Congratulations to T N Ninan for writing the relevant and thought-provoking piece, "The minimum wage temptation" (September 17), on the proposal for implementing a steep increase in minimum wages across the country. Ninan analyses the various implications such an increase could have on the labour market and the Indian economy, with appropriate examples of coir and paddy from Kerala.
If one looks at the Indian economy, it has a sophisticated workforce in sectors such as pharmaceuticals, information technology, etc. They draw much more than the proposed minimum wages at one end and the millions of workers working in small and medium-scale industries that cater to large core sector units of steel, cement, coal, power, etc on the other. Industries in all these sectors have been facing challenges.
While the debt burden of large companies in core sectors has attracted media attention, what has been ignored are the huge payables of these units to their suppliers belonging to the small and medium sectors, which are spread across the country.
Low profitability on one hand and mounting receivables on the other have forced several small and medium enterprises to shut down in the past; some are on the verge of closure. A steep increase in minimum wages, as Ninan beautifully argues, will hasten the process. Regulatory amendments such as payment of bonus with retrospective effect, etc will bring more agony.
Trying to bring in uniformity in minimum wage in a diverse country like ours, across diverse industries, could be detrimental, mainly for small and medium-scale industries. Ninan has rightly pointed out that raising minimum wages to Rs 15,000 could make a large number of units unviable and result in higher unemployment.
Though the new Labour Code on Industrial Relations Bill, 2015, has welcome provisions such as that union leaders must be from among the employees, etc, none of these has come into force. Initiatives that impose a huge financial burden on industries, in the form of increase in bonus, proposal to pay bonus with retrospective effect, enhancement of eligibility criteria for ESI, bonus, etc have all been implemented.
If the government is concerned about balanced growth, which will ensure more employment prospects and sustained viability of industries across sectors and regions, it has to revisit the situation.
George Antony Chennai
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