- Every billionaire from Mukesh Ambani to Sunil Mittal to Ratan Tata to Azim Premji has donated to the Prime Minister's fund, some CEOs have taken pay cuts but that's not enough.
- The unemployment rate in India has gone from about 8% to 23% in March and there are looming fears of more job losses and salary cuts when the middle class and poorer sections of the people need money to survive and, may be, for treatments.
- The Narendra Modi government can replicate the US model of offering 'payroll protection' via incentive for those firms who do not fire people during the lockdown meant to curb the spread of the Covid-19 coronavirus.
Just like the new lockdown guidelines for the commoners, may be it is time for Modi government to outline the steps the companies and business owners — the chest-thumping patriots on other days — must abide by.
There seems to be a looming fear of layoffs, job losses, and salary cuts consuming public sentiment every day. If there is anything the Bandra incident has taught us, it will take less than a spark to cause another round of coronavirus contagion aside from the fact that civil unrest is the last thing India needs.
The level of unemployment in India went up from nearly 8% to 23% in March 2020, according to the Centre for Monitoring Indian Economy.
We can’t save every job but we can save enough to stop the country and the society from imploding. And the Narendra Modi government can offer a helping hand like the Donald Trump administration in the US did with the Paycheck Protection Program. It is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.
The US government agency for small businesses will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. India, as a developing country, may not afford to forego loans and therefore, the programme can be tailored to the Indian context.
What are the specific steps that can be taken in India?
- The government should incentivise companies with the promise of cheap bank loans post lockdown, or tax-related incentives, as long as they have the same number of employees on their rolls as on July 1 compared to say March 31.
For those who have already fired employees or staff, can be incentivised with zero-interest loans if they are able to rehire quickly and maintain salary levels. - The companies, individually or via industry lobbies, can create a separate fund, or a pool of funds that can be used to keep channel partners, distributors, dealers, and other nodes in the value chain afloat, and ensure that their staff and the salespeople are paid.
The companies can either decide to forego the loan to the channel partners or get zero interest on it.
- The government can either contribute a portion of the money (ike it has for the employee provident fund) to such funds right now, or ask banks to lend to these companies at zero/subsidised rates only for the purpose of keeping jobs intact.
- Publicise these measures well enough that people are able to hold their employers (past or present) accountable.
The channel partners — from FMCG to automobiles to technology and other similar sectors — and the layers below them need to be supported so that once the lockdown lifts the chain can be revived at the earliest.
The top four sectors together employ nearly 250 million in India.
There are at least two intangible benefits that will arise out of this. The image of the company/promoter will get a huge fillip. Everyone in India knows how the Tata Group’s 'clean' image has survived generations despite many allegations and controversies.
This will also help the employees appreciate the generosity of the employer and reduce attrition to a great extent. The level of mutual trust and respect between the company and employee may boost commitment and efficiency over the long term.
Even during the ongoing coronavirus crisis, there have been some exceptions. Reliance Industries, for example, has declared that salaries will be paid twice a month for those earning less than ₹30,000 a month. Capgemini India, Cognizant and others are giving salary hikes despite business coming to a standstill due to the pandemic.
What is missing in the current support system and the stimulus?
There have been many thousand jobs cut especially for those working on contract. Anecdotal evidence suggests that people employed with dealers, distributors, channel partners' sales staff of even big companies like Hindustan Unilever (HUL), Raymond, nearly all car makers, and in many more sectors, have already been ‘let go’.
"Hindustan Unilever Limited (HUL) is taking all necessary measures to protect the interests of its employees, support staff, distributors and partners during these difficult times. We are committed to working on their safety, employment, salary protection, and are taking several steps on these matters. For e.g., we recently offered COVID-19 medical insurance cover to all frontline sales force and distributor employees (loaders and delivery staff) where premium for the cover is paid by HUL," the company said in a statement in response to this report.
The government's $22 billion stimulus is trying to support the poorest of the poor with direct cash transfers, subsidised grain and cooking gas etc. the rich have the wherewithal to sustain a longer lockdown, but the same safety net is not available to those who are considered middle class in India, especially those who work in the unorganised sector.
Even those earning, say, ₹50,000 a month may not have savings to sustain a family during a lockdown without a job and cash flow. However, Prime Minister Modi expects him or her to continue paying their domestic help, the guy who washes their cars or motorcycles etc.
What is the private sector doing?
Cribbing! One executive after another is arguing about how the government has not done enough to make this lockdown easier than what it is.
Calculating! Companies across the board are making lists of people who can be fired. It is not like FMCG sales have come to zero but people lower in the value chain have . It is justified to a certain extent. For example, borrowers have been exempt from repaying loans for three months but the non-banking finance company who they borrowed from is not. As is the case with most bureaucratic decisions, this could be an oversight and this can, and should be corrected, soon.
Clamouring! Aside from this, there is a clamour for everything from corporate tax cut to GST relief. Many of them have donated money to the PM-CARES fund but it is unlikely to trickle down to the exact value chains that companies have a stake in.
What should the companies do?
Be realistic! The government or the companies or the billionaires, or any institution for that matter, cannot protect or save everyone but efforts have to be made to go as deep as we can reach with the support.
Be generous! When a bank seems to be going down, one of the first steps that the Reserve Bank of India (RBI) takes is to ask the promoter to bring in more capital. Other businesses can look at the current crisis the same way.
Billionaire promoters may lead the way and bring some additional capital to the table, let it trickle down the value chains that will help them thrive during better times.
It may be time for Prime Minister Modi to call for the support of his fans in India Inc to ensure that his poorer fans don’t get disillusioned or angry.
SEE ALSO:
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New guidelines for all agriculture and related activities that can restart from April 20
Inside the $2 trillion US economic stimulus— and what locked-down India can learn from it