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Doing business in India: The employee’s view

India places in the middle of the pack when it comes to benefits for organised sector workers

The latest Doing Business report makes for sad reading from India’s point of view, especially if you were expecting acche din to have kicked in already. India has slid two places to rank 142 out of 200 countries, with countries like Tonga, Ghana and even Pakistan doing better. But how does it look from an employee’s point of view?

For one, India’s minimum wages are pretty low—lower than those in countries like the Republic of Congo, Haiti and Senegal, let alone our Brics peers and the developed world. Workers in Delhi will be pleased to know that the minimum wage in the capital is higher ($134 a month) than that in Mumbai ($125 a month). They are also better off than workers in countries such as Bangladesh, Afghanistan, Egypt and Denmark which don’t even have a minimum wage for private sector employees.

To be sure, labour market regulations section doesn’t factor into the overall ease of doing business score. But a pertinent question to be asked is whether the minimum wage in India is making it harder for companies to hire employees. The Doing Business report includes a ratio of minimum wages to value added by an employee. The higher this value, the higher the minimum wage a company is forced to pay relative to the output that worker provides. This value is 0.63 for Mumbai and 0.68 for Delhi, higher than any country we would care to compare ourselves to. One way of interpreting this parameter is that Indian workers are so unproductive that companies are finding it hard to justify paying even the minimum wage; so this works as a barrier to hiring.

Workers in India are sure to lament the fact that they aren’t employed in Algeria, Australia, France or Hungary with their laws banning 50-hour work weeks. But they should thank their stars that they don’t work in Australia or New Zealand, both of which allow companies to make their employees work seven days a week.

Specifically, workers in Mumbai should rejoice that the report places their city among only 42 of 200 locations that have major restrictions on working on a weekly day off. What these major restrictions comprise isn’t made clear in the report, though. Delhi-based workers are not so lucky. Not only can companies make them work on their day off at times, but they don’t even have to pay extra for the privilege.

Workers in Mumbai have even more bragging rights over their counterparts in Delhi. They get 21 days of paid annual leave, compared to Delhi’s 15 days. Of course, this isn’t as luxurious a leave policy as workers in Bahrain and the Republic of Congo get, with a month off each year, but we can’t have everything.

Getting fired because you are redundant is always a tough situation to face, but the balm to that wound is the severance pay you are entitled to. While the severance pay in India, at 11.4 weeks worth of salary, doesn’t sound thrilling when compared to Indonesia’s 58 weeks worth of pay, it’s surely a more welcome scenario than the 44 countries that pay you absolutely nothing. Although it is unclear how the 11.4 weeks worth of pay figure was arrived at, since India’s Industrial Disputes Act states that a worker can be retrenched only if he has been paid “compensation which shall be equivalent to fifteen days’ average pay [for every completed year of continuous service]."

All of this may look reasonably good for India’s organized sector workers, the section that the Doing Business report measures, but it has little bearing on the majority of the workforce which is in the unorganized sector. As a recent National Sample Survey report highlights, nearly three-fourths of these workers don’t have luxuries like written contracts, paid leave or even minimal social security.

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