The following piece by C V Madhukar appeared in the September,2011 issue of Governance Now magazine. The debate in Parliament in response to the recent Anna Hazare led agitation demanding a strong Lok Pal Bill was a fine hour for the institution of Parliament.  What was even more important about the debate is that it was watched by thousands of people across the country many of whom have lost faith in the ability of our MPs to coherently articulate their point of view on substantive issues. Of course, in many cases some of these impressions about our MPs are largely formed by what the media channels tend to project, and without a full appreciation of what actually happens in Parliament.  There is now a greater awareness about an important institutional mechanism called the standing committee, and other nuances about the law making process. The Lok Pal agitation brought out another important aspect of our democracy.  There are still many in India who believe that peaceful protest is a powerful way to communicate the expectations of people to the government. Our elected representatives are prepared to respond collectively when such protests are held.  There is a negotiated settlement possible between the agitating citizens and our political establishment within the broad construct of our Constitution.  All of this means that the safety valves in our democracy are still somewhat functional, despite its many shortcomings. But the way the whole Lok Pal episode has played out so far raises a number of important questions about the functioning of our political parties and our Parliamentary system.  A fundamental question is the extent to which our elected MPs are able to ‘represent’ the concerns of the people in Parliament.  It has been obvious for some time now, that corruption at various levels has been a concern for many.  For months before the showdown in August, there have been public expressions of the disenchantment of the people about this problem.  Even though several MPs would say privately that it is time for them to do something about it as elected representatives, they were unable to come together in a way to show the people that they were serious about the issue, or that they could collectively do something significant about the problem.  The government was trying in its own way to grapple with the problem, and was unable to seize the initiative, expect for a last minute effort to find a graceful way out of the immediate problem on hand. In our governance system as outlined in our Constitution, the primary and most important institution to hold the government accountable is the Parliament.  To perform this role, the Parliament has a number of institutional mechanisms that have evolved over the years.  The creation of the CAG as a Constitutional body that provides inputs to Parliament, the Public Accounts Committee in Parliament, the question hour in Parliament are some of the ways in which the government is held to account.  Clearly all of these mechanisms together are unable to adequately do the work of overseeing the government that our MPs have been tasked with.  But it is one thing for our MPs to be effective in their role holding the government to account, and a very different thing to come across collectively as being responsive to the concerns of the people. For our MPs to play their representation role more convincingly and meaningfully there are certain issues that need to be addressed.  A major concern is about how our political parties are structured, where MPs are bound by tight party discipline. In a system where the party leadership decides who gets the party ticket to contest the next election, there is a natural incentive for MPs to toe the party line, even within their party forums.  This is often at the cost of their personal conviction about certain issues, and may sometimes be against what the citizens could want their representatives to do. Add to this the party whip system, under which each MP has to vote along the party line or face the risk of losing his seat in Parliament.  And then of course, if some MP decides to take a stand on some issue, he needs to do all the research work on his own because our elected representatives have no staff with this capability.  This deadly cocktail of negative incentives, just makes it very easy for the MP to mostly just follow the party line.  If the representation function were to be taken somewhat seriously, these issues need to be addressed. The 2004 World Development Report of the World Bank was focussed on accountability.  An important idea in the report was that it was too costly and inefficient for people to vote a government in and wait till the next election to hold the government accountable by voting it out for the poor governance it provides.  That is the reason it is essential for governments and citizens to develop ways in which processes can be developed by which the government can be held accountable even during its tenure. The myriad efforts by government such as social audits, monitoring and evaluation efforts within government departments, efforts by Parliament to hold the government accountable, efforts of civil society groups, are all ways of holding the government to account.  But over and above accountability, in an age of growing aspirations and increasing transparency, our MPs must find new ways of asserting their views and those people that they seek to represent in our Parliament.  This is an age which expects our politicians to be responsive, but in a responsible way. Even as the Lok Pal Bill is being deliberated upon in the standing committee, civil society groups continue to watch how MPs will come out on this Bill.  There are plenty of other opportunities where MPs and Parliament can take the initiative, including electoral reforms, funding of elections, black money, etc.  It remains to be seen whether our MPs will lead on these issues from the front, or will choose to be led by others. This will determine whether in the perception of the public the collective stock of our MPs will rise or continue to deplete in the months ahead.

In April 2020, the International Labour Organisation (ILO) estimated that nearly 2.5 crore jobs could be lost worldwide due to the COVID-19 pandemic in 2020.  Further, it observed that more than 40 crore informal workers in India may get pushed into deeper poverty due to the pandemic.  In this blog post, we discuss the effect of COVID-19 on unemployment in urban areas as per the quarterly Periodic Labour Force Survey (PLFS) report released last week, and highlight some of the measures taken by the central government with regard to unemployment.

Methodology for estimating unemployment in PLFS reports

The National Statistics Office (NSO) released its latest quarterly PLFS report for the October-December 2020 quarter.  The PLFS reports give estimates of labour force indicators including Labour Force Participation Rate (LFPR), Unemployment Rate, and distribution of workers across industries.  The reports are released on a quarterly as well as annual basis.  The quarterly reports cover only urban areas whereas the annual report covers both urban and rural areas.  The latest annual report is available for the July 2019-June 2020 period.

The quarterly PLFS reports provide estimates based on the Current Weekly Activity Status (CWS).  The CWS of a person is the activity status obtained during a reference period of seven days preceding the date of the survey.  As per CWS status, a person is considered as unemployed in a week if he did not work even for at least one hour on any day during the reference week but sought or was available for work.  In contrast, the headline numbers on employment-unemployment in the annual PLFS reports are reported based on the usual activity status.  Usual activity status relates to the activity status of a person during the reference period of the last 365 days preceding the date of the survey.

Unemployment rate remains notably higher than the pre-COVID period 

To contain the spread of COVID-19, a nationwide lockdown was imposed from late March till May 2020.   During the lockdown, severe restrictions were placed on the movement of individuals and economic activities were significantly halted barring the activities related to essential goods and services.  Unemployment rate in urban areas rose to 20.9% during the April-June quarter of 2020, more than double the unemployment rate in the same quarter the previous year (8.9%).  Unemployment rate refers to the percentage of unemployed persons in the labour force.  Labour force includes persons who are either employed or unemployed but seeking work.  The lockdown restrictions were gradually relaxed during the subsequent months.   Unemployment rate also saw a decrease as compared to the levels seen in the April-June quarter of 2020.  During the October-December quarter of 2020 (latest data available), unemployment rate had reduced to 10.3%.  However, it was notably higher than the unemployment rate in the same quarter last year (7.9%).

Figure 1: Unemployment rate in urban areas across all age groups as per current weekly activity status (Figures in %)

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Note: PLFS includes data for transgenders among males.
Sources: Quarterly Periodic Labour Force Survey Reports, Ministry of Statistics and Program Implementation; PRS.

Recovery post-national lockdown uneven in case of females

Pre-COVID-19 trends suggest that the female unemployment rate has generally been higher than the male unemployment rate in the country (7.3% vs 9.8% during the October-December quarter of 2019, respectively).  Since the onset of the COVID-19 pandemic, this gap seems to have widened.   During the October-December quarter of 2020, the unemployment rate for females was 13.1%, as compared to 9.5% for males.

The Standing Committee on Labour (April 2021) also noted that the pandemic led to large-scale unemployment for female workers, in both organised and unorganised sectors.  It recommended: (i) increasing government procurement from women-led enterprises, (ii) training women in new technologies, (iii) providing women with access to capital, and (iv) investing in childcare and linked infrastructure.

Labour force participation

Persons dropping in and out of the labour force may also influence the unemployment rate.  At a given point of time, there may be persons who are below the legal working age or may drop out of the labour force due to various socio-economic reasons, for instance, to pursue education.  At the same time, there may also be discouraged workers who, while willing and able to be employed, have ceased to seek work.  Labour Force Participation Rate (LFPR) is the indicator that denotes the percentage of the population which is part of the labour force.  The LFPR saw only marginal changes throughout 2019 and 2020.  During the April-June quarter (where COVID-19 restrictions were the most stringent), the LFPR was 35.9%, which was lower than same in the corresponding quarter in 2019 (36.2%).  Note that female LFPR in India is significantly lower than male LFPR (16.6% and 56.7%, respectively, in the October-December quarter of 2019).

Figure 2: LFPR in urban areas across all groups as per current weekly activity status (Figures in %)

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Note: PLFS includes data for transgenders among males.
Sources: Quarterly Periodic Labour Force Survey Reports, Ministry of Statistics and Program Implementation; PRS.

Measures taken by the government for workers

The Standing Committee on Labour in its report released in August 2021 noted that 90% of workers in India are from the informal sector.  These workers include: (i) migrant workers, (ii) contract labourers, (iii) construction workers, and (iv) street vendors.  The Committee observed that these workers were worst impacted by the pandemic due to seasonality of employment and lack of employer-employee relationship in unorganised sectors.  The Committee recommended central and state governments to: (i) encourage entrepreneurial opportunities, (ii) attract investment in traditional manufacturing sectors and developing industrial clusters, (iii) strengthen social security measures, (iv) maintain a database of workers in the informal sector, and (v) promote vocational training.  It took note of the various steps taken by the central government to support workers and address the challenges and threats posed by the COVID-19 pandemic (applicable to urban areas): 

  • Under the Pradhan Mantri Garib Kalyan Yojana (PMGKY), the central government contributed both 12% employer’s share and 12% employee’s share under Employees Provident Fund (EPF).  Between March and August 2020, a total of Rs 2,567 crore was credited in EPF accounts of 38.85 lakhs eligible employees through 2.63 lakh establishments.
     
  • The Aatmanirbhar Bharat Rozgar Yojna (ABRY) Scheme was launched with effect from October 2020 to incentivise employers for the creation of new employment along with social security benefits and restoration of loss of employment during the COVID-19 pandemic.  Further, statutory provident fund contribution of both employers and employees was reduced to 10% each from the existing 12% for all establishments covered by EPF Organisation for three months.  As of June 30, 2021, an amount of Rs 950 crore has been disbursed under ABRY to around 22 lakh beneficiaries.
     
  • The unemployment benefit under the Atal Beemit Vyakti Kalyan Yojana (launched in July 2018) was enhanced from 25% to 50% of the average earning for insured workers who have lost employment due to COVID-19.
     
  • Under the Prime Minister’s Street Vendor’s Aatma Nirbhar Nidhi (PM SVANidhi) scheme, the central government provided an initial working capital of up to Rs 10,000 to street vendors.  As of June 28, 2021, 25 lakh loan applications have been sanctioned and Rs 2,130 crore disbursed to 21.57 lakh beneficiaries.

The central and state governments have also taken various other measures, such as increasing spending on infrastructure creation and enabling access to cheaper lending for businesses, to sustain economic activity and boost employment generation.