Archive for General

admin | January 3, 2025
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ARE WE ADDRESSING THE UNEMPLOYMENT ISSUE AS A SECTOR?

Yes, we must address the complex and concerning issues surrounding unemployment, which has, until now, remained an undefined sector. The problem of unemployment poses a huge challenge, with multiple dimensions, varied complexities, and significant impacts on economic development, affecting a large part of our population. It requires special attention, with a concentrated, strategic, and effective set of programs and actions. To address its challenges effectively and efficiently, it must be recognized as a distinct sector and, hence, deserves to be treated as such.

BACKGROUND

1.Lack of Reliable Data:

While we acknowledge the size and complexity of this sector, we do not have an exact figure for the number of unemployed citizens within the employable age group.

2.Disguised Unemployment:

This sector includes disguised unemployment, meaning that for a task that could be done by X people, X++ individuals are employed. It also includes people engaged in household chores or random tasks and those idling away their time. Disguised unemployment is especially prevalent in rural areas, where many family members work on farms out of necessity because they have no other gainful employment options.

3.Lack of Comprehensive Information:

In fact, we lack detailed information on the unemployed, disguised unemployed, or semi-unemployed individuals. Information such as their age group, education level, and rural or urban status would provide valuable insight to better target interventions for those suffering from unemployment. Though challenging, collecting this data is critical, as without reliable estimates, it is nearly impossible to design effective schemes to address the unemployment issue.

4. Ineffective Government Efforts:

The government’s approach has often been perceived as random, with numerous schemes introduced but lacking effective implementation. Far too many initiatives are launched half-heartedly, resulting in limited impact.

THE BASIC STRATEGY CURRENTLY DEPLOYED

1.Infrastructure Development:

Planners are aggressively focusing on developing better infrastructure and large-scale industries, including plants, ports, roads, and buildings, to generate direct and indirect employment and provide more opportunities.

2.Support for MSMEs:

Planners are also convinced that Medium, Small, and Micro Enterprises (MSMEs) have significant potential to create jobs, and they are working to support the growth of the MSME sector. A variety of incentives have been rolled out for this sector, and the MSME Act has been enacted to protect the interests of these businesses. Relevant amendments have been made to exempt MSMEs from complex regulatory requirements and help them compete effectively with larger, more organized sectors. Additionally, MSMEs are offered financial support, subsidies, and priority at various levels.

3.Encouraging Self-Employment and Startups:

Efforts to encourage self-employment and startups have gained momentum in recent years, with encouraging results. Various schemes have been introduced, and a network of incubation centers has been established to foster entrepreneurship.

4.Skill Development:

Skill development initiatives aim to create a more employable workforce by establishing technical and vocational education institutions and offering training programs. This addresses the industry’s concerns about the lack of a sufficiently skilled labor force emerging from the education sector.

5.Labor and Finance Department Initiatives:

The Labor Department has been regulating employment conditions, while the Finance Department has announced various incentives. Many other departments have also joined the effort to tackle unemployment.

6.Banking Sector Support:

The Reserve Bank of India (RBI) has taken several steps to encourage the MSME sector, mandating commercial and cooperative banks to provide affordable financial support through appropriate schemes. Micro-financing through regular banks and non-banking financial institutions has been targeted to support the unorganized sector.

7.Public Perception:

There is a general belief among both the government and the public that significant efforts are being made to tackle unemployment.

EVALUATION OF THE EFFORTS MADE SO FAR

It would be unfair to claim that no efforts are being made to address the unemployment issue. In fact, all departments of the Central and State Governments are making concerted efforts to extend a helping hand wherever opportunities for employment generation arise. Numerous incentives and schemes have been introduced to create job openings and improve employability, especially among the youth. National awareness campaigns and drives aimed at growth and development are targeted at providing more gainful employment.

However, several issues need special attention:

1.Lack of Focus:

Employment generation is handled by multiple ministries, each with its own unique priorities, which leads to a fragmented approach. This lack of coordination reduces the overall focus on addressing unemployment effectively.

2.Labor Laws:
The Labor Department is more concerned with labor laws and their enforcement. Unfortunately, these laws are numerous and often so stringent that they discourage employers from hiring more workers. For instance, the prescribed minimum wages are often too high for MSMEs to afford, and the legal formalities involved in terminating a worker or shutting down a business can be cumbersome. Despite promises to relax labor laws, little concrete action has been taken in this area.

3.Challenges for MSMEs:
The Ministry of Industry enacts laws to protect MSMEs, but these protections are often so overly stringent that large businesses prefer not to engage with MSMEs. For example, under the MSME Act, buyers are required to pay interest rates that are three times the prevailing rates if payments are delayed—this provision discourages businesses from engaging with smaller enterprises.

4.Banking Sector’s Disinterest:

Although banks follow RBI instructions on paper, they are often disinterested in working with the MSME sector, as the profit margins are smaller compared to larger businesses. This despite the fact that MSMEs have greater potential for job creation.

5.Slow Progress:

The ease of doing business index for India reveals that despite ambitious promises and efforts, the journey toward providing more employment has been slow and discouraging.

SUGGESTIONS

1.Establishing a Separate Ministry for Employment Generation:

To address the unemployment issue more effectively, there needs to be a dedicated, strategic, and focused approach. At present, there is no coordinating ministry at either the state or central level for employment generation. The issue deserves a “Mission Mode Priority,” but in reality, there is a lack of central coordination.

2.Key Tasks for the Ministry:

A.Labor Front:

· Simplify the long list of required registrations and permissions, creating common forms and procedures for various registrations.
· Consider introducing different scales of minimum wages for different sectors (large, medium, small, micro, and unorganized).
· Initiate a data collection exercise to regularly track the number of unemployed individuals and the employment generated, maintaining this information on a periodical basis.
· Make it simple to close down a unit or to reduce the workforce employed in case of justifiable reasons. Criteria for clearly refining justifiable business be fixed with appropriate adjudicating authority in place.

B.Industry Front:

· Address the differences between the medium-scale and small-scale sectors. The medium-scale sector is large enough to compete with larger industries, while the small and micro sectors are too small and less organized to take full advantage of incentives.
· Consider revising the definition of the MSME sector, grouping the medium-scale sector with large industries and offering separate incentives and priorities for the small and micro sectors.
· Address the issue of sick industries by reviving schemes like the Gujarat Body for Industrial Relief (GBIFR), which provided strategic help to revive viable businesses.

C.General Recommendations:

· Despite recognizing that India has a surplus of labor and a scarcity of capital, most incentives are based on investments rather than on employment generation. More incentives should focus on generating employment, improving skills, upgrading quality and technology, and offering relevant education.

· For financial support, the Reserve Bank and Government should ensure that separate branches of a large bank or separate small banks and cooperative banks should be set-up exclusively for the small and micro sectors so that, proper monitory and effective implementation is ensured.

CONCLUSION:

Addressing unemployment requires a multi-faceted, strategic, and coordinated effort. While there are positive initiatives underway, more focused action, clear data, and a dedicated ministry is needed to effectively combat unemployment and make lasting improvements. By acknowledging the sector’s complexities and addressing the issues through targeted policies, India can create a more robust employment ecosystem for its population.

Category: Finances, General, Political |
admin | September 28, 2024
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Part-2 “AND A FAIR GAME AT THAT”

Part-1
“ULTIMATELY, IT’S A GAME THAT WE CHOOSE TO PLAY”

Part-2
“AND A FAIR GAME AT THAT”

In part one I merely summarized that life is a game and one should carry on the honest, good and ethical KARMA and offer the same to Lord Krishna. Our duty is to perform KARMA that is destined for us, without worrying about the future, which is in the hands of The Lord Krishna.

This sounds simple but in reality we make our life highly complex by entering into far too many races in the game of life. Race to earn more money, race to have a social status, race to keep our family happy, race to marry the most suitable loved partner, race to acquire lot of power, fame and wealth. We want to achieve all ASAP. We are in a hurry. And the race is highly competitive. We are willing to easily sacrifice even morals and ethics. We stop trusting everybody and lose no opportunity of back stabbing.

Such feelings, situations and mindset, if not prevented from going out of control, would lead to anarchy. No society can sustain and progress unless there is some discipline in adhering to certain rules, dos and don’ts with standard sets of morals and ethics.

Wise people of earlier generation of the sapiens therefore created the wonderful concept of God and basically stated that good behavior will be rewarded and bad behavior will be punished by God. The idea was wonderfully marketed by the saints. They delivered lectures, created stories and poems, wrote numerous scholarly, exhaustive, innovative and still simple scriptures. This movement led to different versions in different parts of the world in which the same concept was marketed and as the time passed, they got to be known as different religions.

Unfortunately, it is a fact that the fear of God and faith in God gets shaken since the mad race to achieve the targets and attain worldly success lures even the best of us to enter this unhealthy competition.

For an individual it is not possible to exist without performing his KARMA and wise people try to stay out of the races and do a solo run because, they realize that life is a game and wining or loosing does not make any difference in the overall scheme of things in the universe. They enjoy the game to the fullest non the less because that is your KARMA.

What say you ?

Category: Finances, General, Political | Tags:
admin | September 22, 2024
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“ULTIMATELY, IT’S A GAME THAT WE CHOOSE TO PLAY”

There are a few questions that keep propping up in our mind. For seeking answers to the same, we set our mind, our intellect, our experiences, our observations, our believes, our prejudices etc all in a pot churn them and still crave to find a satisfactory answer.

One such question is :

Why a person after having earned tens and thousands crore of rupees keep amassing more and more wealth despite knowing that ultimately at the end of life he or she is not going to carry any up. Even after perhaps knowing very well that money, wealth is not everything in life.

After a bit of churning my mind I tend to feel that in actual practice, more by default than by design people behave as if life ultimately is the game that we play. We as sapiens are good at developing imaginations and we set up various races. This thought came to my mind while playing my favorite game of “Temple Run” on my tablet. One imagines oneself as the person on the track who runs, crosses hurdles, gains points and ultimately falters which ends the game. We immediately set up the next race with an attempt to score more points.

In actual life, we being sapiens even set up more than one race simultaneously. Race to earn more money, race to have a social status, race to keep our family happy, race to marry the most suitable loved partner, race to acquire lot of power and so many such races.

And , if we take life as a game, like the one on our mobile, in which one can run simultaneous races then life continues to be interesting. If you fail to score in a particular race, you can try again or you concentrate more on the other games or set up the race again.

In such situation, one does not feel excessively happy nor excessively sad by winning or losing a particular race since, one understands that there are many games that he or she is playing and many a times you can set up the race again.
Interestingly, this matches quite well with the KARMA theory propagated by Lord Krishna in GITA.

Why worry because ultimately, it’s all in a game.

Category: Finances, General, Political | Tags:
admin | September 10, 2024
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SIMPLE THOUGHTS ON THE GALA INTERNSHIP PROGRAM ANNOUNCED IN BUDGET 2024

The latest budget presented by Hon’ble Finance Minister has tried to earn many brownies (credits) for introducing the concept of internship.It is stated in the budget speech itself that Rs.5000/- per month per intern will be financed through the budget in addition to Rs.6000/- to be paid extra for worker on his or her enrollment as an intern. In other words, the trainees will get at least Rs.5000/- per month for a duration of 1 year. It is further stated that the top 500 companies (employers) will be able to employ such trainees and the total number to trainees anticipated is 10 million over the next five years. This means 2 million additional jobs will be created each year by top 500 companies. In other words, on an average each one of the 500 companies will employ 40,000 interns every year.

A simple look at these numbers indicates that this is a highly ambitious and probably impossible target to meet for the 500 companies. Even if 5000 companies are identified then the annual target of additional employment will come to 4000 interns.

This is also almost as ambitious as before.This also raises a number of questions, the answers of which are still awaited.

1.What exactly will be the administrative arrangement to decide who is entitled (employer and employee)? What would be the selection process and how the funds will be disbursed? Direct to the intern or to the employer?

2.This will create room for nearly 40,000 interns per employer if we take the budget’s speech as reference which states that 500 employers are identified. This will be a huge number and feasibility is a question.

3.If the employer gets such support (indirect subsidy) would it not lead to a temptation to reduce their existing employment strength of unskilled and skilled workforce and filling up the vacancy through such interns who are willing to work at very low and almost nil cost?

I will only be too happy to stand corrected if there is any gross error in my understanding because to my mind the announcements made by the Finance Minister are too big, too vague and too good!

Category: Finances, General, Political | Tags: , ,
admin | April 29, 2024
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SOME SUGGESTIONS IN THE ACTUAL INTEREST OF THE MSME SECTOR

Slogans like “ MSMEs are the backbones of our economy” and many such slogans praising and highlighting the importance of the role that MSMEs  in the economic development are well known to all of us particularly because we have been hearing that almost since several decades.

Though I admit that beside dishing out slogans, a lot of efforts have been placed by the Government and the Banks to encourage and help the MSME sector so as to enable them to successfully survive in the fiercely competitive world and withstand the competition from the larger units despite facing funds and infrastructural challenges.

The government has also enacted MSME Act so as to provide a strong legal entitlements and reliefs. Various amendments and additions have been made in the Income Tax and Companies Act with the intention of easing and ensuring some comforts to the MSME sector.

But still, a lot more needs to be done .There is a huge distance between the cup and the Lips.

Some of the glaring issues that remain unresolved so far are highlighted below;

  1. 1. FINANCIAL SUPPORT :

As far as providing easier finances are concerned, it has been consistently observed that the bankers, who by themselves are in highly competitive environments, find it less attractive to finance an MSME unit as compared to the larger units. They rightly feel that efforts involved in financing and monitoring an MSME unit are much more than the margins that they earn as against financing a larger unit. Despite constant instructions etc from RBI and Government, it has remained a challenge to motivate larger banks to finance MSME sector, particularly the Small and Micro units.

One possible solution is to encourage specialized Banks or Cooperative Banks who cater only to this sector. I saw a good hope in channelizing the Cooperative Banks towards financing the Micro and Small scale sector. Unfortunately, after successfully gaining experience in the banking business even cooperative banks also turn their attention towards the larger units.

The NBFCs too are trying to fill up this gap but it has been noticed that they take advantage of the vulnerability of the borrower and extract higher interest and levy additional fees etc.

In short, as far as financing of significant amount is concerned, the MSME sector remains sidelined in reality. They have to resort to extremely exploitative and costly sources of finance   when it comes to substantial and critical need.

There is ,no doubt that there are numerous schemes offred by Banks and Governments. But each bank and diffrerent Governments have their varied schemes and it is a time consuming and complex situation even to know how many schemes exist and which scheme is good for an MSME unit .

What pains the most is that such is a situation when there is a constant tomtoming about encouraging and supporting the MSME sector.

Somehow one sees a situation where one is reminded of the story of a crow who was thirsty and was offered water in a jug where the water was in the lower half of the jug and his beak could not reach.

  1. LEGAL SUPPORT :

The government with a good intention has constantly been trying to introduce / amend the existing Acts so as to make them “MSME friendly”. But as the proverb goes, “help from an ill informed person is more harmful than the harm from a well informed person.”

Let me tell you how this is true. Section-16 of the MSME Act presents a draconian help and i.e. that if any payment to an MSME unit is delayed beyond 45 days then the MSME unit is empowered and enabled to collect interest at the rate which is three times more than the bank rate with a monthly rest. Converting this into simple equation   it amounts to more than 24% per annum rate of interest ( three times a bankrate ) and since it is on a monthly rest it would amount to nearly effective 27% per annum with annual rest.

At the same time the Income Tax Act,1961 {Section 43B(h)} is now amended to ensure that expenses incurred by paying to, MSME would be allowed as an expense only when they are actually paid.

As if this is not enough the Companies Act is also amended to ensure that any over due to MSME and the purchases from MSME are clearly and separately reported in a company’s annual account.

The above appears to be favorable steps. But the reality is exactly the opposite. The large units are now trying to avoid doing any business with MSME units because of the rigid legal approach and consequences. They feel that they are inviting potential heavy liability and exploitation from the MSME sector. This is likely to effect the business potential of the MSME sector.

  1. 3. General :

If one tries to collect an exhaustive list of the benefits and preferences which are offered to MSME sector by Central Government, State Government, Local Bodies, Banks and Financial Institutions one will find that one is lost in a jungle. This reminds me again of a proverb which says that, “Unscheduled, erratic and excessive rain is more harmful than a drought.”

 

One will find varying definitions of M(Micro).S(Small and).M(Medium).E( Enterprise)  not only that the definitions in reality varies from bank to bank, from state to state, from scheme to scheme and they themselves are again subjected to frequent amendments.

 

One of the standard practice of denying an entitlement is to make the preconditions so difficult that the claimant either gives up his claim or is denied the help  and only the lucky few MSME units land up getting the intended help.

The Exit Decision

Besides what is stated above, one thing that strikes while thinking about MSME sector is their reliance and endurance capacity . Somehow, this is noticed in case of many Non MSME units also . An entrepreneur is a good entrepreneur not only when he sets up or runs his enterprise well and successfully . To my mind, he is equally good entrepreneur when he decides to quit at the right time and right way.Many a times emotional and Ego issues prevent many entrepreneurs from quitting at the right time .

At the same time we have to also look at the issue that does our existing legal and banking framework makes the task of quitting easy?

The answer is an emphatic No The current labour laws are so much in favour of labourer s that  the cost of closing a unit and the formalities attached thereto will discourage many entrepreneurs from closing the units which are unviable . This  leads to distressed sales and unfavourable mergers  . The bankers also tend to pressurize regularization of accounts for a long period in order to keep their balance sheets and performance stable

 

The Way Ahead

 

A basic question is, does any sector need a lot of support to be successful , profitable and sustainable ? In an open market economy, a sector will survive against many odds if the basic profitability and strength is present in its business model. All that is required is to allow a peaceful, disturbance and obstacle free atmosphere for them to operate. Whether the unit is MSME or not, it does not matter. All units deserve and need obstacle free , peaceful and disturbance free environment to operate. I feel what we have achieved in case of MSMEs is a “ concentrated bundle of confusion” as far as incentives and supports are concerned. Let’s have a look at our own experience in the past . Look at the rapid development of the Information technology sector which took place during the ninetees and thereon  and carefully note that the unparalled growth of the sector took place during the period when the Government machinery was blissfully in the dark as far as nitty gritty of the sector was concerned . There were no Special Packages offered to them . The market forces and the entrepreneurial attitude of our businessmen drove the momentum .

In other words, encourage all the sectors and please don’t try to give special treatment in a complicated, half hearted manner

All that is needed to foster the growth of MSME sector is a decent , easy and fair atmosphere for all sectors which helps to set up , survive and also provides ease in closing down the operation if it is so required.

In brief, keep the environment of doing business cooperative , predictable,transparent and simple . without any exra special pumping.

 

Category: Finances, General, Taxation |
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