New textile minister's MGNREGA idea is a good one
Given that India has much lower costs of cotton, it comes as a surprise that it has steadily been losing market share to countries like Bangladesh and Vietnam—as a result, not only have textiles exports been falling, even their share in India’s total exports has fallen from 11.3% in FY08 to 8.8% in FY13. One of the reasons, an NCAER study shows, is the high wage costs in India, over double that in countries like Vietnam and Bangladesh. While Indian wages are comparable with those of China, the significantly higher productivity in China ensures that it has a 33% share in US imports of readymade garments as compared to a mere 5% for India. The main reason for this, it is well known, is that the bulk of India’s readymade garments get made in the unorganised sector—and to the extent big buyers like a Walmart want to source large quantities, they prefer dealing with larger companies. Indeed, in the spinning sector where the bulk of capacity in India is in the organised sector, India’s global export share is high.
The new textiles minister (see his interview on the Reflect page) KS Rao has some interesting ideas that are worth looking at since, for now, he is looking at solutions that don’t call for radical, and therefore unworkable, changes in the law such as hire and fire. One rule, for instance, prevents workers from clocking in more than 48 hours a week. Since this is measured on a quarterly basis while textiles is a seasonal business, Rao has suggested the law be kept unchanged, but the unit of measurement be changed to a full year. What that means is that exporters can pay workers overtime and get their orders completed during peak season. Not allowing women to work at night, similarly, robs the industry of an able workforce—when women can work at night in the software industry, he argues, why not allow the same for the textiles business?
While the minister will clearly be working on other areas including providing greater interest relief for the industry as it seeks to modernise, even more important is how he plans to tweak the existing MGNREGA scheme. Since India has a huge unskilled population and the industry needs cheaper labour, Rao’s solution is to let the industry train workers—the wages of R100 per day will be borne by the MGNREGA scheme. So, at one stroke, industry gets apprentices as it were for free and it also gets the much-needed flexibility in hiring, so critical for what is a seasonal demand industry. Whether the government accepts the scheme, however, remains to be seen since, some years ago, a desperate industry had come up with a similar solution but it was rejected. Since industry needs labour only during certain months, it asked the government for permission to hire workers on a guaranteed 200 days of work in a year as in the MGNREGA while paying double (R200 per day) the wages. If an energetic new minister is able to give the scheme, or a modified version of it, a new life, that will work wonders for the sector.