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Various industries are lining up before the Government asking for support to tide over the slowdown. It is a measure of the enfeebled nature of the State that some promoters are able to brandish the threat of labour retrenchment despite laws that make that denouement difficult in practice, to seek financial accommodation from the State. The Government faces a Hobson’s choice. Acquiescing to these pleas gives rise to a moral hazard — encouraging entrepreneurs to engage in reckless adventures secure in the belief that the State would bail them out of any adverse consequences. Yet, the threat of loss of jobs is not something that can be dismissed as of no consequence. If workers are left to fend for themselves, the economic slowdown which triggered the crisis in the first place will assume graver proportions. In the absence of a social security cover — an issue on which Government and industry should apply their minds — continued employment plays a critical role in keeping the economy and society in equilibrium.

Commercial vehicle manufacturer, Ashok Leyland, has shown the way in this regard. Instead of cutting workforce to cope with a demand slump, plants may work for fewer days in the week till the crisis lasts but workers get the full wage promising to put in extra hours at a later time when demand picks up and additional output is needed. In select cases, the RBI may even allow banks to fund the incremental wage costs on terms similar to project finance assistance. The software sector ‘benches’ its employees during lean periods, paying them their salaries but not their perks and allowances and urges them to use the time to upgrade their skills. Industries that have a track record of profitable functioning and have built up reserves should be encouraged to go this route. That still leaves out sunrise sectors (at least in the Indian context) such as aviation or organised real estate where the downturn has struck even before the industry could take root.

Industry, Government and trade unions should develop institutional mechanisms to cope with ups and downs in business activity. A tripartite initiative to deal with downturns is an idea whose time has come. Already, an industry-Government partnership has come into effect to upgrade skills: the private sector is willing to be a majority stakeholder in the National Skill Development Corporation, the corpus of which is expected to swell to Rs 15,000 crore in a few years. The State is also currently administering a health insurance scheme for employees in the organised sector. This scheme incidentally provides for cash compensation for loss of wages from absence due to illness. A record of man days lost and wages foregone due to strikes and lockouts is available nationally for a number of years to enable the development of appropriate actuarial data for the introduction of a scheme of employment insurance. The crisis calls for a lasting institutional solution.

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