Issue 13- On the Gig Economy, China's Golden Week, and Dirty Coal

Issue 13- On the Gig Economy, China's Golden Week, and Dirty Coal

In today's Finshots brief, we discuss

  • The problems with India's gig economy
  • How well China is recovering from the Virus
  • India's possible plan to shut its dirtiest coal plants down

Business

Gig’s up

When the coronavirus pandemic swept through India, it revealed certain weak spots in the way our economy functions- especially in terms of labour and employment. One of the more prominent weaknesses was found in a system that industry lobby Assocham estimates will grow at an annualised rate of 17% to $455 billion by 2023- the gig economy.

Gig workers are basically people who work and earn outside of traditional employer-employee relationships. They include people who work for platforms such as Zomato, Uber, Rapido, Dunzo, Thyrocare etc. They also include freelance coders, writers, or anyone else who provides specific services for payment via a short term contract.

Anyway, the lockdowns halted the services for most aggregator platforms- at least temporarily. And gig workers who didn’t have any kind of benefits or social security were left in the lurch. Over the summer, there were reports of Ola drivers finding it difficult to get by because of declining revenue. Not long after, Swiggy delivery agents staged nationwide protests against their poor wages and working conditions.

Now, the problem mainly lies with India’s labour laws. These laws draw a clear divide between employees and independent contractors. Employees have a formal, defined contract with fixed working hours, steady wages, health benefits, leaves and allowances etc. But there is no such standard for contractors. They are expected to negotiate independently with anyone who wants to hire them. As so, aggregator platforms have been mostly exempted from labour laws.

Until now.

You see, India has recently enacted three labour laws. Among them is the Social Security Code, which has now taken unorganised and gig workers under its ambit. Under the new rules, gig and platform workers are entitled to things like accident insurance, health and maternity benefits, crèche, and old age protection. Furthermore, gig/platform companies are now required to allot 1-2% of their annual turnover towards a social security fund for such workers. However, this contribution should not exceed 5% of the total amount paid to gig workers. State and Central governments will also contribute to this fund.

While this seems like a positive step, the move might end up increasing the financial burden for gig workers. The thing is, if employers are expected to contribute a part of their turnover to the social security fund, they won’t bear this cost themselves. Oh no. In all likelihood, it will be passed on to the workers themselves, reducing their take-home income.

Like Kunal Khattar, founder of an early-stage venture capital fund says, “There will be a huge pushback. No platform is profitable—and will not have the ability to increase their costs in the current covid situation where revenue and transactions are significantly down anyway.” Ouch!!!


Economy

Wanderlust in China

The People's Republic of China was founded on the 1st of October. So every year on that day, the Red Dragon celebrates National Day with much pomp, splendour and an eight-day long holiday. The holiday, referred to as Golden Week, sees citizens going on vacations, shopping and generally having a gala time.

But what with the coronavirus and economic upheaval this year, you would have expected the celebrations to be somewhat subdued. Well, they weren't.

For the first four days of the holiday, some 425 million people travelled domestically. That’s almost 80% of last year’s numbers. Apart from this, flight bookings surged 11% compared to 2019, domestic hotel prices increased, ride-hailing apps Didi and Dida crashed because of the huge demand, and tickets to the Great Wall of China sold out.

All this was only possible because China hasn’t reported any local infections since mid-August, leading the government to lift almost all its restrictions. So does this mean things have truly gone back to normal for the country?

The jury’s still out on that one. As Nicholas Thomas, associate professor in health security at the City University of Hong Kong said, “We will only know how successful China has been 2-3 weeks after the holidays as we see how many new infections emerge. If they manage to avoid an upsurge in cases, it will be evidence that China is truly moving into a post-Covid period.”


Policy

Go Green

As air pollution in India rises to dangerous levels, there is frequent discourse around how to reduce it as well. The problem is, our country uses a lot of coal for powering industries and generating electricity. We’re the world’s second-biggest consumer after China. And to bring about any real difference on the climate front, this dependence needs to be reduced.

And so, the government is considering a proposal that may shut down some of the country’s most polluting coal plants for good. The plan proposes to cap the plants’ heat rate- that is, the amount of coal energy they use to produce each unit of electricity. If this heat rate is capped at  2,600 kilocalories per kilowatt-hour of electricity, as the plan suggests, it would affect some 5% of India’s coal power capacity.

Of course, state distribution firms rely on cheap power from some of these plants, so there definitely may be some resistance there. But in any case, it’s early stages now. So we might have to wait and see how things pan out.


What else happened?

Dubious Wage Growth

When the pandemic struck, thousands of Indian workers made their way back to their homeland where they relied on agriculture and the rural jobs scheme for work. Analysts thought this would lead to an over-supply of rural workers, and a consequent decrease in wages. But wages increased instead. Know more.

Yet another investment

Yesterday, Reliance Industries announced that a subsidiary of the Abu Dhabi Investment Authority (ADIA) will invest ₹5,512.50 crore for 1.2% stake in its retail arm, valuing it at a whopping ₹ 4.285 lakh crore. Read more.

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-Written by Vedika Agarwal