distributed by states/UTs to identified migrants/stranded migrants. The low utilization clearly confirms that the actual number of migrant workers was much less and if they had returned to their home states then they were already covered either under NFSA or state ration card scheme. Moderate utilization clearly shows that the actual number of inter-state migrants was much less than anticipated earlier.

Formalisation of informal workers

The Atma Nirbhar Bharat Scheme advocated infusion of capital to ensure enhanced labour productivity and higher wages. Moreover, it envisaged internal consolidation in the MSME sector via mergers and acquisitions that would bring in benefits of scale. But these would further squeeze the possibility of generating more employment. Increase in labour productivity and infusion of capital further reduce the demand for labour.

India is a labour-surplus economy. Higher capital intensity-led enhanced labour productivity and ultra-flexibility in production cycles might have severe repercussions on the availability and quality of jobs in India. This apprehension came true as India experienced the highest unemployment rate during the pandemic induced lockdowns and partial lockdowns. Situations worsened further during the second wave of Covid-19 pandemic.

To maintain pre-pandemic level of employment, proportionate increase in expected demand must be more than the enhanced labour productivity. This would necessitate increased competitiveness in international market. This again would require enhanced labour productivity and possibilities of making a part of the workforce redundant cyclically. Thus the objectives are contradictory to each other.

Economic consolidation and realization of economies of scale do not go hand in hand with the creation of greater livelihood opportunities. The former would nudge the economy towards greater formalisation and on the other, lack of employment opportunities would aggravate informality.

Atmarnirbharta, or self-reliance, requires organisations that can benefit from economies of scale, entrepreneurs who take risks and grow those organisations, independent professionals who have the skills that can support technological progress and productivity growth, and banks that understand the hazards of providing credit and that diversify their risks while financing growth. The crux of Atma Nirbhar Bharat Scheme is to provide boost to manufacturing in India in a context where internal market is big enough to attain economies of scale.

India’s manufacturing sector has been characterised by the missing middle — a concentration of small/micro-firms at one end of the spectrum and some large firms at the other. Indian manufacturing is characterised by a high share of fragmented informal organisations. National Sample Survey Office (NSSO) data reveal that the share of informal employment is as high as 95-98% in sectors such as textiles, leather and furniture.

Other export sectors like industrial machinery, specialty chemicals, food products and fabricated metals have 60-85% share of informal employment. There are 19.67 million micro, small and medium enterprises (MSMEs) in manufacturing, employing 36.04 million people. The share of micro enterprises, among MSMEs is almost 99%.

The expectation that economic growth will generate profits for these firms and make them embrace formality may not materialise. Shift to a formal status would essentially mean additional costs of paying taxes, adhering to safety norms, and providing additional employment benefits to workers. All these would add to the cost and employers would try their best to avoid that. This explains why manufacturing units remain informal even when those are financially doing well.

However, regulation and productivity need not be mutually exclusive. Supporting informal businesses is desirable from the employment perspective. Initiatives to keep them afloat and make them increasingly productive are desirable. Atmanirbharata or self-reliance should have regulatory component along with thrust on productivity and competitiveness. So far, focus has been on mobilization of resources and up-scaling leading to realization of economies of scale and higher productivity. Ensuring adequate compensation, decent working condition and provision of social security are issue that remained hidden in the background.

Moreover, Indian labour market is characterized by rising open unemployment, declining female work participation rate, lack of structural transformation and underemployment, low productive and low-quality job, shortage of skilled workforce, low employment elasticity of manufacturing sector, stagnant growth of manufacturing and missing middle. Atmanirbharata does not address such labour market issues.

Nothing on offer for informal workerd

From the perspectives of informal workers, Atma Nirbhar Bharat Package provided few immediate benefits like distribution of free foodgrains, portability of ration cards, easy access to loans for street hawkers, affordable rental housing, provident fund subsidy etc. These measures had varying success and these are at various stages of implementation. Nevertheless, the intent was clear that these measures were formulated to tide over difficulties in the short run.

The medium and long-run impacts of atmanirbharata on informal workers is ambiguous. The primary vision of self-reliant economy that relies on greater mobilization of local resources and realization of economies of scale and subsequent increase in productivity and competitiveness has the potential of further aggravate informality in labour market.

This particular package does not address the fundamental issue of informality. It provides for certain immediate relief measures, but falls short of providing any meaningful panacea for reducing structural informality in Indian labour market.