Vol. XLIII No. 06 February 10, 2019

Interim Budget Makes Mockery of Informal Labour’s Plight

Archana Prasad

AFTER its election in 2014, the Modi government had promised to create 20 million jobs in five years. However, the recent debate on the job creation data shows that unemployment is at its peak at the end of the five year term of the Modi government. Curiously the current government has rubbished this data, without releasing any of its own statistics. The argument being made by the spokespersons of the BJP is that this data does not represent the true picture as most of the livelihood has been created in the form of self-employment and is largely in the informal sector. In one sense, the debate around the job creation data has made the government admit that its policies are not creating any decent jobs and are only resulting in vulnerable employment, if any at all. The suppressed data of the NSSO data 2017-18 shows the general unemployment rate in the country was 6.1 per cent, a little lower than the CMIE estimate of 7.2 per cent. This number shows the abysmal failure of the current government and puts the budget proposals in context of the impending polls.


In its election manifesto of 2014 the BJP promised a comprehensive pension scheme as well as social security for unorganised sector workers. It had also stated that it would be initiating a scheme for the registration of all workers in informal labour so that these workers can come under the purview of labour laws and labour welfare schemes.  In the four and a half years that followed, the government made several changes which worsened the situation of workers in informal labour, especially with the comprehensive labour law reforms that it mooted through four different codes. These reforms were aimed at changing the rules of the labour market by facilitating employer friendly labour market flexibility which has expanded persistent informality and led to high vulnerability within working class families. Hence, the first point to note about the track record of the Modi government is that its claims of expansion of formal employment seem to be quite flawed especially as they are largely based on an inadequate analysis of the EPFO Data.

The proposals made in the interim budget 2019-20 have to be seen in this context. Broadly speaking, the first big ticket announcement covering the rural informal sector is the structured annual income transfers of Rs 6,000 to people who own land below two hectares of land. However even this miniscule amount excludes the landless rural proletariat. Further the share of the employment generation schemes has reduced from 0.495 per cent of the GDP in 2018-19 to 0.475 per cent of the GDP in 2019-20 allocations. This clearly shows that the NDA government is making no investment in generating jobs. The other significant announced made by the interim budget is the proposed Pradhan Mantri Shram Yogi Mandhan Yojana which is meant to be a comprehensive pension scheme for workers in the unorganised sector. This so called ‘comprehensive’ social security says that all workers in informal labour having an income below Rs 15,000 per month and are about 29 years of age can deposit a monthly amount of Rs 100 as premium till the age of 60 years. Those between the age of 19 and 28 years can pay Rs 55 per month till the age of 60 years. In both cases the beneficiaries are to get Rs 3000 per month as pension after 60 years. The government touts that this is the largest pension scheme in the world benefits 100 million workers and allocates Rs 500 crore towards its implementation.

It is interesting to note that the only concrete measure proposed by the government for workers in the interim budget shows them a dream of getting some income only after 30 years of investment. For example if a person is to invest Rs 100 per month in the pension scheme and the rate of interest is 7.6 per cent on the premium invested, at the end of their working career they would have a total cumulative compound premium of about 1.47 lakhs (including interest). This means that the person, who would get Rs 3000 per month pension, would exhaust their premium in 4-5 years. The value of Rs 3000 at the end of 30 years with a 2 per cent rate of inflation would be Rs 500. This means that the scheme as proposed by the union government is just a distant dream and does not offer any relief to workers entrapped in informal labour relations.


Given the above context, it is pertinent to note that the lack of focus on universal social security is a feature of all the budgets that have been made by the outgoing NDA regime. A recent analysis of social security measures in the last five years shows that the actual allocations for employment generation and social security schemes have been going down ever since prime minister Modi took office. As already mentioned earlier, the share of total employment generation schemes as a proportion of GDP has been declining steadily. For example the allocation for the small and medium scale enterprises has just increased by 6.9 per cent over the last year, which is definitely not enough to meet the commitments made in the interim budget. As the acting finance minister had stated the government would provide interest subvention of 2 per cent to all MSMEs with an incremental loan of Rs one crore. This is to be done under the Prime Minister Employment Generation Programme that manages the interest subsidy for the ministry. However a closer look at the interim allocations shows that there has only been a nominal 10 per cent increase in this allocation, thereby once again exposing the hollow promises of the government.

Apart from employment generation, social security programmes have also suffered under this government. The total allocations for social security programmes for informal labour have decreased substantially from 2014-15 onwards. The total allocation in 2014-15 was Rs 25051.58 crore out of which only about 60 per cent was spent. In 2017-18 this allocation came down to Rs 22,520 crore of which only 42.9 per cent of the funds were actually spent. This year the allocation has been halved to Rs 11455.51 crore, with no real estimates on how much expenditure is to be made. One of the main reasons for this is that many of the social protection schemes, especially insurance and pensions, are now being run through private agencies and non-banking financial institutions. Hence the contraction of social security expenditure is directly related to the privatisation of social security services and this has implications for the way in which informal labour is organised.

The discussion above shows that the record of the Modi government has been abysmal as far as informal labour is concerned. On the one hand it is pushing policies that deepen persistent informality, and on the other hand the government is cutting back on social security measures and making informal labour dependent on private players. Both these measures are increasing the vulnerability of the working class. Hence the anti-worker empty rhetoric of the government needs to be exposed in the campaign towards the general elections 2019.