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1. WORKING PAPERS

  • Fragility and Job Creation 
    Ali Mehdi , Sanjay Pulipaka , Sugandha Singh and Sri Siddhartha Ayyagari

It is considered to be axiomatic that severe inequity and economic distress often contributes to the emergence of conflict. Sometimes, conflict contributes to the fragility of state institutions. As a corollary, it is assumed that sustainable conflict resolution is critical to address fragility, and this requires addressing the economic dimensions of a conflict. Implicit in these arguments is the belief that improved economic situation will create enough incentives in the form of productive work opportunities to keep people away from becoming active participants in a conflict.

The inter-linkages between conflict, economy and job creation can be better understood by examining the experiences of South Asia. South Asia is witnessing multiple post-conflict situations and political transitions. Countries in the region such as Nepal and Sri Lanka have been witnessing significant political changes, and these countries figure in harmonised list of fragile situations compiled by the World Bank.   On the other hand, parts of India are in a conflict situation, and some have moved into the post-conflict situation. States such as Jammu & Kashmir and Chhattisgarh are experiencing sustained conflict.  Kashmir conflict is a consequence of identity politics and irredentist claims.  In Chhattisgarh, the conflict revolves around access to and equitable share of resources. There are parts of India which have moved into a post-conflict situation. Punjab has successfully moved out of the insurgency. The Naxal presence in Telangana has declined significantly.

The proposed research project will examine some of the above case studies (Nepal/Sri Lanka and Kashmir/Telangana) to explore the inter-linkages between conflict, economy and employment.

  • Labour Regulations and Firm Growth: Evidence from South Asia 
    Radhicka Kapoor & P.P. Krishnapriya 

There is near unanimity about the importance of the manufacturing sector in creating productive jobs for South Asia. A critical aspect of the debate on job creation in the manufacturing sector is about the role of small and medium enterprises (SMEs) vis-à-vis large enterprises in generating employment. Historically, South Asia has supported SMEs as it believed that these enterprises would use labour-intensive methods of production, thereby generating faster employment. Consequently, small firms account for a disproportionately large share of the total firms in the manufacturing sector.  For instance, in India, small firms account for over 75% of the total firms in the organised manufacturing sector.  From an employment generation perspective, however, the share of small enterprises in total manufacturing employment has been significantly smaller than that of large enterprises.

It is well established in the literature that one of the critical elements of the overall business environment which determines the job creation capabilities of enterprises is the labour regulatory regime. Labour law in South Asia maintains the threshold concept excluding numerous, often survival oriented small enterprises outside the purview of compliance requirements. Therefore, firms tend to remain small, just below the threshold level, so that the costs and burden of regulatory requirements do not need to be complied with. In this paper, we attempt to use datasets from three South Asian countries (India, Sri Lanka and Bangladesh) to examine whether labour regulations are in fact hindering the growth of enterprises, thereby creating a ‘Growth Trap.’  We attempt to understand what are the commonalities and differences in labour regulations among these countries, and what set of policies will help accelerate the growth of employment in their respective manufacturing sectors.

  • Law, Skills and the Creation of Jobs as ‘Contract’ Work in India: Exploring Survey Data to make Inferences for Labour Law Reform in South Asia 
    Deb Kusum Das, Jaivir Singh, Homagni Choudhury and Prateek Kukreja

The paper will begin by discussing the theoretical literature emphasizing the importance of relationship specific investments for skills and proceed to  emphasize the role of the labour law in this context. We follow this up with a discussion of South Asian labour law (largely India, Pakistan, Bangladesh and Sri Lanka) with particular emphasis on laws that impact employment and skills. We will use the specially commissioned survey data from the Indian formal manufacturing to  gain empirical insight on the links between law, skills and the extensive use of ‘contract’ labour. We hope to use these findings to comment on the costs and benefits of the ‘contract’ labor system and it’s variants across South Asia, particularly in view of moves to reform  labour law in South Asia.

  • Innovations in labor market regulation and mechanisms of place-based implementation in Brazilian Manufacturing:
Lessons for India from a Decade of Reforms in Brazil 
    Meenu Tewari and Andrew Guinn

This paper draws on a comparison between India and Brazil — an emerging economy similar to India in size and manufacturing capability – to analyze recent reforms in the structuring and enforcement of labor regulations in Brazil that have led to both skill formation and growth in the formal manufacturing sector. What institutions and institutional arrangements are associated with these reforms? How do they play out in a variety of different sectors? How do lessons translate to the Indian context?  An important dimension of state efforts to reshape the labor market in Brazil has been the creation of both positive and negative incentives to promote formalization among employers across sectors (Berg 2010, Pires 2008) that have neither crippled the manufacturing sector nor undermined social welfare. This has been accompanied by an investment in place-based strategies that have helped embed workers with local communities through the provision of non-workplace amenities such as schools, housing and healthcare. Thus, the Brazilian case can provide several lessons for policymakers in India who wish to promote improved economic performance while at the same time reducing inequalities and risks faced by workers.

 

 

2. POLICY BRIEFS

 

  • Improving the Regulatory Framework for Labour in the Manufacturing Sector 
    Prof. Anwarul Hoda and Durgesh Kumar Rai

An important national objective in India is to stimulate the manufacturing sector in order to spur GDP growth and to provide employment to growing numbers of job-seekers. Although manufacturing faces several hurdles in the country, one of the most important is the burdensome labour laws. In this connection, the laws governing industrial relations, in particular the Industrial Disputes Act (IDA) 1947 have received maximum attention, but as noted in   an OECD 2007 study, it is not the inflexibility of the IDA alone that is influencing ‘labour market outcomes’ but also the uncertainty caused by the complex, overlapping and out dated nature of labour laws in India.

In the first policy paper, under this project, we have already covered the laws relating to industrial relations, and it is our intention in this study to examine other important labour laws, which are constraining manufacturing, and to make recommendations on the improvements and amendments that need to be made.  In the second policy paper we propose to examine the role of labour laws relating social security that affect the expansion of manufacturing and employment in the country. We intend to cover the major acts relating to social security of workers viz., the Employees’ Compensation Act, 1923; the Employees’ State Insurance Act, 1948; the Employees’ Provident Fund & Miscellaneous Provisions Act, 1952; and the Payment of Gratuity Act, 1972. We shall also cover two other important legislations that affect manufacturing, namely the Factories Act, 1948, and the Payment of Bonus Act, 1965.

The research will be based on desk work as well as intensive consultations with various stakeholders, including apex chambers and industry associations.

  • Technology and Jobs in South Asia: Opportunities, Challenges and Way Forward 
    Pankaj Vashisht

Technological progress has been the most important driver of economic growth in the modern history of mankind. Over period, technology has brought enormous benefits. It has increased labour productivity and improved standard of living across the globe. Yet technological innovations have always caused anxieties among labour. Since technological changes disturb the traditional ways of doing things; it makes few traditional skills and jobs redundant while creating the demand for new set of skills, leading to labour market disequilibrium. The current wave of information and communication based technological progress is no exception in this regard. It is now widely documented that ICT revolution has transformed the labour markets worldwide, creating both challenges and opportunities for labour. On the positive side it has generated enormous new job opportunities and has increased the effective size of job market. However, on the negative side, it has displaced many mid skill routine jobs leading to the polarization of labour market and consequent increase in income disparities.

The south Asian economies are also not isolated from the current wave of technological change. The use of ICT is quite visible in all sectors of production in these economies. However, little effort has been made to study the labour market implications of technology in these economies. This paper is a modest attempt in this direction. The paper will examine how technology has been inducing structural change in these economies and what have been its implications for labour. The paper will also spell out the regulatory and other policy reforms which are needed to enhance the labour market benefits of technological change while minimizing the risk.