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QEP 2025-26 Theme Manufacturing & Labour TheIAShub

The Quality Enrichment Programme (QEP) outlines strategies and goals for India's manufacturing and labor sectors targeting 2025/26. It includes analysis of previous year questions, key themes in industry and labor, and expected topics for future discussions, emphasizing the importance of MSMEs, labor reforms, and the gig economy. The document also presents key facts about India's economic contributions from various sectors, including manufacturing, MSMEs, and employment statistics.

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0% found this document useful (0 votes)
712 views43 pages

QEP 2025-26 Theme Manufacturing & Labour TheIAShub

The Quality Enrichment Programme (QEP) outlines strategies and goals for India's manufacturing and labor sectors targeting 2025/26. It includes analysis of previous year questions, key themes in industry and labor, and expected topics for future discussions, emphasizing the importance of MSMEs, labor reforms, and the gig economy. The document also presents key facts about India's economic contributions from various sectors, including manufacturing, MSMEs, and employment statistics.

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26

Under the Guidance of M K YADAV

INDEX
1 PREVIOUS YEAR QUESTIONS (2013-2024) 2
- Repeated Themes from PYQs
- Expected Questions For 2025/26
2 FACTSHEET: Manufacturing & Labour 5
3 THEME WISE KEYWORDS: As per Usage in Body of Answer & Way forward 8
4 CASE STUDIES & BEST PRACTICES: LOCAL, NATIONAL & INTERNATIONAL 11
5 FROM THE SPEECHES: PM, PRESIDENT, & VP 12
6 MANUFACTURING SECTOR: CHALLENGES & WAY FORWARD 13
7 REVISITING GLOBAL SUPPLY CHAIN 16
8 MSME SECTOR: KEY CHALLENGES & FUTURE PROSPECTS 19
9 SEMICONDUCTOR INDUSTRY IN INDIA 23
10 ANSWER WRITING VIA TEMPLATES: MACROECONOMIC & QEP FRAMEWORK 25
11 DEMOGRPAHIC DIVIDEND & CHALLENGES OF EMPLOYMENT CREATION 30
12 INFORMALIZATION OF EMPLOYMENT 32
13 SUGGESTIVE MEASURES: LABOUR REFORMS 33
14 KEY GOVERNMENT INITIATIVES FOR LABOUR REFORMS 35
15 LABOUR LAW REFORMS: NEED & CHALLENGES 36
16 AUTOMATION: A CHALLENGE TO WORKFORCE? 43

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
Under the Guidance of M K YADAV

1 PREVIOUS YEAR QUESTIONS (2013-2024)


2014
GS3
• Normally countries shift from agriculture to industry and then later to services, but India shifted directly
from agriculture to services. What are the reasons for the huge growth of services vis-a-vis industry in the
country? Can India become a developed country without a strong industrial base?
• “While we flaunt India’s demographic dividend, we ignore the dropping rates of employability.” What are
we missing while doing so? Where will the jobs that India desperately needs come from? Explain.

2015
GS3
• There is a clear acknowledgement that Special Economic Zones (SEZs) are a tool of industrial development,
manufacturing and exports. Recognizing this potential, the whole instrumentality of SEZs requires
augmentation. Discuss the issues plaguing the success of SEZs with respect to taxation, governing laws
and administration.
• “Success of make in India program depends on the success of Skill India programme and radical labour
reforms.” Discuss with logical arguments.

2016
GS3
• How globalization has led to the reduction of employment in the formal sector of the Indian economy? Is
increased informalization detrimental to the development of the country?

2017
GS3
• Account for the failure of manufacturing sector in achieving the goal of labour-intensive exports rather
than capital-intensive exports. Suggest measures for more labour-intensive rather than capital-intensive
exports.
• Industrial growth rate has lagged behind in the overall growth of Gross-Domestic-Product(GDP) in the
post-reform period” Give reasons. How far the recent changes in Industrial Policy are capable of
increasing the industrial growth rate?

2018
GS 1
• What is the significance of Industrial Corridors in India? Identifying industrial corridors, explain their
main characteristics.

2019
GS 1
• Can the strategy of regional resource-based manufacturing help in promoting employment in India?

2021
GS 1
• Examine the role of ‘Gig Economy’ in the process of empowerment of women in India.

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
Under the Guidance of M K YADAV

2022
GS 3
• “Economic growth in the recent past has been led by increase in labour productivity”. Explain this
statement. Suggest the growth pattern that will lead to creation of more jobs without compromising
labour productivity.

2023
GS 3
• Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of
MSMEs. Comment on the present policies of the Government in this regard.
• Most of the unemployment in India is structural in nature. Examine the methodology adopted to
compute unemployment in the country and suggest improvements.

2024
GS 3
• Discuss the merits and demerits of the four ‘Labour Codes’ in the context of labour market reforms in
India. What has been the progress so far in this regard?

REPEATED THEMES FROM PREVIOUS YEAR QUESTIONS (PYQs)


• THEME 1: INDUSTRY & MANUFACTURING SECTOR
- Challenges; Role of Industrial growth in GDP; share of manufacturing sector & economic growth, `Impact
of liberalisation; Structural Transformation (growth of services vis-a-vis industry); MSME etc.
- Initiatives: SEZ, Industrial Corridor, Industrial Policy, FDI in retail
• THEME 2: LABOUR & EMPLOYMENT
- Challenges of Unemployment; Declining Employability; Informalisation of Labour; Labour productivity,
Globalisation & Employment, Labour Codes
• THEME 3: MANUFACTURING & LABOUR INTERLINKAGES
- Make in India’s dependence on Skill India; Regional resource-based manufacturing & employment;
Manufacturing Sector & Labour Intensive Exports etc

OTHER EXPECTED TOPICS FOR 2025/26


• MANUFACTURING SECTOR & MAKE IN INDIA
- The time is ripe for India to leverage the 'China Plus One' strategy for its ‘Make in India’ vision. What are
the opportunities available to India in this regard and how can it gear up to effectively leverage these
opportunities?
• MSME: SUSTAINABLE MANUFACTURING BASE & INCLUSIVE GROWTH
- Critically analyse the role of Micro, Small and Medium Enterprises (MSMEs) in making India a sustainable
manufacturing base of the world. Highlight the measures taken by the Government in promoting the
MSME sector.
• START UP ECOSYSTEM
- On one hand India is described as “the posterchild of emerging markets” for its vast potential for start
ups, but on the other hand it is also lamented for its harsh environment for them. Highlighting the
success of the Start up India initiative, discuss the challenges which continue to hinder the growth of
Start ups in India.

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
Under the Guidance of M K YADAV

• EXPORT LED GROWTH: OPPORTUNITIES & CHALLENGES


- “An exports-based strategy can significantly help India in achieving a double digit growth.” Critically
analyse. What key strategies has the government formulated in this regard?
• POTENTIAL & CHALLENGES OF HIGH PRIORITY SECTOR –ELECTRONICS, AUTOMOBILE
- While India has the potential of being the semiconductor hub of the world, it still has to manage the
challenges associated with the industry. Critically analyse.
• GIG ECONOMY
- As India moves towards its stated goal of becoming a $5 trillion economy by 2025, the gig economy will
be a major building block in inclusively achieving this goalpost. Discuss.
• INFORMALISATION OF LABOUR FORCE
- Determine the various challenges associated with the informalisation of workers in India. Do you think
that only by increasing the share of organized sector can result in a greater formalisation of workforce?
Give reasons to justify your answer.
• OTHER IMPORTANT TOPICS
- Opening of strategic sectors like Coal, Space & Defence to private & foreign players – Benefits & Concerns.
- Services Sector: Tourism Sector (esp Sustainable Tourism, Rural Tourism, etc.); E-Commerce (ONDC).

==========================================================================================

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
Under the Guidance of M K YADAV

2 KEYFACTS

INDUSTRY & MANUFACTURNG


Industry GDP and
Employment • Accounts for about 30% of GDP and employs nearly 28% of the workforce.
(Economic Survey 2022-23)
Sectoral Growth Rates • Overall industrial growth rate: 4% (Vs. 10% in 2021-22)
2022-23 • Manufacturing: 1.5%
(Economic Survey 2022-23)
Manufacturing Sector • 77.5% weightage in IIP
• 17% of India’s GVA (Eco Survey 2022-23); 60% of Industrial GVA
• Employment: 15% of workforce (every job created in the manufacturing sector
creates 2-3 additional jobs in related activities).
Position of Indian • 5th largest manufacturer: 3% of Global Output (After China, US, Japan, &
Manufacturing in the World Germany).
• 2nd most sought-after manufacturing destination, after China replacing USA.
(Global Manufacturing Risk Index 2021)
Targets under Make in India • Increase share of manufacturing in GDP to 25% by 2025 [from 17% presently]
• Create 100 million new jobs through promotion of labour intensive industries
like Textile, Leather, MSMEs, Electronics etc.
MSME Sector • Contribution: 30% to GDP (Manufacturing & Services), 45% of manufacturing
output, and 40% of exports.
• Employment: 80% of jobs in industry is by MSME with just 20% of investment.
• Composition: 30% MSME in manufacturing and 70% in services.
- More than 99% of MSMEs are in ‘Micro’ sector.
- 94% of MSME is in unorganised sector; 55% of MSME in rural areas
Indian Pharmaceuticals Global Standing
Industry • 3rd largest by volume and 14th largest by value, globally.
• Largest supplier of generic drugs (20% of the global exports).
• Largest supplier of vaccines globally (60% of global production).
India
• Contribution to GDP – 2%
• India’s Pharma Market: Largest Market share - Generic drugs (>70%).
Electronics Global Standing
• India’s electronics market is one of the largest (to reach $300 billion by 2026).
• India is 2nd largest mobile phone manufacturer globally
India
• Contribution of electronic industry to India’s GDP – 2.5%
• Growth rate – Domestic production has more than tripled from $30 billion in
2014-15 to nearly $105 billion in 2022-23.
• High Import Dependence: 60% of electronic products demand met by imports.
Semiconductor Sector • India as hub for semiconductor design: 2,000 chips designed per year.
• Talent Pool: India has 20% of the world’s semiconductor design engineers.

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
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• Global major producers: Taiwan, S. Korea, Japan, USA, & China (75% of global
capacity in East Asia.)
Automobile • Contribution: 7% of GDP, >25% of Industrial GDP, 50% of manufacturing GDP
• Contribution to Exports – 8%
• Globally: India 3rd largest automobile market in the world (after China & USA).
- Largest manufacturer of two-wheelers, three-wheelers and tractors in the
world, and 5th largest vehicle manufacturer overall.
Gems and Jewelry • Contribution to GDP - around 7%
• Contribution to Merchandise Exports: 15% (India among top 7 Exporters: 3.5%
of the world’s total exports).
• Diamond Advantage: >90% of the world's diamonds are cut and polished in India
Textile Contribution
• India’s GDP - 2%; Industry Output: 7%; India’s Total Exports earnings – 15%
International Competitive advantage
• Fibre Production: 2nd largest textile fibre producer in the world
- Largest jute producer, 2nd largest producer of silk and cotton.
• Technical Textile - 6th largest producer globally
• Exports: 3rd largest exporter of Textiles & Apparel in the world.
Leather Contribution
• Synthetic leather accounts for 90% of the total leather manufacturing.
• Gender inclusive - 30% of total employed are women
• Has one of the youngest workforce with 55% of workforce below 35 years of age
International Competitive advantage
• 2nd largest producer of Footwear and 2nd largest exporter of Leather Garments.
• A strong base for raw materials – India has 20% of the world’s cattle and buffalo
and 10% of the world’s goat and sheep population.
e- Commerce • India’s e-commerce market: Fastest growing in the world (20% annually).
• Online Retail Market: 3% of total retail market & 25% of organized retail market.
• Increased Adoption: > 60% of orders from tier-2 cities & smaller towns.
==========================================================================================

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
Under the Guidance of M K YADAV

LABOUR & EMPLOYMENT


Labour in India • India adds 12 million workers to the labor force annually.
[Periodic Labour Force • Total Work-age population – 65% of total population
Survey (PLFS) – 2023-24] • Total Labor force participation rate – 60% of total population
- Male: 80%, Female: >40%; Rural: 65%; Urban: >50%
• Total Worker Population Rate (WPR) – about 60% (Work Force Participation Rate).
- Male: >75%, Female: >40%; Rural: >60%; Urban: 50%
All-India (%) – 15 years & above
Rural Urban Rural + Urban
Rates
Male Female Person Male Female Person Male Female Person
LFPR 80 47.6 64 75.6 28 52 79 41.7 60
WPR 78 46.5 62 72.3 26 49.4 76 40 58
UR 2.7 2.1 2.5 4.4 7.1 5.1 3.2 3.2 3.2

Work Status of employed
• Self Employed: 60% of total employed; Regular wage: >20%; Casual Labour: <20%
Workforce in Informal
• Workforce employed in unorganized sector – About 85%
sector & jobs
• Workforce employed in informal jobs (organized + unorganized sector) – >90%
• Share of informal workers in the organized sector – 60%
• Trend - Informalization of the workforce [increased casual and contract labor] in
both government (primarily) & private sector.
Informalisation & Social • Nearly 60% of regular wage/salaried employees in the non-agriculture sector had
Insecurity [PLFS 2023-24] no written job contracts. About 60% did not have any social security benefit.

Unemployment rate (UR) • UR improved from the 45-year high of 6% in 2017-18 to 3% in 2023-24
• Male’s UR (3%) = Women’s UR (3%)
[PLFS 2023-24]
• Urban UR (5%) is more than twice of Rural UR (2.5%)

Youth & Unemployment • Labor force participation rate (LFPR) of youth - >45% (lower than LFPR of Workage
population [15-59 yrs])
(age group of 15-29 yrs)
• Unemployment rate among youth – about 10% (in Double Digits).
[PLFS 2023-24]
• Urban youth unemployment > Rural (15% vs 8.5%)
Unemployment & • UR for Educated persons (secondary & above level education) – 7% (greater in urban
Education Level [PLFS areas than rural).
2023-24] • Unemployment among non-literate – 0.2%
Migrant Labour (‘Circular • Total number of internal migrants in India (inter state & intra state) – about 45
Migrants’) crore or 37% of the population.
[Census 2011] • Interstate workers - 5.5 crore
• Economic Contribution - Contribute 10% of India’s GDP. High Internal
remittances contribution ➔ immense poverty and inequality reducing potential.
Gig Workers
• In India, there are about 15 million gig workers (ASSOCHAM report).
• India’s gig economy has the potential to serve up to 30% of India’s non-farm
workforce and add up to 1.25% to India’s GDP.

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
Under the Guidance of M K YADAV

S 3 THEME WISE KEYWORDS


Sr.# KEYWORDS FOR USE IN BODY OF THE ANSWER
Red Tapism

• Bureaucratic trap/inertia, Regulatory bottlenecks, Regulatory cholesterol, Tyranny of ‘inspector raj’,


Complex ‘Web of laws’

1
Crony Capitalism

• Regulatory capture by Private Interest

• Public and Private Enterprise becoming a ‘Personal Enterprise;

2
Challenges of Manufacturing Sector

• ‘Missing middle’ (mid-size firm)

• Trapped at Low End of Global Value Chain; Low Productivity Trap

3
MSME

• MSME as “Silent Engine of Growth”

• Dwarf Vs. Giants (MSME), Policy that fosters Dwarfism, ‘Perverse Incentive to remain small’

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
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Exports

• Export Superstars

• Champion sectors

• Sunrise Sectors

5
Sustainable Manufacturing

• Zero effect & Zero defect

• Circular economy

Businesses should work towards EARTH


• E – Environment
• A – Agriculture
• R - Recycling and Circular economy
• T – Technology
• H – Healthcare

6
Labour & Employment

• Good Jobs: FBSE: Formal & Productive, Bang For Buck, Social Transformation, Export & Growth

• Labour-abundant but welfare-deficit country

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
Under the Guidance of M K YADAV

KEYWORDS FOR USE IN WAY FORWARD


From ‘Populist Subsidies’ to ‘Milestone-based incentives’

8
• Policy Balm + Big Bang Structural Reform = India as Global Manufacturing Powerhouse

• Make in India for the World + Assembly hub for the world = India as Global Manufacturing Powerhouse

9
From Manufacturing Unit to Manufacturing Destination

10
From ‘Credit worthy MSMEs’ to 'MSME worthy Banks’

11
‘Idea to Innovation to Industry’ (‘Idea, Innovate, Incubate and Industry).

12
From Labour Intensive to Labour Sensitive

13
From ‘Informalisation Trap’ to ‘Sweet synthesis of Social Security & Skills’

14
From Mere Investment driven to Productivity driven economic growth

15
• From Job Seekers to Job Creators

• From Brain Drain to Brain Gain

16

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
Under the Guidance of M K YADAV

4 CASE STUDIES & BEST PRACTICES

NATIONAL & LOCAL


• Boosting industrial growth in Punjab -
- Recruit consultants from top B-schools - IIMs & ISB
- MSME industry's reach to state headquarters was difficult, so services provided are in district itself
to get same kind of support and regulatory clearances.
- New industries without regulatory clearances for 3.5 years.
- Streamlined inspection mechanism - central inspection system where officials of concerned
departments carry out joint inspection, chosen randomly by a computer and reports to be put
online in 48 hours to reduce harassment.
- High quality power with low T&D losses.
- Dedicated freight corridors, national highways, excellent railway network, airports
• India Innovation Index - NITI Aayog - Karnataka topped - high level of knowledge output, diffusion, and
more number of higher education institutions, research labs, business clusters etc,
• Boosting MSME sector, Rajasthan - Amendments to various labour laws.
- Industrial Disputes Act - Employer can retrench upto 300 (up from 100) workers without permission
from government. Worker should raise an objection regarding dismissal, retrenchment etc within
3 years. Trade union can be formed only if minimum 30% total workers are members (up from 15%)
- Contract Labour Act made applicable only if more than 50 workers up from 20 workers.
- Similar amendments to Factories act, Apprentices Act etc
- Impact - Number of factories with more than 100 employees increased substantially - model
appreciated by Economic Survey.
• Madhepura Electric Locomotive Project, a joint venture between the Indian Railways and the French
multinational Alstom, of how mega projects can be leveraged to boost domestic production.

INTERNATIONAL

• Mittelstand Companies, Germany: They are small and medium-sized enterprises (SMEs) that specialize
in niche industries. These companies play a crucial role in Germany's manufacturing landscape,
contributing to innovation, adaptability, and flexibility.
• Vietnam’s integration in Global Supply Chains: Today, Vietnam is the 2nd largest smartphone exporter,
producing 40% of Samsung’s global mobile phone products and employing 35% of its global staff.
- Facilitating factors - Stable investment climate; Abundant low-skilled & low-cost labour.
✓ Proximity - Most of the electronic inputs imported by Vietnam are from China; Hong Kong SAR,
China; Japan; Korea; Singapore; Taiwan, China; and Thailand.
• Bangladesh Apparel Sector: How Foreign firm benefitted Domestic Firms
- Foreign firms created incentives for local suppliers to improve their quality & productivity.
- Spillover effects of shared suppliers: Domestic firms that shared local suppliers with foreign firms
gained access to newer and better local inputs.
- Today, Bangladesh is 3rd largest exporter of apparels and footwear after China and Vietnam.
==========================================================================================

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
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5 FROM THE SPEECHES: PM, PRESIDENT, & VP

5.1 FROM THE SPEECHES OF HON’BLE PRIME MINISTER


• Where earlier there used to be talk of Fragile Five, now India is being identified with anti-fragile. India
has convincingly shown the world how to convert calamities into opportunities.
• Today, India is undergoing a rapid change in mindsets as well as markets.
• On Labour force & Employment
- India's labour force has a huge role to play in realizing India’s dreams and aspirations to build a
developed nation in the Amrit Kaal.
- In this era of the Fourth Industrial Revolution, technology has become the core driver for
employment.
- A globally mobile workforce is going to be a reality in the future. We need to design new-age
policies and interventions for these new-age workers.
- Flexible workplaces, a work-from-home ecosystem, & flexible work hours are the need of the
future.

==========================================================================================

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
Under the Guidance of M K YADAV

6 MANUFACTURING SECTOR: CHALLENGES & WAY FORWARD


Since the industrial revolution, no country has become a major economy without becoming an industrial
power. – Lee Kuan Yew

6.1 MANUFACTURING SECTOR: ISSUES & CHALLENGES


Beset with multitudes of problems, the manufacturing sector seems to have stagnated at 16% for past 30 years,
way below the intended target of 25%, due to following reasons.
• Infrastructure and Logistics concerns
- Physical infrastructure in India suffers from substantial deficit in terms of capacities as well as
efficiencies. Problems include: poor networks of roads, inadequate air & sea port capacities,
undeveloped railway networks, lack of uninterrupted power supply & industrial machineries,
unorganized warehousing, etc.
- This has resulted in high logistics cost (14% of GDP, compared to 8% (US) & 10% (EU)) ➔ adverse
impact on cost competitiveness of Indian goods in global markets.
• Restrictive labour laws
- On one hand, labour laws do not allow hire and fire flexibility to firms to respond to changing
business environment, and on the other hand, fails to provide income and social security to the
workers ➔ rise of casual/contractual/informal employment ➔ > 90% workers in informal jobs.
- It has led entrepreneurs to stay away from labour intensive sectors and opt for highly capital or
skilled-labour intensive technologies sectors ➔ wastage of demographic dividend.
• Skill mismatch – unskilled labour force, lack of training/vocational programmes, inadequate industry-
student interface etc.
• Domination of Small firms & Low productivity
- MSME centric labour intensive industries, constituting 45% of manufacturing output, are marked by
low productivity, low investment, lack of access to technology, no economies of scale, disincentive
to grow, and workers overwhelmingly employed in low productivity and low wage activities.
- Poor productivity of labour offsets the comparative advantage of cheap labour, particularly in
apparel sector where smaller Indian firms are unable to compete with Vietnam & Bangladesh.
• Complicated business environment
- Administrative complexities and bureaucratic red-tape in incorporating business, dealing with
construction permits/environmental clearances, registering property etc.
- Tardy commercial dispute resolution (includes protecting minority investors, enforcing contracts,
implementation of insolvency and bankruptcy norms etc).
• Inadequate expenditure on R&D and Innovation
- Currently, R&D spending amounts to less than 1% of GDP in comparison to >2% by China.
- The private sector accounts for around 35% of the country’s total R&D spending compared to 70%
in advanced economies and China.
• Slow technology adoption - Adoption of digital technologies in India is still in its infancy.
Inefficient technologies ➔ low productivity & higher costs ➔ Low international competitiveness
• Export Challenges: While medium to high technology (MHT) are fastest growing sectors in the world,
India continues to produce medium to low technology, thus, operating at low end of manufacturing
value chain ➔ low export competitiveness and demand.
- Challenges of stagnant/shrinking global demand and rising protectionist tendencies around the
world. E.g. Trade war between US and other major economies, removal of Generalized System of
Preferences (GSP) enjoyed by India etc.

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
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- Stiff competition from South-East Asian and other South Asian countries (Bangladesh/Vietnam in
apparels; Vietnam and Indonesia in leather and footwear)
• Limited capital access - high interest rates making borrowing costlier, unwillingness of banks to lend
due to rising NPAs, FDI limited to bigger firms, fluctuating exchange rates making External Commercial
Borrowing (ECBs) costly etc.

6.2 KEY GOVERNMENT INITIATIVES


• Infrastructure – GATI Shakti & National Infra Pipelines, Industrial parks, NIMZ, DMIC, UMPP, Port
development, Sagarmala, Bharat mala, focus on renewable energy, Smart Cities, FDI in railways,
promotion of Private participation in DISCOMs, Railways, Coal sector etc
• Labour reforms – Passage of 4 labour codes, Pandit Deen Dayal Upadhyay Shramev Jayate Karyakram,
Portable Universal Account Number for all EPFO accounts, Shram Suvidha Portal, Randomized labour
inspection scheme, Pradhan Mantri Rozgar Protsahan Yojana, etc.
• Re-skilling and Upskilling: Apprentice Protsahan Yojana, Manufacturing Sector Skill Councils under PM
Kaushal Vikas Yojana, Sector specific incentives to state govts. e.g. Electronics System Design and
Manufacturing (ESDM), Silicon manufacturing etc .
• Logistics -
- Logistic Efficiency Enhancement Programme (LEEP) to enhance freight transportation on 44
economic corridors.
- National Trade Facilitation Action Plan (NTFAP) to implement WTO’s Trade Facilitation Agreement
- Trade Infrastructure for Export Scheme (TIES) - First mile and last mile connectivity for export-
oriented projects.
- Logistics Data Bank under Delhi Mumbai Industrial Corridor Development Corporation (DMICDC)
- Containers in transit tracked through RFID to cut lead time in container movement
• Capital – AtmaNirbhar Bharat Fiscal Package, PM Mudra Yojana, Credit Linked Subsidy PMEGP,
Relaxation of FDI norms, SMILE loans by SIDBI for MSME, National Infrastructure Investment Fund etc.
• Regulatory overhaul - e-Biz project, Investor Facilitation Cell under INVEST INDIA, Independent Rail
Development Authority to decide freight tariffs, online tax filing, online environmental clearances etc.
• Focus sectors – 24 focus sectors under Make in India - automobiles, chemicals, IT, pharma, food
processing, textiles, ports, aviation, leather, tourism and hospitality, wellness, railways etc.
• Taxation - Goods and Services Tax would aid to integrate value chains in manufacturing.
• Nurturing Innovation and strengthening IPR ecosystem – National IPR Policy, Innovation labs,
incubation labs, technology parks, SETU, AIM, etc.
• Public Procurement:
- Government E-Marketplace (GEM) made compulsory for paperless & cashless purchase of
common use goods.
- Public Procurement Policy for MSMEs & MSME SAMBANDH: minimum of 25% (increased from
20%) of total purchases from MSMEs, with 3% from women entrepreneurs.
• Export Promotion – Export preparedness Index, Promoting Districts as Exports Hubs etc.
• Facilitating easy exit:
- Insolvency and Bankruptcy Code (IBC) and establishment of separate commercial courts & e-courts
- Promotion of Arbitration & Reconciliation as a means of dispute resolution.
- Separate insolvency and bankruptcy norms for MSMEs with adequate protection.
• International collaboration - eg. With Japan for Bullet trains, Nuclear fuel agreement with Australia to
ensure energy security, Singapore’s assistance in Smart cities, US partnership for Solar power & defence.
• Increasing productivity of MSMEs: Read ahead.

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6.3 WHAT MORE NEEDS TO BE DONE?

ACRONYM AS WAY FORWARD ‘PROGRESS’

WAY FORWARD: INDIA NEEDS TO PROGRESS IN MANUFACTURING SECTOR


• P - Policy Reforms: Equal focus on improving Ease of Doing Business & Cost of Doing Business in India (Land,
Labour, Capital, raw material etc.) to improve domestic & international competitiveness.
• R - Research & Development: Increase R&D expenditure, esp. in sectors where India is globally competitive.
E.g. e-commerce, Healthcare, Pharmaceuticals & Biotech, Automobiles, green tech, new & renewable energy
• O - Optimal Infrastructure: Development of robust infrastructure (Physical + Social + Digital), including
transportation, logistics, power supply, and industrial parks, to support efficient manufacturing operations.
• G – Global Value Chains: Ensuring Strategic Integration with GVC
- Carrying out multi-pronged deeper reforms – Land (including Land Banks for investors), labour, law,
financial, infrastructure, governance (for eg. Mission Karmyogi), etc.
- “Merging local with global” - creating global brands out of India.
- Harmonizing Indian quality standards with global standards.
- Strengthening linkages between Indian and global SMEs and intensifying FDI.
• R – Reaping Industry 4.0 Gains: Huge efficiency gains can be realized through adoption of technologies such
as “internet of things”, robotics and AI ➔ Smart Manufacturing.
• E – Enhanced Focus on high value sunrise sectors (e.g. Semiconductor, electronics, silicon manufacturing and
fabrication, electric vehicles, defence, aviation etc) and labour intensive sectors (food processing, textiles esp.
Technical textiles, leather, Tourism, food processing etc.).
• S - Skilling & gainful employment of the millions of aspirants who join the workforce over the next two
decades. Targeted measures to improve labour productivity in select sectors, especially in MSMEs.
• S - Sustainable Manufacturing: including practices such as energy efficiency, waste reduction, and responsible
resource management, to ensure environmental protection and long-term viability ➔Zero Effect, Zero Defect

==========================================================================================

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7 REVISITING GLOBAL SUPPLY CHAIN

- Geopolitical tensions, high


Russia Ukraine Conflict – energy prices, rising interest
Impact on Food, Fuel, & rates and persistent inflation are
Raw Materials expected to constrain global
trade.

- Global growth rate projections


have been cut down to less than
3%

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==========================================================================================

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8 MSME SECTOR: KEY CHALLENGES & FUTURE PROSPECTS


8.1 STATUS & SIGNIFICANCE
• Economic Significance
- Composition - > 99% of MSMEs are in ‘Micro’ sector (NSS, 2015-16), 94% of MSME is in unorganised
sector, 32% MSME in manufacturing and 68% in services, & 55% of MSME in rural areas.
- Contributes - 30% to GDP (Manuf. & Services), 45% of manufacturing output, & 40% of exports.
- Diversity of MSME sector - products ranging from traditional to high –tech precision items.
- Comprises key sunrise sectors – such as electronics industry, chemicals, leather, textiles, agro and
food processing, pharmaceuticals, transport and tourism industries, etc
• High Labour Intensity - 80% employment with just 20% investment. Generates 2nd highest employment
(110 million), after Agriculture sector. Thus, key to poverty alleviation and to prevent distress migration.
• Key to Inclusive growth)
- Creating employment opportunities for special segments such as women workforce, physically
challenged, traditional industries, etc
- Addresses regional imbalance and unequal distribution of national income and wealth.
• Strategic significance - MSME is a key component in ‘Make in India’, Digital India, Start-up India, Stand
up India, Indigenous Defence production, and Foreign Trade Policy initiatives of the Government. It has
crucial linkage to e- commerce & m-commerce industry in India.

8.2 MSME: DEFINITION


WHAT ARE MSMEs?
• Changed Definition of MSME: changed by amending the MSMED Act, 2006
- Removal of current distinction between manufacturing & services MSMEs.
- Increase in the investment limit.
- Additional criteria for annual turnover introduced.
REVISED MSME CLASSIFICATION
Composite Criteria: Investment & Annual Turnover
Classification Micro Small Medium
Manufacturing Investment < Rs. 1 crore Investment < Rs. 10 crore Investment < Rs. 50 crore
& Services Turnover < Rs. 5 crore Turnover < Rs. 50 crore Turnover < Rs. 250 crore

BENEFITS OF CHANGE IN DEFINITION OF MSME


• Incentivises growth – Low investment threshold in MSME definition had created a fear among MSMEs
of graduating out of the benefits and hence killing the urge to grow.
• Replaces outdated definition - the previous definition of MSME was finalised in 2006. After 14 years,
with continued inflation & erosion of value of Rupee, the thresholds have become impractical.
• Meets long standing demand of Industry - Many sectors where MSMEs have substantial share such as
Pharmaceuticals, Auto-component, Food processing, among others, have been demanding a many-fold
increase in the investment limit needed to be compliant of the new mandatory and industrial standards.
The minimum investment exceeded at least 5 crore even if one had low turnover.
• Reduces costs - The criterion of investment in plant and machinery requires self-declaration, which in
turn requires verification and leads to transaction costs. The additional turnover based criteria is
transparent, as authorities can cross check the turnover through platforms such as GST Network. Thus,
eliminates the need for inspection.

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• Aligning to new tax regime – The change makes the norms of classification growth- oriented and aligns
classification norms to the new tax regime revolving around GST, which captures turnover details of
enterprises.
• Improves Information Access - A turnover based definition, coupled with incentives for filing GST, will
encourage MSME to file taxes and transact through banks, resulting in improved information availability
on the sector for the policy makers.
• Enhance Ease of doing business - An enterprise would automatically move on to the requisite slot after
attaining a specific turnover and it would not require fulfilment of tedious formalities. The consequent
growth will pave the way for increased direct & indirect employment in MSME sector.
• In line with Global norms - The clear and unambiguous definition is also in consonance with global
norms and learns from the best practices across countries.

8.3 MSME SECTOR: ISSUES & CHALLENGES


• Policy environment not conducive to growth – Perverse incentives to remain small, unregistered, and
informal as tax & other concessions are withdrawn if they outgrow beyond a limit, leading to a heavy
concentration of micro enterprises (99%).
- Difficult entry / exit norms (insolvency process takes 78 years – World Bank), multiplicity of rules,
inspector raj, complex compliance norms etc.
• Small size, lack of Infrastructure & outdated Technology – which leads to
- Absence of economies of scale, thus leading to high cost Thus, MSMEs remain uncompetitive
of operations, transport and raw material. vis-a-vis MNCs & international
- Low output, quality, and value addition. players like China, Vietnam,
Philippines, Thailand etc.
• Lack of Adequate Capital and Credit
- MSMEs face the problem of delayed payments, further leading to rising MSME NPAs.
- Only 4% of MSME have access to formal credit due to lack of adequate collaterals, low assets
recovery rate (just 14%) for failed firms, complex loan procedures etc
- Tendency of most angel investors, venture capitalists etc. to be biased towards service sector.
- Limitations in accessing investors directly through capital markets due to lack of standards to rate
credit worthiness.
- Many MSME are still reeling under the effects of demonetization & GST and ongoing liquidity
crunch due to crises in Banking & NBFC sector.
• Limited access to Marketing and information services.
• Skills and capacity development – small scale of operations, low profit margins, and temporary workers,
hence, there is little incentive to invest in skills training.
• Inadequate social security net - which is a concern especially as >90% of MSME is in unorganized sector.
• MSME clusters - MSME clusters are inadequately equipped in areas such as tool rooms, innovation
centres, testing facility, etc
• Lack of awareness - MSMEs lack adequate information about various schemes and benefits made
available by the government.

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8.4 WAY FORWARD & RECOMMENDATION: MSME SECTOR

ACRONYM AS WAY FORWARD ‘SCALE’

WAY FORWARD: MSMEs should focus on - SCALE -


• S - Sense of security
• C - Credit availability
• A - Access to market
• L - Leverage technology
• E - Ease of doing business

KEY RECOMMENDATIONS: EXPERT COMMITTEE ON MSMEs (Chairperson: UK Sinha)


• Comprehensive MSME Code - The MSMED Act, 2006 may be reimagined as a holistic MSME Code having
a provision for sunset on plethora of complex laws scattered all over the legislative framework.
• Periodic revision of MSME definition - from time to time in the context of changing economic scenario.
• Public Procurement through GeM portal –
- Government may make it mandatory for CPSUs to procure from MSEs through the GeM portal only.
- GeM can be developed as a full-fledged marketplace for MSE sellers to procure raw material too.
• Issues of Delayed Payments - An amendment may be made to the MSMED Act, 2006 requiring all
MSMEs to mandatorily upload all their invoices on Information Utilities (IU) set up under IBC to ensure
automatic display of the names of the defaulting buyers.
• Marketing & Technology Support for MSMEs –
- Government should build networks of development service providers that can provide customized
solutions to MSMEs in the area of technology, product development and marketing techniques.
- Assist MSMEs to on-board ‘B2B’ and ‘B2C’ e-commerce market places.
- A Technology Mission should be launched for converging the efforts of various stakeholders for the
technology upgradation of the MSMEs across India.
• Financial support
- Distress Asset Fund - Structured to assist units in clusters where a change in external environment,
e.g. a ban on plastics or ‘dumping’ has led to a large number of MSMEs becoming NPA.
- Collateral free loans - revise the collateral free loan limit to ₹20 lakh.
- Facilitate Crowd sourcing – by setting up Non-Profit Special Purpose Vehicle (SPV).
- Govt Supported Fund of Funds - to support Venture Capital firms investing in the MSME sector.
- Use of Priority Sector Shortfall (PSS) funds to create a low cost lending window for State
Governments (by SIDBI) for infrastructure projects in clusters.
• Incentives for start-ups - suitable financial and non-financial incentives must be deployed to retain
successful Indian start-ups entities in India.
• Focus on capacity building - establishment of Enterprise Development Centres (EDCs) within District
Industries Centres (DICs) in each district, for purpose of skilling and technology development.
• Exit Policy for MSMEs - provision for out-of-court assistance to MSMEs such as mediation, debt
counselling, financial education, or the appointment of a trustee.

KEY GOVT INITIATIVES FOR MSME


• Encouraging enterprise & employment
- Prime Minister’s Employment Guarantee Programme - credit linked subsidy to establish new enterprises
employment opportunities in rural and urban areas.
- ‘Sampark’ portal - Bridge between the talent pool and enterprises seeking trained manpower.

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• Ensuring Credit Access – MUDRA Yojana, PSB 59 Minute Loan, Udyamimitra loan Portal, India Aspiration Fund,
Trade Receivables e-Discounting System (TReDS) portal, Credit Guarantee Fund Trust for MSEs, etc.
• Enhance Productivity & innovation
- ASPIRE – A Scheme for promotion of Innovation, Rural Industry and Entrepreneurship
- SFURTI - Scheme of fund for Regeneration of Traditional Industries
- Aatmanirbhar Bharat ARISE-ANIC Initiative to promote research & innovation in MSMEs.
- Lean Manufacturing Competitiveness Scheme
• Improve access to Technology - Credit Linked Capital Subsidy Scheme for Technology Upgradation, Zero
Defect, Zero effect scheme (to deliver quality products using clean technology), Digital MSME scheme
• Professional support & Training
- Champions Portal: a single window solution to handhold the MSMEs throughout the business lifecycle.
- Udhyami Mitra Yojna - To promote and support new MSMEs in getting NOC, legal compliance, capital,
training, plants-machinery-technology etc. to startup entrepreneurs.
- National SC/ST hub - It is to provide professional support to entrepreneurs from SC/ST.
- Udhyam Sakhi - A one stop platform portal launched for emerging women entrepreneurs of India.
- Udyam Abhilasha - A National Level Entrepreneurship Awareness Campaign by SIDBI to train rural youth in
aspirational districts to be entrepreneurs.
• Grievance Redressal - MSME Samadhaan to empower MSEs to directly register cases of delayed payments.
• Improving Govt. interface
- Udyam Registration: Portal for registration of MSME. No supporting documents at the time of online filing.
- Public Procurement - MSME Sambandh portal to monitor the implementation of the Public Procurement
from MSMEs by CPSE.
- MSME Data Bank: enables the Ministry of MSME to streamline and monitor the schemes and pass on the
benefits directly to MSMEs.
• Skill - PM Kaushal Vikas Yojana
• Initiatives Under Aatmanirbhar Bharat Abhiyan Package
- Equity infusion for MSMEs through Fund of Funds.
- Collateral free automatic loans to meet operational liabilities and restart businesses.
- Expediting payment of dues to MSMEs: from Govt/ CPSEs to be released within 45 days.
- Insolvency resolution: A special insolvency resolution framework for MSMEs under IBC
- e-market linkage for MSMEs to act as a replacement for trade fairs and exhibitions.
- Disallowing global tenders: upto Rs. 200 cr in government procurement tenders to protect Indian MSMEs
==========================================================================================

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9 SEMICONDUCTOR INDUSTRY IN INDIA


9.1 NEWS IN FOCUS
• The Cabinet recently approved modifications in the Semicon India Program ('Programme for
Development of Semiconductors and Display Manufacturing Ecosystem in India').
• Centre will now offer uniform fiscal support of 50% project cost for all technology nodes for setting up
of semiconductor fabrication units.

9.2 BACKGROUNDER
ABOUT SEMICON INDIA PROGRAM 4 Schemes under Semicon India
• Launched in 2021 by Ministry of Electronics and 1. Scheme for setting up of Display Fabs
Information Technology (Meity). 2. Set up of Semiconductor Fabs
• Aim: Provide financial incentive to companies that are 3. Set up of Compound Semiconductors/
engaged in semiconductor manufacturing. Silicon Photonics/ Sensors Fab,
• Nodal agency for schemes approved under Semicon Semiconductor Assembly, Testing, facilities.
India: India Semiconductor Mission (ISM) 4. Design Linked Incentive (DLI) Scheme.
- ISM is a specialised and independent Business
Division within Digital India Corporation (DIC) to build a vibrant semiconductor ecosystem.
✓ DIC is a not-for-profit Company set up by MeitY, that leads and guides in realizing the vision,
objectives and goals of the Digital India program.
- Composition: An advisory board consisting of leading global experts in the field of semiconductors.
About Semiconductor
• It is a material (composed of
Silicon, Germanium etc.) that
fits between a conductor (full
conductivity) and an insulator
(no conductivity), designed to
manage and control the flow
of current in electronic devices
and equipment. Hence, the
name semiconductor.
• Global major producers -
Taiwan, South Korea, Japan,
USA, and China (75% of global
capacity in East Asia).
• Semiconductors Market in
India: $25 billion; projected
reach $80 billion by 2028.

9.3 NEWS ANALYSIS


IMPORTANCE OF DOMESTIC SEMICONDUCTOR MANUFACTURING IN INDIA
• Insulation from Global Supply Chain Shocks: Concentration of chip manufacturing in few countries
makes India vulnerable to global shocks like US-China trade war, Covid-19 pandemic etc.
• Strategic autonomy & Technological Sovereignty: Creating import dependency on semiconductor
devices can undermine India’s foreign policy options. For eg. 60% of global chips are produced in Taiwan,
and China can create ‘Malaccan Dilemma’ kind crisis for India.

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• Industry 4.0 & Modern Electronics: essential component for advanced technologies like AI, Quantum
computing, Block chain applications, 5G, IoT, Self-driven vehicles, Drones etc.
• Climate Change & Clean Energy: Semiconductor chips are key components in several green technologies
like EVs, solar panels, turbines, LEDs etc ➔ meet India net zero carbon emissions Target.
• Positive Spillover Effect: Health Sector (AI/ML Tools performing complex surgeries), Boost to Space
Economy (Satellite, Launch Vehicles, Deep space probes), Precision Agriculture, Smart energy etc.
• Success of Government big ticket reforms like Make in India, Digital India, $ 5 trillion economy, Aatma
Nirbhar Bharat depends on how India achieves self-sufficiency in chip production.
• National security: By reducing dependence on imported semiconductors, safeguarding critical
infrastructure, defense system, sensitive data from vulnerabilities.
• Employment generation - in domains like design, fabrication, assembly, testing etc.
• Stable Forex: A vibrant & competitive semiconductor ecosystem will help India boost export earnings
by tapping global market & save huge Forex (India imports 100% of SC Chips) ➔ narrow trade deficit.
KEY CHALLENGES
• Highly capital-intensive: Manufacturer has to maintain a large volume production facility to support
volume orders that will result in very high investment in the beginning.
• High maintenance & Infra dependency: They require high-quality supply of pure water, uninterrupted
electricity, etc. For e.g. TSMC alone uses almost 5% of all Taiwan’s electricity
• Lack of highly-skilled labour & technology:
- Education trend more inclined towards software rather than core technology like semiconductor.
- Inadequacy of institutes engaged in cutting edge research in advanced semiconductor manufacture
• Scarcity of raw materials: From a value-chain perspective, SC production needs silicon, Germanium &
Gallium arsenide, and Silicon carbide which are not available in India and needs to be imported.
• Adverse effect on environment: Many toxic materials are used in the fabrication process such as
arsenic, antimony, and phosphorous, along with high global warming potential fluorinated compounds.
• Other Factors: Gaps in meeting global products standard, Intellectual Property Rights issues, Inadequate
Credit availability, Administrative delays, Inadequate R&D and Innovation ecosystem.
OTHER KEY GOVT. INITIATIVES
WAY FORWARD (Includes NITI Aayog recommendations)
• Production Linked Incentive scheme (PLI)
• Strategic policy & Legal framework: covering entire
• Chips to Startup (C2S) Programme: train high-
chip-making value chain ie. design centers, testing
quality engineers.
facilities, packaging, etc. Legislative backing to policy
• Modified Special Incentive Package Scheme
& incentives on the lines of USA & EU Chips Act.
(M-SIPS) for Semiconductors.
• Sustainable Logistics & Infrastructure: Required for a
• Digital RISC-V (DIR-V) program: production of
modern Fab, with swift transportation, a large
microprocessors & achieving industry-grade
quantity of pure water, uninterrupted electricity,
silicon & designs.
communication, a pollutant-free environment, etc.
• Industry & academia collaboration: Jointly designed curriculum & promotion of a start-up culture
among faculty & students in higher educational institutes through initial capital and mentoring.
- For eg. 'Semiconductor Startup Incubation and Acceleration Program (SSIAP)' at IIT Hyderabad.
• ‘Friend Shoring’ for secure supply: Government trade & foreign policies to focus on securing access to
foreign technology & input suppliers in friendly countries (For Eg. QUAD, S. Korea, Taiwan etc).
- Securing Rare Earth elements by investing in offshore reserve eg. Lithium triangle in S. America.
• Gain Gradual Expertise: India can start with assembly, testing, marking, and packaging (ATMP) that
generates more employment and require less investment than full-fledged Fabs.
- Can gradually enter and master complex R&D and advanced semiconductor manufacturing.
• Other Measures: Facilitative tax & IPR regime, Industrial clusters, funding across value chain, etc.

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10• ANSWER WRITING VIA TEMPLATES: MACROECONOMIC FRAMEWORK

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• ANSWER WRITING VIA TEMPLATES: QEP THEMES BASED FRAMEWORK

Q) Can the strategy of regional resource-based manufacturing help in promoting


employment in India?

Sr # QEP THEMES CUSTOMISED POINTS/DIMENSION


GS PAPER 1
1 Indian History •
2 Post Independence World History •
• Extraction of local resources to benefit local industries eg. mineral
3 Geography - Resources
rich Jharkhand, Chhattisgarh, Odisha
• Boom in Rural industries ➔ reduced urban -rural divide ➔ no forced
4 Urbanisation
migration for employment ➔ balanced regional development
Gender Issues & Vulnerable • Optimal utilisation of available human resources – including hitherto
5
Sections excluded population - women, SC/ST, poor, unskilled etc.
• Vocal for local & going global ➔ Regional specialisation – One
6 Globalisation & Indian Society district/region one product (Diamonds, organic foods) ➔ GI Tags
➔International demand ➔ more export, more employment
GS PAPER 2
• Greater sense of ownership of resources & assets ➔ Jan Bhagidaari
1 Good Governance & Civil Society ➔ better maintenance, aware citizen demanding accountability,
enhanced social capital
• Prosperous Regions as magnets & models ➔ Better & Balanced
2 Cooperative Federalism Centre State relations ➔ better implementation of employment
schemes.
3 Education & Skill Development • Human resources - Local talent & skill pool with local knowledge
4 Health & Nutrition
• Regional resources used for regional prosperity ➔ no siphoning off
5 Poverty & Inequality of critical resources ➔ reduced poverty & inequality via increased
employment.
GS PAPER 3
• Boost to ancillary industries ➔ virtuous domino effect on
1 General State of Indian Economy employment in other related sectors
- Mining ➔ metal parts ➔ Micro Industries
• Boost to Agri incomes & Employment
2 Agriculture 1) Agri outputs as raw material to boost agro based industries
2) Regional Prosperity ➔ increased consumption demand
3 Manufacturing & Labour Sector • Boost Local Entrepreneurship (from Job seeker to Job Creators)

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• Locally sourced resources ➔ Cost cutting ➔ high profitability ➔


increased scale more employment.
• Development of supply chain & infra ➔ road, rail, ➔ Benefits &
4 Physical Infrastructure employment across the logistics chain - Extraction, transport,
storage, market, exports
Energy Sector: Conventional &
5
Renewable
• Local resources ➔ local profits ➔ improved taxation revenues for
6 Taxation & Fiscal Policy
states ➔ more public spending to increase skills & employment
Climate Change & Sustainable • Sustainable utilisation of local resources, better use of traditional
7
Development knowledge
8 Disaster Management •
• Boost to e commerce ➔ linking villages (specialisation product esp
9 Digital India & Cyber Security
tribal areas) with international markets
• Peace & prosperity ➔ improved employment ➔ reduced social
10 Internal Security
tensions ➔ better law & order situation

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11 DEMOGRPAHIC DIVIDEND & CHALLENGES OF EMPLOYMENT CREATION

11.1 INTRODUCTION
• India enjoys a place of pride in the international arena not only as the fastest emerging economy, but
also as a vast pool of dynamic human resources.
• While most of developed world is moving towards ageing population, India has:
- The largest youth population in the world with around 27% of the population in the age group of
15-29 years and 65% of population below 35 years of age.
• India, by harnessing this youth power & demographic dividend, can become “skill capital” of the world.
• However, the present demographic advantage of India is predicted to saturate by 2040. Thus, there is
very narrow window to harness it.
- The employability of this pool of creative talent has been the highest concern.
• India currently needs ‘twin reforms’:
- Creating ‘gainful employment’ opportunities for nearly 10-12 million people joining the labour
market every year.
- Bringing informal sector workers into a formalised set up by creating ‘high productivity – high
wage’ jobs.
• Thus, the focus of government has been on promoting self-employment and entrepreneurship,
transforming youth into ‘job creators’ from ‘job seekers’ ➔ ‘Empowering through Enterprise’.

11.2 CHALLENGES IN CREATING EMPLOYMENT OPPORTUNITIES


• Lack of credible data – Unorganised sector comprises more than 80% of the labour force in India, which
is difficult to measure ➔ Lack of data on migrant labours & workers in Gig economy.
• Structural Rigidities of Labour market: Complex & restrictive Indian labour laws, imposing huge
compliance burden on the companies. Thus, firm’s preference to move into capital intensive sectors
• Low Labour productivity – due to
- Poor Labour welfare – dismal working conditions, overtime, inadequate compensation, etc directly
impact labour morale, and hence their productivity.
- Skills deficit – Inadequate education & training ecosystem, absence of industry linkage, demand –
skill mismatch, low placement rate ➔ unemployment & underemployment
- Dominance of small sized firms – due to faulty policies & labour laws that constrain Indian firms to
achieve economies of scale ➔ large unorganized sector with low productive jobs ➔
underemployment.
- Under-developed innovation ecosystem and poor adoption of technology – thus, inability to
complement and enhance labour productivity.
• High proportion of informal, low wages jobs & lack of social/job security: >90% of workforce is trapped
in casual, informal, unsecure work due to labour laws.
- Poor implementation of social security provisions for 15 million “gig” workers.
• Job Less growth – which is compounded by
- Firm’s preference to move into capital & skill intensive sectors due to prevailing labour issues.
- Disruptive changes due to 4th Industrial Revolution – joblessness among semi & unskilled
workforces and emergence of new jobs requiring completely new skill set.
• Gender discrimination – which is reflected in low women participation rate, high gender wage gap, and
low representation of women at senior management positions ➔ wastage of demographic dividend.

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
Under the Guidance of M K YADAV

• Absence of holistic labour policy: Introduction of piecemeal reforms in labour laws from time to time,
while a holistic national labour policy is elusive.
• Roadblocks to key government initiatives – Unresolved Labour sector issues neutralise government
initiatives to put Indian economy on the path of 10% growth rate – for eg. Make in India, Skill India, Start
up India, Smart cities, making India an export hub, etc.
• High trust deficit & socio economic losses - Trust deficit between workers and Management and lack of
effective industrial dispute resolution mechanism leading to increased discontent, lockouts, loss of
production ➔ tarnishing India’s image as an investment destination eg. Maruti lockout, leading to loss
of lives of management personnels.
• Challenges to fostering spirit of entrepreneurship – ‘Risk averse’ mind set of people, lack of access to
credit, market linkages, space, network, and mentors.
• Ineffective linkage (disintermediation) between prospective employers and employees - This has led
to labour shortage in some parts of the country, with excess labour supply in other parts.

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
Under the Guidance of M K YADAV

12 INFORMALIZATION OF EMPLOYMENT

12.1 REASON FOR INFORMALISATION IN ORGANISED SECTOR


Though, there has been an increase in employment in ORGANISED SECTOR, it is mainly in informal jobs.
Nearly 60% of workforce in the organised sector is in informal jobs.

Who are informal workers?


1. Those who work in informal/unorganized sector.
Paradox - It was
2. Those assumed
working that economic
in organised reforms any
sector without will employment
usher in an era of rapid
benefits industrialization
provided and workers
by the employer. in
Includes
informal sector would be subsumed in formal sector eventually. Though there has been a transfer of
those working on contract or casual labourers (without contract). Eg, plumber, sweeper, electrician, BPOworkers
from informal to formal
employees, sector,
IT, media, etc.at the same time formal sector has seen a marked increase in informalization
of jobs.
Reasons for informalization in ORGANIZED SECTOR are:
• Strict, inflexible labour laws that restrict a company’s ability to hire and fire in response to the dynamic
market environment. Thus, adversely affecting their competitiveness.
• Cut throat business competition has favoured cheap labour, thus, demand for temporary, casual,
contractual labour as a means to keep wage bill low and profits high. Contractualization also helps firm
avoid Regulatory Cholesterol (refer to the box below).
• With the growth of MNCs, offshore outsourcing and international sub-contracting has increased leading
to the shift towards temporary employment.
• Technological development has led to fragmentation and decentralization of production process
leading to more employment on informal basis through outsourcing. Also, rise of ‘gig economy’, esp.
due to emergence of online based services.
• Rapid growth of population and lack of opportunities in rural areas drive people to migrate in large
numbers to urban cities in search of employment. They lack bargaining power and requisite skills and
settle for informal jobs out of desperation.
• Lack of preparedness - Capital intensive growth, demand - Skill mismatch and lack of adequate training
programme to prepare workers to enter formal jobs.
• Failure of organised sector to create high productive jobs. Thus, workers are merely moving from
informal jobs in unorganised sector to informal jobs in organised sector.
• Expanding construction sector has been one of the highest employment generators but demanding
more of unskilled labourers (90% of organised construction sector employment is informal).

12.2 IMPLICATIONS OF INFORMALIZATION


• Vulnerable workforce with no safety, adequate working conditions, social security benefits, health
insurance, pensions, or secure job tenure. Will compound the problem of poverty and reverse any gains
made so far. Already marginalised sections like women, SC/ST, etc. are worst hit.
• Prevents inclusive growth due to difficulties in accessing institutional finance, technology, market etc.
• Lack of credible data on the informal workforce, some even escape detection of any sorts due to
difficulty in data collection. Thus, government welfare schemes do not reach them.
• Weakens labours’ bargaining power - Wages are driven down even below minimum wage level.
• Low labour productivity, thus jeopardizing growth and competitiveness.

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
Under the Guidance of M K YADAV

13 SUGGESTIVE MEASURES: LABOUR REFORMS


• Regular & reliable economic data – PLFS survey is a step in the right direction.
• Realign India’s Education System to Emphasise Skills rather than mere Degrees (Use as Fodder points
on any question on linkage between Education and Skills to boost employment)
- Vocational Skill Centric Curriculum: from class 6 onwards to develop an interest in learning skills for
employment. For eg. As implemented by Haryana, Himachal Pradesh and Kerala.
- Incentivising the fees for acquiring vocational / technical education as most of these institutes are
in the private sector and out of reach of youth from the low income category.
- Aligning National Education Policy with the National Skill Development Policy and alignment of
vocational courses in schools with the National Skills Qualification Framework.
- Transferable skills: Responding to ever changing/unpredictable technology driven economy by
Teaching skills that are transferrable across occupations.
- Focus on skilling in sectors having potential to create maximum employment
✓ New emerging areas - Big Data Analytics, Artificial Intelligence, Internet of Things, Cloud
Computing and Virtual Reality, Block Chain and Electric Vehicles etc.
✓ Labour intensive sectors – For the large segment of poorly educated and low skilled labour force
such as apparel; textile and leather; tourism and hospitality sector; and construction.
✓ High growth sectors – Infrastructure, Transport, IT, Telecom, construction, healthcare, retail,
automobile, banking and financial services, etc.
- International best practices: Combining ‘school-based learning’ with ‘work based learning’ as found
in Austria, the Czech Republic, Denmark, Hungary, Netherlands, and Switzerland.
• Formalization – (Job productivity depends on growth of the sector) (Use as Fodder points for any
question on enhancing formalisation of workforce).
- Expansion of organised sector so that they can become “engines of growth” in order to accelerate
creation of formal, well paying, high productive, safe jobs.
- Within Organised sector – need to focus on labour intensive goods and services to avoid perils of
“jobless growth” – eg. Apparel, footwear, tourism, food processing, electronics, construction etc.
- Reforms in MSME/unorganized sector - so that they develop into larger enterprises and enter
organized/formal sector.
- Removal of all existing impediments to business growth – Promote ease of doing business,
enhance investment, create supporting infrastructure, develop industry relevant skill pool, create
facilitative regulatory environment, simplify GST, adopt India Stack for moving all laws to Paperless,
Presenceless, and Cashless interface. etc.
• Labour Law Reforms: Reducing uncertainty and complexity in labour legislation, creating a robust and
comprehensive floor of rights (“minimum rights”), & modernising dispute resolution.
• Financialization – Expand financial inclusion through digitization, vibrant bond market, alternate
investment options to household to divert investment from ‘idle’ physical assets (real estate, gold) to
‘productive’ financial assets.
• Integrating Micro Industries to Marketplace - Integrating more micro enterprises at village level to large
market places, including online markets vai e commerce, to ensure continued livelihood.
• Encouraging Private Sector Funding - Need to explore various options such as reimbursable
contributions, levies or even mandatory cess to determine how best to motivate the industries to
voluntarily participate in the skill development.

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
Under the Guidance of M K YADAV

• Increasing Female Labour Force Participation – through access to capital, market linkages, education &
skill development, reforms in laws, formation of SHGs, removal of traditional gender barriers etc.
• Urbanization – Create new job magnets like Gurgaon near Delhi, Whitefield near Bangalore, Mohali
near Chandigarh etc.
• Boost exports – Creation of strong networks of manufacturing units and integrating them with global
supply chain is required to make use of export-led growth in manufacturing, especially in labour
intensive sectors like textile and apparel industry.

WHY EXPORT MATTERS?

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
Under the Guidance of M K YADAV

14 KEY GOVERNMENT INITIATIVES FOR LABOUR REFORMS

• Credible Annual Data - Periodic Labour Force Survey (PLFS)


• Labour reforms
- Simplification, amalgamation & rationalization of multiple laws - into 4 Labour codes
- Pandit Deendayal Upadhyay Shramev Jayate Karyakram - Shram Suvidha Portal, Apprentice
Protsahan Yojana, Revamped Rashtriya Swasthya Bima Yojana etc.
- Pradhan Mantri Rozgar Protsahan Yojana - where the Government provides the 8.33% of employer
contribution to the Employees' Provident Fund.
- SAMADHAN Portal - An e-dispute portal for filing industrial disputes by workmen/employer.
- Skill Ecosystem - Dedicated Ministry of Skill Development and Entrepreneurship, Skill India Missions,
Pradhan Mantri Kaushal Vikas Yojana 3.0, Labour Market Information System, PM DAKSH etc.
• Entrepreneurship promotion - Startup India, Standup India, MUDRA, ASPIRE, Atal Innovation Mission,
Pradhan Mantri Yuva Yojana etc ➔ “job generators”.
• Gender related measures: Maternity Benefit (Amendment) Act - It has increased the maternity leave
from 12 to 26 weeks with added crèche facility at workplace.
• Social Security
- Pradhan Mantri Shram Yogi Maan-dhan Yojana – Pension scheme for unorganized workers.
- PM Laghu Vyapari Maan-Dhan Yojana - Pension Scheme for Traders, Shopkeepers & Self-Employed
- Atal Beemit Vyakti Kalyan Yojna - compensation to insured persons when rendered unemployed.
• Other Initiatives (to overcome COVID Crises)
- ‘AtmaNirbhar Skilled Employee Employer Mapping (ASEEM)’ portal to bridge the demand-supply
gap of skilled workforce across sectors.
- SVANidhi Scheme launched to facilitate collateral free working capital loan upto Rs.10,000/- of
one-year tenure, to approx 50 lakh street vendors to resume their businesses.
- Pradhan Mantri Garib Kalyan Yojana to help poor, needy and unorganised sector workers.
- Pradhan Mantri Garib Kalyan Rojgar Abhiyan - to facilitate employment of migrant workers who
have gone back to their Home State.
- Affordable Rental Housing Complexes (ARHC) - The migrant labour/urban poor will be provided
living facilities at affordable rent under Pradhan Mantri Awas Yojana (PMAY - U).

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
Under the Guidance of M K YADAV

15 LABOUR LAW REFORMS: NEED & CHALLENGES


15.1 BACKGROUNDER
• To improve ease of compliance and ensure uniformity in labour laws, the National Commission on
Labour recommended the consolidation of central labour laws into broader groups such as (i) industrial
relations, (ii) wages, (iii) social security, (iv) safety, and (v) welfare and working conditions.
• In pursuance to this, 4 labour codes have been passed by simplifying, amalgamating and rationalizing
the relevant provisions of 29 Central laws.
- Code on Wages, 2019
- Code on Social Security & Welfare, 2020
- Code on Occupational Safety, Health & Working Conditions, 2020
- Code on Industrial Relations, 2020
• The consolidation of laws would aid Ease of compliance and increase Ease of Doing Business in India

15.2 NEWS ANALYSIS


NEED FOR REFORMS IN LABOUR LAWS
• Lack of a holistic labour policy - Which is a major obstacle in the way of developing a competitive eco-
system for Indian firms.
• Archaic and rigid labour laws - making it difficult for organization to effectively respond to changing
external environment & new technologies, thus paralysing industries, investment, productivity,
competitiveness, and labour interest ➔ creates exit / entry barriers ➔ no EoDB ➔ impact key govt
initiatives like Make in India.
• Multiplicity of laws - Centre 40+, States 100+ law, ➔ high cost of compliance ➔ uncompetitive firms
vis a vis foreign firms.
• Depleted Labour law enforcement machinery: It has not expanded in accordance with expansion in
number of laws and industries and suffer from inadequate resources (financial & human) and powers.
• Inspector Raj – harassment of industrial units, corruption, rent seeking ➔ adversely impact interest of
worker through connivance with factory owners.
• Insufficient penalties – failure to act as deterrent.
• Encourages Informalization - Adverse ‘hire and fire’ clauses - leading to contractualisation, casualisation
or informalization of labour. No national level fixation of minimum wages.
• Law for migrant workers not implemented in letter and spirit. Especially lack of protection for
construction workers, domestic workers, illegal mines.
• Lack of strict law to prohibit gender discrimination in labour market.
• No provision for collective bargaining – strikes have been declared illegal. There are several registered
trade unions, but no criteria to ‘recognise’ unions which can formally negotiate with employers.

THE 4 LABOUR CODES: KEY FEATURES

1. The Code on Wages, 2019

• The Code on Wages Bill consolidates the following 4 acts - Minimum Wages Act, 1948, Payment of Bonus
Act, 1965, Payment of Wages Act, 1936, and Equal Remuneration Act, 1976.

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• Holistic Coverage - It seeks to regulate wage & bonus payments in all employments where any industry,
trade, business, or manufacture is carried out, including, government establishments & private sector.
• Floor wage - The central government will fix a floor wage, taking into account living standards of workers
and it may set different floor wages for different geographical areas.
- Provides for the consultative mechanism for determining the national minimum wage
• National Minimum Wage – Centre/States to keep Minimum wages more than or equal to Floor Wages.
• Periodic revision of Minimum wages by Centre & states ➔ revised every 5 years or less.
• Other features – fixed working hours (by Centre/States), rest day once a week, overtime (at least twice
the normal rate of wages) etc.
• Prohibition of Gender discrimination - in matters related to wages and recruitment of employees for
the same work or work of similar nature.
• Provisions regarding Penalties - Penalties for different types of violations rationalized. Amount of fines
varying as per the gravity of violations and repeat of the offences.
• Advisory Board – by Centre & states
- Board having representation from (i) employers, (ii) employees (in equal number as employers), (iii)
independent persons, and (iv) five representatives of state governments.
- One-third of the total members will be women.

2. The Code on Social Security, 2020


• Coverage - Central government may, by notification, apply the Code to any establishment (subject to
size-threshold as may be notified).
• Registration of all 3 categories of workers - unorganised workers, gig workers and platform workers.
• Unorganised workers include home based, self-employed workers.
• Gig Workers - refer to workers outside the traditional employer-employee relationship (eg. freelancer).
• Platform workers are those who access organisations or individuals through an online platform and provide
services or solve specific problems.

• Social security funds for unorganised workers, gig workers and platform workers shall be set up by the
Central government. Similarly, State governments also to set up separate social security funds.
• National Social Security Board - for the purposes of welfare of unorganised workers, gig workers and
platform workers, and recommend and monitor schemes for them.
• Role of aggregators - Schemes for gig workers and platform workers may be funded through a
combination of contributions from the central government, state governments, and aggregators.
- For this purpose, the Code specifies a list of aggregators in Schedule 7 (such as ride sharing services,
food and grocery delivery services, content and media services, and e-marketplaces).
• Changes in definitions
- Expanding the definition of ‘employees’ to include workers employed through contractors.
- Expanding the definition of “inter-state migrant workers” to include self-employed workers from
another state.
- Expanding the definition of “platform worker” to additional categories of services or activities as
may be notified by the government.
- Expanding the definition of audio-visual productions to include films, web-based serials, talk shows,
reality shows and sports shows.
• Additional powers during an epidemic - The central government may defer or reduce the employer’s
or employee’s contributions (under PF and ESI) for a period of up to 3 months in the case of a pandemic,
endemic, or national disaster.

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
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3. Code on Occupational Safety, Health & Working Conditions, 2020

• Rationalization of labour law - Amalgamates 13 labour laws including the Factories Act, 1948; the Mines
Act, 1952; the Building and Other Construction Workers Act, 1996; the Contract Labour Act, 1970 etc.
• Coverage
- Factories - Threshold increased to: (i) 20 workers for premises where the manufacturing process is
carried out using power, and (ii) 40 workers for premises where it is carried out without using power.
- All Establishments engaged in hazardous activity - regardless of the number of workers.
- Contract workers - It will apply to establishments or contractors employing 50 or more workers,
including contract labour engaged through a contractor by central and state governments.
• Exemption – It empowers the state government to exempt any new factory from the provisions of the
Code in order to create more economic activity and employment.
• Contract labour regulation & prohibition
- Prohibits contract labour in core activities, with certain exceptions.
- It defines a list of non-core activities where the prohibition would not apply for eg. (i) sanitation
workers, (ii) security services, and (iii) any activity of intermittent nature.
• Daily work hour limit - Fixes the maximum limit at eight hours per day.
• Employment of women
- Women will be entitled to be employed in all establishments for all types of work under the act.
- Employer to provide adequate safeguards prior to employment in hazardous/dangerous operations
• Inter-state migrant workers and unorganized workers
- Definition of inter state migrant worker
✓ A person who has been recruited by an employer or contractor for working in another state or
any person who moves on his own to another state and obtains employment there.
✓ Only those persons will be considered who are earning a maximum of Rs 18,000 per month.
- Benefits for inter-state migrant workers: These include: (i) option to avail the benefits of the public
distribution system either in the native state or the state of employment, (ii) availability of benefits
available under the building and other construction cess fund in the state of employment, and (iii)
insurance and provident fund benefits available to other workers in the same establishment.
- Database for inter-state migrant workers: to be maintained by Central and state governments.
Inter-state migrant worker can register themselves on the basis of self-declaration and Aadhaar.
• Establishment of Social Security Fund: for the welfare of unorganised workers.
• Fixation of standards - Centre empowered to prescribe standards on occupational safety and health.
- National/State Occupational Safety and Health Advisory Board to recommend standards.
- Safety Committee & Safety Officer in certain factories and establishments.
• Mandatory Annual health check – to be provided by the employer
• Mandatory Appointment letters for all workers - which must underline their rights to statutory benefits
• Other provisions - Various welfare provisions regarding washing facilities, fixed working hours, extra
wages for overtime, prohibition of overlapping shifts etc. are included in the code.

4. Code on Industrial Relations, 2020

• Rationalization - simplify/replace the 3 laws: Trade Unions Act, 1926; Industrial Employment Act, 1946
and the Industrial Disputes Act, 1947.
• Defines Workers - ‘workers’ to include all persons employed in a skilled or unskilled, manual, technical,
operational & clerical capacity, supervisory staff drawing up to ₹18,000 a month as salary.

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• Eased rigidity in retrenchment – Employee limit increased from 100 to 300, above which the
government approval is needed for layoff/retrenchment/closure.
• Exemption - The appropriate government may exempt any new industrial establishment or class of
establishments from the provisions of the Code in public interest.
• Standing orders - All industrial establishments with at least 300 workers must prepare standing orders
on certain matters. These include: (i) classification of workers, (ii) manner of informing workers about
hours of work, holidays, paydays, and wage rates, (iii) termination of employment, (iv) suspension for
misconduct, and (v) grievance redressal mechanisms for workers.
• Trade unions - Trade unions that have a membership of at least 10% of the workers or 100 workers,
whichever is less, will be registered. The central or state government may recognise a trade union or a
federation of trade unions as Central or State Trade Unions, respectively.
• Sole Negotiating Union - If there are more than one registered trade union of workers functioning in an
establishment, the trade union having more than 51% of the workers as members would be recognised
as the sole negotiating union.
• Negotiation Council - If no trade union is eligible as sole negotiating union, a negotiating council will be
formed consisting of representatives of unions that have at least 20% of the workers as members.
• Tribunals for settlement of disputes - The worker may apply to the Industrial Tribunal for adjudication
of the dispute, 45 days after the application for the conciliation of the dispute is made.
• Fixed term employment – It has been introduced giving employers the flexibility to hire workers based
on requirement through a written contract. Fixed term employees are treated on a par with permanent
workers in terms of hours of work, wages, allowances and other benefits, including statutory benefits
such as gratuity.
• Right to Strike based on certain pre-conditions
- The Code prohibits strikes and lock-outs in all industrial establishments without notice. The 2020
code requires all persons to give a prior notice of 14 days before a strike or lock-out.
- This notice is valid for a maximum of 60 days.
- The Code also prohibits strikes and lock-outs: (i) during and up to 7 days after a conciliation
proceeding, and (ii) during and up to 60 days after proceedings before a tribunal.

LABOUR CODES: KEY BENEFITS


• Rationalisation and Consolidation of laws ➔ better compliance, EoDB etc ➔ attract capital and create
new formal jobs.
• Matching corporate needs in the digital world: through the introduction of conducting web-based
inspections.
• Reduces workers' exploitation: For de-licencing /de-registration, it is mandatory to notify registering
officers about the closure of their establishment and certify payment of dues to all employed workers.
• Strengthened safety and social protection systems: through following provisions.
- Inclusion of the gig and platform workers, along with unorganised sector worker, in the Social
Security Code 2020.
- The provision for insurance coverage has been extended to plantation workers.
- Free annual health check-ups and safety committees have been introduced for establishments
such as factories, mines and plantation sectors in place of hazardous factories.
- A fixed minimum wage has all potential to create conducive environment for Social Justice.
• Supports Female labour force participation: night shifts for women for all types of work.
• Expands the definition of migrant worker: It includes workers who would be directly employed by the
employer besides those employed through a contractor.
• Institution of a Reskilling Fund: to promote lifelong learning mechanism.

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
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• Fixed-Term Employment (FTE): Such Contractual employees to get all statutory entitlements, similar to
regular workers.
• Provisions for better resolution of disputes: The provision for a 14-day notice period before strikes and
lockdowns would allow both workers and employers to attempt resolving the issues.
LABOUR CODES: KEY CONCERNS
• Delegated Legislation - Many essential features of the law are not specified in the Codes but have been
delegated to be prescribed by the government through Rules.
- For eg. setting the thresholds for application of various social security schemes, specifying safety
standards and working conditions, the power to increase the threshold for establishments that have
to seek permission before retrenchment etc.
• Power to exempt establishments - Central and the state government have wide discretion in providing
exemptions from these codes, including those related to hours of work, safety standards, retrenchment
process, collective bargaining rights, contract labour.
• No universalization of Social Security – The gig, platform & unorganized sector worker continue to be
covered by discretionary schemes since the benefits, such as pension and medical insurance, are
mandatory only for establishments with a certain minimum number of employees.
• Overlapping definition – The code defines a gig, a platform & an unorganized sector worker separately.
But, in practical terms, there might be an overlap between the 3 categories.
• Strikes & lock-outs may become difficult for all establishments due to provision relating to prior notice.
• Fixed term employment – the Code does not restrict the type of work in which fixed term workers may
be hired. Therefore, they may be hired for roles offered to permanent workmen, which otherwise is
prohibited for contract labour.
• Implementation challenges
- Transitional challenges in moving from old to new system.
- Without reforms in Labour enforcement machinery & attitudes of the officials, the reform in laws
will not lead to desired impact.
- Various provisions are at the discretion of the states which might breed non uniformity in
implementation or non implementation.

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
Under the Guidance of M K YADAV

16 AUTOMATION: A CHALLENGE TO WORKFORCE?

16.1 INTRODUCTION
• Technological advancement and pace of change will significantly affect the availability of jobs, type, and
location causing a Paradigm shift.
• Machines will replace some jobs, and new jobs will be created while existing jobs may take on a new set
of tasks. It is, therefore, essential that automations are sustainable & able to create benefits for people.
16.2 AUTOMATION: OPPORTUNITIES
• Powerful drivers of economic opportunity: By automating repetitive tasks, machines lead to higher
efficiency and lower operational cost ➔ benefits can be passed on to worker & customers.
• Improved working conditions: by reducing the need for manual labour, which can be physically
demanding and dangerous ➔ reduced workplace injuries and an improvement in overall well-being.
• Improved Safety: Robots are also increasingly used in places that demand high output and zero error.
For eg. Aviation, Automobile, Pharma industry etc.
• Improved customer service: by providing more accurate and faster responses to customer queries,
which can help to improve customer satisfaction. For eg. Chatbots.
• New job creation: Emergence of New business models & changing nature of jobs are expected to create
new, high skilled jobs such as Robotic, Programming, Data Scientists, etc.
• Promote Social Equality
- By improving the quality of existing jobs: This will lead people to be more productive and eligible
for higher remuneration.
- Non-discriminatory access – Technology serves to remove entry barriers (caste, religion, gender,
and location) ie. anyone can participate from anywhere ➔ accessible to the vulnerable group.
16.3 AUTOMATION: CHALLENGES
• Job Losses: with maximum impact on semi and unskilled labours, who make up a substantial portion of
the workforce in manufacturing & agricultural sector. Esp. Women workforce.
• Large-scale displacement of the workforce: As location and type of jobs will change.
• Limitation of New jobs: The new jobs created will not be a one-to-one substitute of the existing jobs.
- Access to new jobs created may be difficult without acquiring adequate skills.
• Vicious cycle of a weak economy: Surging unemployment will reduce consumer demand and damage
social cohesion.
• Aggravate Income inequality: as the jobs that are replaced by machines tend to be lower-paying and
lower-skilled, while the jobs created by automation tend to be higher-paying & require specialized skills.
• Reduced bargaining power for workers: as companies may be able to reduce labour costs by replacing
workers with machines. This can result in lower wages and fewer benefits for workers.
• Reduced productivity gains: The introduction of the advanced machine tool may worsen the work
environment if investment in training workforce has not done in advance ➔ loss for the businesses.

16.4 WAY FORWARD


• Twin Approach: Along with automation, businesses need to plan on upgrading skills of an existing
workforce to harness the long term ‘technological dividends’.
• Introduction of New curriculum and pedagogy for schools, colleges, universities and setting up of more
vocational training centers is the need of the hour.
- Education sector to be re-aligned with greater focus on STEM (Science, Tech, Engineering & Maths).

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QUALITY ENRICHMENT PROGRAMME (QEP): TARGET 2025/26
Under the Guidance of M K YADAV

• Impact assessments: Government/ Research institutions need to investigate how technological changes
will affect employment, what are the opportunities for consumers, manufacturers and other
stakeholders involved in the entire supply chain management.
• Special protection to semi-skilled and unskilled workforces and labour intensive manufacturing units
like construction, agriculture ➔ targeted programmes that focus on skilling/reskilling.
- Nuanced Extension of social security net in case of widespread income/job losses.

Conclusion: Thus, a ‘culture of adaptability and lifelong learning’ will be crucial for spreading the benefits of
automation widely through society.

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