Despite the rise in economic activity, wages have seen little revision, and the country faces labor shortages.
Migrant Workers Remain Alienated In India’s High Growth Trajectory
Rebounding from a technical recession in 2020, India’s economy is on track for double-digit growth in the next financial year, though the full impact of the pandemic has not yet been assessed.
The International Monetary Fund’s World Economic Outlook report projects India’s gross domestic product to grow by 11.5 percent in 2021, while the government’s Economic Survey projects growth of 11 percent. India follows an April-March financial year.
India will be the only country to record double-digit growth, according to the IMF’s projections. Among emerging markets, China will be second to India, with 8.3 percent GDP growth projected. The United States’ GDP growth is projected to be 5.1 percent.
While these projections are encouraging, the Covid-19 pandemic is still having a huge impact, not only on India’s economy, but globally.
“There will be need for government spending to reduce the risk of permanent damage to the economy from the shock of this global pandemic, which has caused contractions in GDP that are unparalleled in modern history for most economies,” a report in Forbes from the London Business School states.
“IMF in its projections makes certain assumptions, particularly regarding the unorganized sector,” said K. R. Shyam Sundar, a professor at the Xavier School of Management in Jamshedpur. “The real indicator of economic growth is the increase in real wages, which will push the aggregate demand. The private sector must offer the workers attractive wages for them to return to work.”
In India, where the economy contracted by 8 percent in 2020, according to the IMF, migrant workers have been hit particularly hard during the pandemic. For these workers, the wages are not high enough for them to risk their health during the pandemic.
“Only those migrant workers [in Satjelia, an island in the Sundarbans region of West Bengal] who were in acute financial distress went back to work, while others settled with low-paying agricultural and locally available work,“ said Pranabesh Maity, a staff member at the Sundarbans Green Environment Association in Satjelia.
After the lockdown, which led to an abrupt halt to transport, many migrant workers from industrial hubs walked hundreds of miles to reach home.
“The wages have not increased, and many people do not want to go back to work. The threat of Covid-19 led many workers to stay back. Many people who used to work in cities as migrant workers are ready to hunt for crabs in restricted reserve forests, even with a risk of a tiger attack,” Maity, said.
After Covid-19, wages in the informal sector, which employs a large pool of migrant workers, declined significantly.
“In India, recent evidence suggests that formal workers’ wages have been cut by 3.6 percent, while informal workers have experienced a much sharper fall in wages of 22.6 percent … ,” a report by the International Labour Organization states.
Nearly 21 million salaried employees lost their jobs when India’s economy went into recession last year, according to the Centre for Monitoring Indian Economy. As of January 2021, it listed the country’s unemployment rate at 6.5 percent.
“Salaried employees continue to take a hit in India’s job markets during the lockdown. Five months into the lockdown, they remain the biggest casualty,” the center’s report states. “… Salaried jobs … include people employed by households on a salaried basis. So, household maids, cooks, chauffeurs, gardeners, guards are also salaried employees if the terms of their engagement entails a fixed salary at a fixed frequency. These are mostly informal salaried jobs.
“All salaried jobs put together account for 21 to 22 percent of total employment in India. There are many more farmers than salaried jobs. And, there are even more daily wage laborers. Farmers and daily wage earners together account for nearly two-thirds of the Indian working population.”
The revival in the textile sector, however, has been steep, resulting in cotton prices shooting up sharply in the past six months, said Vijay Mathur, former additional secretary-general at the Apparel Export Promotion Council.
The price of one candy of cotton (355.62 kg) has increased from about INR 30,000 ($411) to INR 40,000 ($549) in six months.
“A lot of exporters and spinners are making good profits as there is a good demand for cotton the export market,” Mathur said. He thinks that “by the next spring-summer season, orders for which start coming in May, there will be a huge shortage of workers.”
With workers staying home during the pandemic, India already is facing a labor shortage despite increased demand.
Ahead of the lockdown, the apparel sector in the large southwestern state of Karnataka employed nearly 25,000 workers. Now, the number is 15,000, said Prathibha R., president of the Garment and Textile Workers Union in the state, one of the hubs of apparel manufacturing in India.
“There is no incentive for workers to come to work,” said Prathibha. “There is an acute shortage of workers in big factories. Many small factories have closed. However, there has been no wage revision, and those who left don’t want to come back.”
India’s factory output shrunk by 1.9 percent in November, mainly in the manufacturing and mining sectors.
Despite GDP growth projections, overall demand in the economy, a large part of which comes from rural areas, remains less than optimal. To counter the slowdown, the government in May announced a stimulus package of INR 200,000 crore ($266 billion), amounting, it said, to nearly 10 percent of GDP. According to analysis by India Ratings and Research, the relief package worked out to 1.1 percent of GDP.
Much of the stimulus was tied to loans for industrial units. This financial year, the Reserve Bank of India has reduced key interest rates by 115 basis points.
“The major focus of the government to revive the Covid-19 battered economy has till now been on the supply side, but it is high time to change gears and focus on the demand side as well, lest the ongoing recovery begins to lose steam,” Sunil Kumar Sinha, principal economist and director of public finance at India Ratings & Research, said in a press statement this month.
(Edited by Uttaran Das Gupta and Judith Isacoff)