It’s unfair to expect private businesses to foot the social security bill for lockdown

One of the strange features of the virus-induced economic standstill in India is the state’s blithe presumption that the private sector will fund safety nets for workers for an indeterminate period. The Prime Minister’s address on lockdown extension made an appeal to employers to be compassionate by not laying off workers. The Labour Ministry has since begun to collate data on job losses and pay-cuts from the EPFO and ESIC, issuing the veiled threat that this will be shared regularly with the Prime Minister’s Office. Cash-strapped Indian States, finding in such appeals a convenient ploy to avoid concrete action, have issued directives of their own. The Karnataka government has directed private sector employers to abstain from lay-offs and to grant workers paid leave, while Maharashtra has mandated that business owners must pay 100 per cent of their workers’ wages during the lockdown. These directives are now being contested at Supreme Court by small business owners for being both illegal and un-constitutional.

The stringent lockdown no doubt poses an existential threat to large swathes of India’s workforce, requiring urgent ameliorative measures. An SBI analysis estimates that India’s 37.3 crore-strong labour force, made up mainly of informal or self-employed workers, will likely suffer a ₹4 lakh crore income loss. But expecting private businesses to somehow foot this bill displays a lack of basic understanding on how businesses operate. This stringent lockdown, unlike slowdowns that we’ve seen in the past, has led to zero revenues for most businesses in the past month, creating unprecedented working capital stress. It is surely time for the state to pay attention when a PSU behemoth like SAIL complains of a liquidity crunch arising from un-recovered fixed costs and rising inventories. The All India Manufacturers Association has been issuing fervent appeals the past month on how the lack of orders and cash flows has pushed over 70 per cent of MSMEs to the brink, with no means to pay even utility bills leave alone full wages. Business owners in sectors such as retail trade find themselves in dire straits and can hardly afford largesse to employees. The government must surely be aware that over 90 per cent of Indian businesses are own-account enterprises with little access to bank facilities even in the best of times. But appeals for relief have so far fallen on deaf ears.

It is high time India’s Central and State governments stopped passing the buck on unemployment benefits and announced a concrete package for workers and businesses debilitated by the lockdown. Expediting pending vendor payments and tax refunds must take top priority. Allowing an interest-free moratorium on MSME loans must be considered. Most nations that have lockdowns in place have offered wage subsidies to industry to keep workers on the rolls, deferred retirement contributions, waived utility bills and offered special credit lines and guarantees. India needs to do likewise. Charity must begin at home.

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