India Intelligence Report

   Development of Unorganized Sector


The Government is working on a positive draft that seeks to bring development benefits such as health care, sick benefits, maternity benefits, and life insurance to 362 million workers in the unorganized sector earning less than Rs. 6500 a month. The Arjun Sengupta Commission submitted a new and modified proposal that is expected to cost USD 1.65 billion in the first year (.2% of GDP) and USD 5.7 billion in the fifth year (.48% of GDP). It also plans to provide a provident fund returning 10% and an old age pension of Rs. 200 a month for below the poverty line (BPL) population.

The proposal seeks to deliver the services through the vast network of post offices and governed through a new bureaucracy called the National Social Security Board. The commission has negotiated special deals with the Life Insurance Corporation and General Insurance Corporation for the target crowd. It also sought to create a hierarchy with new bureaucracies at the State level and worker Facilitation Centers.

There are two other proposals one from the Labor Ministry and another from the National Advisory Council that steers the Government and which the Opposition uncharitably calls a "Super Cabinet" or run by a "Super Prime Minister." The idea of providing such facilities to the working poor is fantastic in concept but flawed in implementation proposal.

At the outset, it is extremely important that such development options are available to the working poor who have no means to fund these benefits by themselves. However, what is flawed is the creation of more bureaucracies, hierarchies, unsustainable entitlement programs, and lack of accountability. Further, there is genuine fear that the political parties are creating such a program to expand Government, create vote-banks, and infuse a sense of good feeling all around.

India does not need more Government. It should privatize these facilities, create caps on expenditure, provide time limit for entitlements, and create accountability such as non-alcohol clause, savings growth, investment options etc.

Handing out money haphazardly through an inefficient post office system is not the way to do it.