Speech of  Ms. Sudha Pillai,  Secretary,   Planning Commission,  Government of  India at Poverty Reduction and Development Forum discussion on “Financial Crisis and Poverty : Challenges and Actions” , being held in Beijing on 17th October, 2009

________________________, 

Fighting poverty is the biggest challenge before mankind.  The Poverty Reduction and Development Forum is making an earnest endeavour in this regard by solemnly observing the 17th International Day for Poverty Eradication through the discussion on “Financial Crisis and Poverty: Challenges and Action”, being jointly hosted by the State Council Leading Group Office of Poverty Alleviation and Development of China (LGOP) and UN China and being organized by International Poverty Reduction Centre in China (IPRCC) and UNDP China.   Needless to say, the world is currently engulfed by a financial crisis of serious proportion  whose impact is most severe on poverty-afflicted people.  All countries, both developed and developing, are making their efforts to speed up the recovery process. In this context, the Forum deserves praise for bringing together the practitioners from all walks of life to exchange their ideas and opinion to surmount this global problem.  I also deem it  a rare privilege for having been invited to share my thoughts with the distinguished audience and also apprise you of steps that we are taking to fight the menace in India. During my discourse,  I shall be dealing with a specific issue, namely, Promoting Inclusive Growth to Fight Poverty and Financial Crisis India’. 

So far as the magnitude of poverty in India is concerned,  the Planning Commission has adopted per capita consumption expenditure as the criterion to determine the poverty line.  The poverty line corresponds to a basket of goods and services anchored on a norm of per capita daily calorie requirement of 2400 in rural areas and 2100 in urban areas.  The estimates of poverty are made from the large sample survey data on household consumer expenditure conducted by the National Sample Survey Organization. The percentage of people below the poverty line at national level is estimated to have declined form 54.88 % in 1973-74 to 35.97 %  and further to 27.50 % in 2004-05 due to various proactive measures taken during the planning process to promote growth as well as to ameliorate poverty. It needs to be emphasized that over 9% growth rate of GDP witnessed  during 2005-06 to 2007-08 must have had a benign impact on poverty reduction, though it is not enough.  Hence,  the 11th Five Year Plan ( 2007-12) aims at achieving faster and inclusive growth.  One of the parameters of inclusive growth is to promote both employment and employability.  The strategy aims at putting the economy on a sustainable and accelerated growth trajectory, while creating productive employment opportunities across the country in all sectors.  So, inclusive growth is going to provide the thrust in our fight against poverty. The environment for inclusive growth has been created by a few flagship schemes of the Government already in operation, namely, the Bharat Nirman for building infrastructure and providing basic amenities in rural areas, the National Rural Employment Guarantee Scheme with the objective of providing 100 days of guaranteed unskilled wage employment to each rural households opting for it in all districts, the National Rural Health Mission to provide effective and reliable primary health care facilities, the Sarva Shiksha Abhiyan for making available free and compulsory education to all children in the age group of 6-14 years, Mid-Day Meal Scheme to provide cooked food with a nutritional content to primary school students and Jawaharlal Nehru National Urban Renewal Mission to provide basic services to the urban poor and integrated houses to slum dwellers.  Besides, various other schemes relating to road connectivity, housing, wage and self employment, drinking water and backward areas development etc. are in operation.  These are operated through active involvement of Panchayati Raj Institutions (PRIs), which constitute our grass root level democratic governments.
 
While the policy measures were progressing in their designed course,  it was shaken by the impact of global financial slow down.  As all of us are aware, in 2008, the economic slowdown engulfed the international money, credit, equity and financial exchange markets. The high commodity and energy prices, the sub- prime crisis, contraction in the real estate market especially in the developed countries and the severe global financial services shock, which triggered a massive tightening in lending, had a significant impact on most sectors of the economy and on employment. The decline in investment, production and consumption on account of diminishing confidence of both the investors and the consumer, affected the millions of people losing their jobs.  Ripples of recession leading to reduction in exports to developed countries were felt by all the developing countries.  Credit availability and its cost became major areas of concern. The combined impact of all these factors resulted in loss of employment and reduction of income leading to social distress.

In an increasingly globalised economic milieu, these external developments had major impact on world economy, including the emerging market economies and developing countries through both direct and indirect economic linkages. Export-dependent emerging economies were hit the most. For the Indian economy, although the exports are not the mainstay of GDP growth, the export for October, 2008 registered the first negative growth in seven years.  The global financial downturn and subsequent deleveraging and risk aversion in the global markets affected the Indian equity and the foreign exchange markets. While the Indian economy has a sufficient resilience to withstand the impact of global recession because of overall strength of domestic demand and the predominantly domestic nature of financing of investment and exposure of exports being  less than 20% of GDP, some slowdown was inevitable.  The annual growth rate of the GDP decelerated to 6.7 % in 2008-09 as compared to growth rate of 9.0 % during 2007-08 and to 5.8 % in the first quarter of 2009-10 ( April to June). This also was expected to reflect on job loss situation. 

With a view to assess the impact of global financial downturn on employment in the industries/sectors affected by the slowdown during the quarter October-December, 2008,  Labour Bureau of the Ministry of Labour & Employment carried out a survey in 2581 units spread over 11 States/UTs in the sectors, viz. Mining, Textiles, Metals, Gems & Jewellery, Automobile, Transport and IT/BPO. These sectors contributed more than 60% to GDP in the year 2007-08. It was revealed that about half a million workers lost their jobs during October-December, 2008. The major impact of the slowdown was noticed in the export oriented units.  The most affected sectors were Gems & Jewellery, Transport and Automobiles where the employment declined by 8.58%, 4.03%, and 2.42%, respectively.

In the second quarterly survey to assess the impact of financial downturn on employment during January-March, 2009,  the sample of  3192 units was drawn from spread over 12 States / UTs.  In addition to sectors covered in the first survey, leather and handloom-powerloom were also covered during the second survey.  It was revealed that the Sectors registering increase in employment during January-March, 2009 period were gems & jewellery (3.08%), textiles (0.96%), IT-BPO (0.82%), handloom-powerloom (0.28%) and automobiles (0.10%). A decline in employment during Jan-Mar, 2009 was observed in leather (2.76%), metals (0.56%) and transport (0.36%). As compared to October-December, 2008 quarter wherein about half a million workers lost their jobs, the employment in selected sectors increased by a quarter million during the January-March, 2009 period.

The Labour Bureau conducted the third quarterly survey to assess the impact of economic slowdown on employment during April-June, 2009. 3003 establishments covered in previous quarterly survey were revisited.  It was revealed that the overall employment declined by 0.13 million during April-June 2009 over March, 2009. Most effected sectors were export oriented units especially in Textiles, IT/BPO and Gems & Jewellery. Seasonal factor was stated as one of the reasons as during this period the migrant workers generally visit their place of origin resulting in their less availability for work.

Various initiatives have been taken by the Government of India to mitigate the adverse impact of the global financial downturn. These measures, while promoting economic growth, also protect workers’ interests, by increasing job opportunities. Three specific  stimulus packages have been announced on 7.12.2008,  2.1.2009 and 24.2.2009.  In the Budget 2009-10, hailed on the fourth stimulus package,  further fiscal incentives have been extended by way of relief in Direct Taxes, relief in Indirect Taxes and expenditure enhancing measures.  The interest subsidy for housing loan borrowers from the lower and middle-income groups has been provided.    In absolute terms the four stimulus packages amounted to about Rs. 2.18 lakh crore (i.e. Rs. 2180 billion or about US$ 45.42 billion @ Rs. 48 = $1).   The Monetary measures taken include measures taken by Reserve Bank of India for enhancing the availability of credit at lower cost for financing the economic activities. While these steps have helped in retaining the pace of growth,   specific measures taken to help workers are in respect of providing social security and enhancing employability through skill development and vocational training.  This is a tribute to our emphasis on inclusive growth.

In order  to provide social security to unorganized sector workers,  who constitute about 94% of  459.1 million work force, an Act,  namely,  the Unorganized Workers’ Social Security Act, 2008 has been enacted.  Under the Act, the Government has to formulate, from time to time, suitable welfare schemes for different sections of the unorganized sector workers on matters relating to life and disability cover, health and maternity benefits, old age protection etc.  A Scheme called the Rashtriya Swasthya Bima Yojana (RSBY) to provide health cover to unorganized BPL workers has been made operational with effect from April 1, 2008.  Under the scheme, a Smart Card is being issued to each beneficiary and covers a family of 5 persons facilitating cashless/paperless transaction up to Rs.30,000/- per annum. Government has also approved inclusion of Maternity Benefit under the RSBY. This is in addition to Indira Gandhi National Old Age Pension Scheme being implemented by Ministry of Rural Development to cover all BPL citizens above the age of 65 years with effect from 19th November, 2007 with per capita grant of Rs. 200/- per month to be provided by the Government of India in addition to the amount on the pension schemes being provided by the States/UTs and Aam Admi Bima Yojana providing death and accident insurance launched on 2nd October, 2007 with a view to providing the death and disability cover to members of rural landless households aged between 18-59 years. The benefits include Rs. 30,000/- in case of natural death and Rs. 75,000/- in case of death due to accident or permanent disability. The scheme also provides scholarship up to a maximum of two children studying in 9th to 12th standard at the rate of Rs. 300/- per quarter per child. It is being implemented by Ministry of Finance.

Under the Building and Other Construction Workers (Regulation of Employment & Conditions of Service) Act, 1996 and the Building and other Construction Workers Welfare Cess Act, 1996, a cess @ 1% on every construction activity costing more than Rs.10 lakh is levied. The Schemes relating to Group Insurance, Medical and Health Care, Scholarships, Pension etc. financed out of this cess will benefit contract workers in construction industry. 
Welfare schemes in operation for other unorganized sector workers employed in non-coal mine, cine, bidi (indigenous cigar) industry etc. provide social security to workers in these sectors. 

In order to provide a social safety net, the Employees’ State Insurance Corporation has introduced a Scheme, namely, “Rajiv Gandhi Shramik Kalyan Yojana” with effect from 01.04.2005. Under the scheme, employees who lose their employment due to retrenchment, closure of factories/ establishments or permanent invalidity due to non-employment injury, after being insured for five or more years, are entitled to Unemployment Allowance in cash equal to 50% of their wage upto 12 months during his/her entire service. In addition, he and his family members are also entitled to medical care.

So far as skill development and vocational training is concerned,  since 2004, an effort has been made to identify and implement reforms in administration of Industrial Training Institutes (ITIs) so as to facilitate closer interaction with the industry and improve quality of training and make the graduates better employable.  Vocational training is provided to about 9.54 lakh trainees in 112 trades every year through a network of about 7000 Industrial Training Institutes/Centres.  Government of India has taken steps to upgrade 100 Government ITIs through domestic funding and 400 with the World Bank assistance into Centres of Excellence.  The remaining 1396 Government   ITIs are being upgraded in a Public Private Partnership mode at a cost of Rs 25 million  per ITI being provided by the Central Government as interest free loan.  About 0.74 million   apprentices are being trained every year in 188 trades under Apprentices Act, 1961 to meet the demand of skilled manpower in the country. Another scheme titled ‘Skill Development Initiative’ has been started during 2007-08 with an outlay of Rs 5500 million.  This will provide training to one million persons in next five years and thereafter, one million persons every year in modular employable skills with multi-entry and multi-exit options in flexible delivery schedules. In order to meet the growing need of skilled manpower of different sectors of economy, Government of India has decided to set up 1500 new ITIs and 50,000 Skilled Development Centres.

The Government has declared a National Skill Development Policy and is in the process of finalizing another important policy, namely, National Employment Policy which will help in promoting employment and employability in the country.

I may also add that considering the gravity of the situation, the problem is receiving the attention of the United Nations system, the Bretton Woods Institutions and the G-20 process.  The problem has been discussed in various regional and sectoral tripartite International Labour Organization (ILO) meetings, the G-20 London Jobs Conference and the meeting of the G8+6 Labour and Employment Ministers in Rome.  Apart from various ameliorative measures adopted by different countries as a response, broadly classified under four categories, namely, (i) stimulating labour demand, (ii) supporting job seekers, jobs and unemployed,  (iii) expanding social security and (iv) food security and social dialogue and rights at work,  a ‘Global Jobs Pact’ has been evolved during the 98th Session of the International Labour Conference(ILC) of the ILO held in June 2009.  The Global Jobs Pact is envisaged as a policy contribution by the ILO to mitigate the impact of the crisis on working families and enterprises, including the informal and rural sectors and to help in shaping a productive and sustainable recovery.  Its strategic objective is to place employment and labour market issues, together with social protection and respect for workers’ rights, at the heart of stimulus packages and other relevant national policies to confront the crisis, using social dialogue as a key consensus-building tool.

Putting employment and social protection at the core of recovery policies will essentially require placing emphasis on the following:

     ---Ensuring support and credit flows to enterprises, foremost to small and medium-sized enterprises.
 
 ---Safeguard viable jobs through support for shorter hours combined with skills development and to limit wasteful lay-offs.
 
 ---Support jobseekers through well-designed unemployment benefits
 
 ---Reinforce active labour market programmes to avoid the risk of long-term unemployment and social exclusion 
 
 ---Employment guarantee programmes are effective, especially in developing countries
 
 ---Young people, and in particular disadvantaged youth, require special support measures
 
 ---Increase investment in employment-intensive infrastructure and public goods
 
 ---Invest in tomorrow’s green economy.
 
 ---Invest in food security and rural development
 
 ---Introduce or extend social protection to low-income groups and
     informal workers.   
    
 ---Support for migrant workers
 
 ---All countries should consult recovery policies with social partners.
 
 ---Protect and promote workers’ rights and international labour standards.

 ---Review of current public expenditure and its reorientation, as necessary, to prioritize employment, labour market and social   protection objectives within existing budget, especially to support enterprises and workers in the private, public and social sectors, in particular small enterprises and the informal economy.      

Director General, ILO has submitted a report on “Protecting People, Promoting Jobs:  From crisis response to recovery and sustainable growth”  to G 20 Leaders Summit in Pittsburgh held on 24-25 September, 2009 where action points on ‘Global Jobs Agenda’ were delineated  to have an opportunity to build on a medium term out look for sustainable growth. Broad views arising in this meeting such as giving emerging countries like Brazil, China and India a prominent place in any international decision-making architecture, continuance of stimulus measures,  multilateral consensus-building,   raising regulatory standards for financial institutions thorough the Financial Stability  Board,  resisting protectionism etc. need to be followed in all seriousness. 

India will make earnest efforts in the above directions.  I take this opportunity to request all of you to take similar steps so that we succeed in fighting the financial crisis and reducing poverty. 
Thanking you
………