Home / Opinion / Columns /  Indian gig workers may finally be getting a fairer deal

In the long history of labour relations in profoundly hierarchical India and the short history of the gig economy, Uber’s announcement this week of new terms for drivers may prove revolutionary. To work around the recurrent problem of drivers cancelling rides because they did not want to go to the destination or wanted a cash payment upfront rather than waiting for the company to reimburse them weekly, the cab hailing service is making that information available to drivers so that they can pick which rides to accept. Changing a payment system so that drivers are paid the next day for most rides and allowing drivers to see destinations is commonsensical and humane.

The gig economy and more broadly the startup universe have been buffeted by storms, lately. First, poor working conditions and high fuel prices are making the retention of drivers and two-wheeler delivery personnel an uphill battle. Attrition at food delivery companies is estimated at around 40% every month. Second, the US Federal Reserve’s accelerated rate hikes this year mean the end of the funding merry-go-round that seemed as easy as playing Monopoly. India’s low labour costs had made windfalls for startup founders even more dramatic. Unicorns were minted at rich-world valuations while the pay offered to ‘delivery partners’ stayed decidedly developing world. Last year, 40 new unicorns—companies with valuations of $1 billion or more—were created in India.

Such numbers have wowed even veteran financial commentators. A giddy briefing in The Economist this month pointed to India’s speedy climb in digital transactions and burgeoning unicorns as signs of an India undergoing a transformation as “epic" as that of the US in the late 19th century. This was not as far-fetched as its extrapolation from one data point that riots do not harm India’s economy. But, as magazine covers sometimes inadvertently do, The Economist’s may actually mark the end of India’s unicorn frenzy. As The Economic Times reported on 28 April, in March and April, “four unicorns were minted in India compared to 10 during the same period last year. So far this month, no new unicorn rounds have been announced, against eight new ones in April 2021."

The backdrop for this slowdown is a global bear market. The Financial Times last weekend cited research from Man Institute, a hedge fund company, showing that since 1960, the S&P 500 and US government bonds had never fallen simultaneously for five or more weeks consecutively—until the start of May. One can see why people in New York and London would want optimistic stories of growth in far-off places.

In India, many less well-off were getting employed again in our cities and we seemed set to reshape our inequitable K-shaped recovery when Omicron hit and prices spiralled up early this year. As an otherwise sanguine article by Reserve Bank of India (RBI) deputy governor Michael Patra and colleague Indranil Bhattacharya observes, by the end of 2021-22, India’s economy will be “barely" 1.8% above its pre-pandemic level of gross domestic product (GDP). Growth in the quarter ending March 2022 is estimated by research firms to be at about 3.5%.

There were also signs that at least large companies, which have become stronger during the pandemic years, were beginning to increase investment. Factory utilization rates were climbing, but this will be hit by the retail inflation spike to 7.8% in April, a surprise even after march’s 6.95%. Large consumer goods companies are reducing the size of packages of biscuits and detergents or raising prices. As volume and margin growth slows and interest rates rise, new investments will be postponed. Core inflation, notably of medical services and education, has been entrenched for some time and has likely cut into middle class spending on goods. The Centre’s continual hikes of taxes on petrol and diesel over the past couple of years may have been necessary to keep its fiscal deficit in check, but it has also acted as a consumption tax. Such markers of middle-class prosperity as sales of entry-level cars and two-wheelers are languishing.

As I wrote in this newspaper in October 2019 (bit.ly/3GfDJYN), our middle class has been shrinking for a few years. Last March, Pew estimated 32 million Indians had fallen out of the middle class during the pandemic amid a global drop in the size of the middle class. This year’s sharp rise in Indian inflation even before Russia’s invasion of Ukraine will have undermined the recovery in earning power for those working in restaurants and hotels, even as those industries continue to see a welcome rebound. Pronab Sen, India’s former chief statistician, told me that RBI, by leaving its first interest rate hike till as late as this month instead of hiking early in the year, is “so far behind its inflation targets that (it has) no room for policy to take effect." India is thus set to endure 6%-plus inflation for the foreseeable future. As in the US, where workers in labour-intensive industries are demanding and getting a better deal, in India indexing petrol costs to payouts for gig economy drivers and delivery riders and giving them better working conditions marks a welcome socioeconomic shift.

On Monday , I summoned a taxi on my app to find it had suddenly stopped moving towards my front gate. After a few minutes, I asked why. Back came the reply, shortened for text-speak: “Wait. Having tea." I praised his directness when he arrived. He, in turn, promised me a good passenger rating. I have neither the courage nor the stamina to be a social reformer in India, but I applaud these early signs of change.

Rahul Jacob is a Mint columnist and a former Financial Times foreign correspondent. 

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