Euphoria of the 5 per cent

After a long while, the Reserve Bank of India appears to have glimpsed a breakthrough in the dark clouds casting gloom over the economic landscape. On Tuesday, Governor Raghuram Rajan ticked off signs of sunnier days ahead: increasing export growth, pick-up in some services sector and agriculture; the year could end with a revived GDP rate of 5 per cent.

What difference will the central bank’s estimates of a marginal spike in GDP make to our perception of economic growth? For those who consider India an emerging economy such as South Korea, Japan or even Iceland, perhaps a GDP of 5 per cent would be wonderful.

But in order to think this way they would have to also deal in and perpetuate a fiction in which the expansion of one part of the national economy suffices to determine the destiny of the whole.

That is how policymakers think when crafting key policy relating to, say, the revival of manufacturing. They assume that a pick-up would increase employment. Two years ago, the Manufacturing Policy laid out plans to increase factory output share in GDP from the current 15-16 per cent to 25 per cent. That’s how East Asian manufacturing had expanded at similar stages of development: so why not India?

Why not indeed? If India’s demographic dividend needs to be cashed that means 220 million jobs by 2025. And manufacturing could do the trick, so the history of industrialism has taught us.

Bucking history

But evidence from various studies shows jobless growth in the decade to 2009-2010 in organised manufacturing.

Yet, if the authors of the Manufacturing Policy can still retain their faith in organised manufacturing (registered under Factories Act) to provide additional jobs to reap that youth-dividend, one can only surmise it as self-deception, or an attempt to simply keep themselves busy.

Unlike any other emerging economy, India remains for the most part in the shadows. Nowhere is this more clear than in the peaceful co-existence of diverse, syncretic modes of employment corresponding to modes of production from different stages of development.

India’s unorganised sector of production is truly national spatially and across time. Various studies attest to its resilience, as a remnant of backwardness perhaps but also as a major source of employment for those willing to work.

Then there is an overlapping category -- the micro, small and medium enterprises (MSME) segment of manufacturing, the mainstay of India’s traditional exports such as textiles, gems and jewellery, darling of seminarists, industrial economists and conscientious policymakers brought up on Fritz Schumacher. The traffic between this and the informal sector (those employing, say, less than 10) is vast, as enterprises such as gems and diamond polishing draw from the informal sector to keep wages, and therefore costs, low.

The glamorous, organised sector is the smallest in terms of employment. In 2008, the organised sector accounted for 27 million workers, of which 17 million were in government entities. But policymakers, consumers and producers aren’t complaining, because it generates about half the manufacturing sector’s output. And that helps to create the fiction of the part as the whole. Isn’t India its consuming middle-class and its billionaires?

Fiction as fact

Since the main drivers of GDP are in the organised sector — agriculture long ago having given up driving the Hindu rate of growth —and since they have taken India into expansionary mode, their strategic importance to India’s destiny is already established.

That importance articulated in terms of the relation between manufacturing and jobs, is built on the fiction of a composite economy where the vast, unorganised sector is simply denied an existence.

This organised island, or the new idea of India, is seen as amenable to the same kinds of ‘reforms’ that would work in advanced countries. Policymaking in New Delhi and on Mint Road in Mumbai enforces this fiction; but equally if not more forcefully, so does a new discourse. This is not composed of a set of economic policies or principles but contains an ideology that helps reinforce the fiction within the organised economy itself.

This ideology is of the sociological and psychological kind, not so much the political; it allows people to accept a set of economic and organising principles as the only option to a better life.

New Age employment

One nascent and New Age organising principle now leaching into the ‘registered’ neon economy is the idea of temporary employment as the only way to beat the volatility of business cycles that hurts employers and workers alike.

Also called Private Employment, flexi-staffing outsources job requirements to third party agencies or private employment agencies (PEA) that employ people and hire them out to “user” companies on fixed term employment contracts. The hiring firm pays fees to the staffing company or PEA that in turn pays the employee a wage. The idea is disseminated as a win-win for employers and employees. The former can adjust labour costs to the business cycle; just as output is cut so can jobs. Employees, particularly fresh entrants to the job market, can get jobs with full benefits assured them by established PEAs that will cast around for “temp” placements.

Adherents of the temp-staffing model point to its popularity, in Europe and the fact that the ILO has endorsed it as an appropriate mode of employment for the current times.

Temp-staffing can help rid India of unemployment, wax its adherents and usher in the new age of global practices. But labour laws have to be changed, especially the ones that relate to compulsory benefits rules that are observed more in the breach.

Rituparna Chakraborty, Vice-President of the Indian Staffing Federation, the apex body of staffing companies, feels mandated employee benefits evoke a simple calculus. Traditional pay, whether for permanent or contractual workers, involves deductions for statutory benefits that often leave less than half of the nominal pay in hand.

Most young entrants, she stresses, would prefer to get more pay now with perhaps some health benefits than face deductions for PF, ESIC, pension; employers too would rather hand out more pay than cope with statutory benefits.

Uncertainty as certainty

In the temp model can be seen a New Age consciousness making its way into the formal economy. It invokes the need to accept uncertainty and impermanence as a way of life, of the impossibility of job security and the premium on the present.

Time acquires dual dimensions: on the one hand it is immeasurable because of the impermanence of employment and yet it is contained in the here-and-now, in a contract.

Over the long term, temp staffing evokes self-centredness; in the individual and the organisation now mediating through money. The social compact breaks down at the “shop floor.” But also at the national level between the highest tripartite relationship of democracy itself: between the state, employee and the firm.

In a perverse way, temp jobs could mean inclusion — into which world is the question.

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