Reforming India's Informal Labour Market

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Why in News?

India's labor market has a large informal sector, with over 400 million workers not in formal jobs. This informal workforce makes up more than half of the country's GDP.

However, many of these workers earn low incomes and have limited skills, showing the need for more formal jobs and fair opportunities.

What is the Current State of the Labour Market?

Global State of Informal Economy:

• Over 60% of the global workforce and 80% of businesses operate in the informal economy.
• More than 2 billion people work in informal jobs.
• Informal employment makes up:
  • • 90% of total jobs in low-income countries.
    • 67% of total jobs in middle-income countries.
    • 18% of total jobs in high-income countries.

From 2010 to 2016, informal work contributed about 40% of GDP in Sub-Saharan Africa, Europe, Central Asia, Latin America, and the Caribbean.

In India:

• The informal labor market covers almost 85% of India's workforce.
• Over 90% of informal workers are self-employed or casual laborers.
• The informal sector generates more than half of India's GDP.
• Over 94% of the 27.69 crore informal workers registered on the e-Shram portal earn Rs 10,000 or less per month, and over 74% of these workers are from Scheduled Castes (SC), Scheduled Tribes (ST), and Other Backward Classes (OBC).
• About 25.56% of the informal workers belong to the General Category.
• Around 94% of registered informal workers earn Rs 10,000 or less per month, while 4.36% earn between Rs 10,001 and Rs 15,000 monthly.

 

What are the Challenges Posed by the Informal Labour Market?

Precarious Employment:

Agricultural labourers and street vendors often experience seasonal unemployment and low wages because there are no regulations or bargaining power. This leads to income inequality and increased poverty.

Sustainable Livelihoods:

Providing sustainable livelihoods and fair opportunities for informal workers is difficult.

Social Vulnerability:

• Large families put a strain on agricultural labourers.
• Low incomes keep home-based workers and street vendors in a cycle of low social status, limiting their access to social security, healthcare, and other basic rights.

Occupational Hazards:

• Waste pickers and recyclers face health risks due to poor working conditions and lack of safety measures.
• Child labor is also common in this sector.

Institutional Challenges:

Informal workers often lack legal protection and are vulnerable to harassment by authorities.

Way Forward

Universal Coverage:

Leverage the eShram Portal: Work with industry associations to enroll all 400 million informal workers into social security schemes.

Simplifying Registration Processes:

Integrate Informal Businesses: Simplify registration for informal businesses to bring them and their workers into the formal economy.

Self-Help Groups (SHG): Use SHGs to promote self-reliance and improve conditions for informal workers.

Implementation of Labour Codes:

Swift Implementation: Quickly implement the four consolidated labour codes (Wages, Industrial Relations, Social Security, Occupational Safety) to address current issues.

Needs-Based Support:

Tailored Schemes: Create social security programs for specific groups like street vendors, agricultural laborers, and construction workers.

Extended Benefits: Provide maternity benefits, accident and death compensation, education, and livelihood support during lean periods.

Skill Development and Formalization:

Skill Upgradation: Equip informal workers with skills to improve their employability and help them transition to the formal sector.

Formalization Incentives: Introduce policies and schemes to encourage the formalization of the labor market.

Reduced GST for Employment Services: Classify employment services as "merit services" with a lower GST rate (e.g., 5% instead of 18%) to boost job creation.

Link Skilling to Employment: Ensure skilling initiatives are directly connected to job opportunities.

Grievance Redressal Mechanism:

Periodic Redressal: Establish an accessible and officially monitored mechanism to regularly hear and address grievances from informal workers.

India’s Service Sector

Why in News?

Business activity in India experienced strong growth in May 2024, primarily due to the dominant services sector. The HSBC flash India Composite Purchasing Managers' Index (PMI), compiled by S&P Global, showed record export growth and the highest rate of job additions in nearly 18 years.

What is the Service Sector?

About the Service Sector:

The service sector includes industries that offer intangible services such as finance, banking, insurance, real estate, telecommunications, healthcare, education, tourism, hospitality, IT, and BPO.

Contribution of India’s Service Sector:

• The service sector contributes over 50% to India's GDP.
• The Covid-19 pandemic severely impacted the services sector, with its share in India's Gross Value Added (GVA) dropping from 55% in 2019-20 to 53% in 2021-22.
• India is a major export hub for software services. The Indian IT outsourcing service market is expected to grow by 6–8% between 2021 and 2024.
• In September 2023, India maintained its 40th rank in the Global Innovation Index (GII) due to advancements in technologically dynamic services that can be traded internationally.
• The Indian services sector attracted the most FDI inflows, amounting to USD 108 billion between April 2000 and December 2023.

What are the Key Highlights of India's Flash Composite PMI?

Composite PMI Increase:

The Flash Composite Purchasing Managers' Index (PMI) for India increased to 61.7 in May 2024 from 61.5 in April 2024, indicating robust economic activity.

Steep Job Expansion:

May 2024 witnessed the most significant expansion in private sector jobs since September 2006, fueled by strong growth in new orders and capacity pressures.

Export Orders:

Both the manufacturing and services sectors experienced a record increase in new export orders, marking the fastest pace since the series began in September 2014.

Input Costs and Prices:

Input costs rose at a quicker rate, leading to higher prices for Indian goods and services. This resulted in margin pressures, especially for service providers.

 

What Are the Challenges Related to India's Services Industry?

Inadequate Physical Infrastructure:

Insufficient transport networks lead to delays and higher logistics costs, which make up 14% of India's GDP, double the average in developed nations.

Digital Infrastructure:

Limited high-speed internet access in rural areas and concerns about cybersecurity and data protection affect customer trust and international compliance standards. For instance, a major data breach at the Indian Railways Catering and Tourism Corporation (IRCTC) in 2019 exposed millions of users' personal information.

Skill Development:

Educational curricula misaligned with industry needs and insufficient vocational training worsen workforce shortages. According to the World Bank, 22% of graduates are considered unemployable due to skill mismatches.

Employment Practices:

Rigid labour laws hinder hiring and firing flexibility. Many service jobs offer low wages and lack job security, sometimes resulting in mass layoffs.

Taxation Issues:

Multiple taxes and compliance requirements increase administrative burdens for businesses. While the Goods and Services Tax (GST) aimed to simplify the system, its implementation has been challenging for many service providers.

Domestic Competition:

Intense competition among numerous SMEs limits profitability, and the unorganized sector in the services industry results in inconsistent service quality and standards.

International Competition:

Established global companies in sectors like IT and finance increase competition for local firms. Protectionist measures abroad can restrict market access for Indian service exporters. For instance, the US imposes H-1B visa quotas, making it difficult for Indian IT companies to send skilled workers for projects.

Access to Finance:

Limited access to affordable finance hampers growth and expansion for service providers, impacting investment in research and development, and thus innovation and competitiveness. This creates disparity in competitiveness and market reach between traditional physical establishments and digital counterparts.

What are the Potential Opportunities for India in the Service Sector?

IT-BPO (Business Process Outsourcing)/ Fintech:

This sector is a major employer and contributor to India's GDP. It benefits from a large pool of skilled IT professionals and government support for the fintech industry, promising growth potential.

Healthcare & Tourism:

India's healthcare sector is rapidly expanding due to an ageing population, rising disposable incomes, and a growing medical tourism industry. It offers high-quality care at lower costs compared to developed countries.

Logistics & Transportation:

India's logistics sector has significant growth potential, supported by government infrastructure investments. These investments create opportunities for logistics and transportation companies to thrive.

Education:

India's large young population and increasing demand for quality education create opportunities for companies offering online education and vocational training services.

Professional Services:

India's abundance of skilled professionals in fields like accounting, law, and consulting presents opportunities for companies offering professional services to businesses.

Way Forward

Social Security Portability:

Develop a portable social security system tailored to the needs of gig workers and individuals transitioning between formal and informal sectors, ensuring continuity of benefits.

Entrepreneurship and Innovation:

Establish industry-specific startup incubators and accelerators to foster entrepreneurship and innovation. Expand angel investor networks to provide early-stage funding for promising startups, stimulating economic growth.

Targeted Programs for Marginalised Groups:

Implement skill development programs targeted at individuals from marginalised communities, like the SMILE initiative, to promote inclusivity and empower active participation in the workforce.

AI and Automation Reskilling:

Provide training in AI, robotics, and data science to prepare the workforce for the rise of automation. Empower workers to adapt and excel in the evolving job market through reskilling initiatives.

Remote Work Opportunities:

Encourage companies to adopt technology that facilitates remote work, improving job accessibility for individuals residing outside urban centers. Promote a balanced work-life equilibrium for employees.

Best Practices:

Implement strategies to incentivize informal workers to transition to the formal sector, drawing insights from Peru’s National Strategy. Foster decentralized stakeholder involvement, including the state, businesses, academia, workers, civil society, and Indigenous peoples, to drive successful formalization efforts.

IUCN Report on Mangrove Ecosystems

Why in News?

The International Union for Conservation of Nature (IUCN) has released a new report warning that half of the world's mangrove ecosystems are in danger of collapsing. This is the first thorough global assessment of mangroves by IUCN.

Titled "Red List of Mangrove Ecosystems," the report revealed these findings on International Day for Biodiversity (May 22nd).

 

What are the Key Findings of the Study?

About:

This study divided the world's mangrove ecosystems into 36 different regions known as provinces and evaluated the threats and risk of collapse in each region.

Findings:

More than Half of the World's Mangroves at Risk:

• Over 50% of the world's mangrove ecosystems are at risk of collapse, classified as vulnerable, endangered, or critically endangered, with nearly 1 in 5 facing severe risk.
• One-third of the world's mangrove ecosystem provinces will be severely affected by sea-level rise, with 25% of the global mangrove area predicted to be submerged in the next 50 years.

Higher Risk to South Indian Mangroves:

• Mangrove ecosystems in South India, shared with Sri Lanka and Maldives, are classified as "critically endangered."
• In contrast, mangrove ecosystems in the Bay of Bengal region (shared with Bangladesh) and the western coast (shared with Pakistan) are labeled as "least concerned."

 

Climate Change as a Major Threat:

• Globally, climate change is identified as the primary threat to mangrove ecosystems, affecting 33% of mangroves.
• This is followed by deforestation, development, pollution, and dam construction.
• Increased frequency and intensity of cyclones, typhoons, hurricanes, and tropical storms are impacting mangroves on certain coastlines.

Global Impact:

• Coasts along the Northwest Atlantic, North Indian Ocean, Red Sea, South China Sea, and Gulf of Aden are predicted to be significantly impacted.
• Without increased conservation efforts, about 7,065 sq km (5%) more mangroves could be lost, and 23,672 sq km (16%) will be submerged by 2050.

What are India’s Initiatives Related to Mangroves Conservation?

Coastal Regulation Zone (CRZ) Notification (2019):

Under the Environment (Protection) Act, 1986, this notification categorizes coastal areas, including wetlands, into four groups. It prohibits activities that could harm mangroves, such as dumping waste, industrial activities, land reclamation, and construction within these zones.

Existing Forest Laws:

The Indian Forest Act, 1927: States like Maharashtra have declared mangroves on government land as Reserved Forests, providing legal protection.

The Wildlife Protection Act, 1972: Some mangrove areas serve as vital habitats for wildlife and are safeguarded under this act.

Other Relevant Acts:

Additional laws like the Water (Prevention and Control of Pollution) Act, 1974, and the Maharashtra Tree (Felling) Act, 1972, regulate activities that could pollute or harm these ecosystems.

Central Sector Scheme on 'Conservation and Management of Mangroves and Coral Reefs':

This scheme offers financial aid to coastal states and union territories for implementing mangrove conservation action plans. These plans may include surveys, alternative livelihood programs, and awareness campaigns.

Mangrove Initiative for Shoreline Habitats & Tangible Incomes (MISHTI):

Introduced in the 2023-24 Union Budget, MISHTI aims to increase mangrove cover along coastlines and degraded lands. It supports sustainable development and protects vulnerable coastal areas.

How Significant is the Mangrove Ecosystem?

Challenges Faced by the Mangrove Ecosystem:

Habitat Destruction and Fragmentation:

Mangroves are cleared for agriculture, urbanization, aquaculture, and infrastructure, leading to habitat loss and fragmentation, disrupting ecosystem functioning and biodiversity.

Climate Change and Sea Level Rise:

Rising sea levels due to climate change threaten mangroves. Extreme weather events like cyclones and storms can cause severe damage to mangrove forests.

Pollution and Contamination:

Agricultural runoff, industrial discharges, and improper waste disposal pollute mangrove habitats, harming flora, and fauna. Heavy metals, plastics, and other pollutants adversely affect these ecosystems.

Lack of Integrated Management:

Mangroves are often managed in isolation without considering their interconnectedness with adjacent ecosystems like coral reefs and seagrass beds. Integrated management is crucial for effective conservation.

Overfishing and Unsustainable Harvesting:

Overfishing and unsustainable harvesting of mangrove resources, such as fish, crabs, and timber, can reduce their ecological and economic value.

Invasive Species:

Non-native species, like the red mangrove, can outcompete native species and alter the structure and function of mangrove ecosystems.

Lack of Awareness and Protection:

Mangroves are undervalued and lack legal protection, making them vulnerable to exploitation and destruction. Increased awareness and legal safeguards are necessary for their conservation.

What can be Done to Protect Mangrove Ecosystem?

Cracking Down on Harmful Activities:

Implement stricter laws and enhance enforcement to prevent pollution, deforestation, and unsustainable development along the coast. This will help protect mangrove habitats from degradation.

Mangrove Adoption Program:

Launch a public-driven program allowing individuals, corporations, and institutions to "adopt" sections of mangroves. Participants would be responsible for the maintenance, protection, and restoration of their adopted areas, fostering a sense of ownership and collective responsibility.

Mangrove Research and Development:

Invest in research to explore novel applications of mangroves, such as using them for phytoremediation to clean polluted water or developing new medicines from mangrove plant extracts. This could lead to innovative ways to leverage the unique properties of mangroves for sustainable development.

Empowering Local Communities:

Involve local communities, who often have a deep understanding of mangrove ecosystems, in conservation efforts. Create sustainable livelihood opportunities tied to protecting mangroves, fostering a shared responsibility for their well-being.

Bio-Restoration Techniques:

Utilize bio-restoration techniques to revive degraded mangrove areas, helping to maintain original biodiversity. Ecological restoration can accelerate mangrove recovery compared to natural regeneration.

Diverse Species in Restoration Efforts:

Ensure restoration efforts include a variety of mangrove species rather than monocultures. This approach will create forests that are more resilient to the impacts of climate change.