Economic development driven by manufacturing creates better quality jobs

Livelihoods: The experience of Indian states reiterates global findings that balanced economic development is key to more inclusive growth.

Around 40 percent of India’s economic activity comes from Maharashtra, Gujarat, Tamil Nadu, and Karnataka. The average prosperity level in these four states, measured in terms of per-person real income, was around INR 12,000-13,000 per month in 2018-19, while for the rest of India, it was only around INR 7,600 per month.

Each of these four states, however, have reached their current levels of prosperity through very different development models. In all of them, agriculture accounts for only 10-15 percent of the economy, and their growth is driven either by manufacturing or high-tech services.

In 2018-19, for Gujarat, the highest gross value added (GVA) came from the manufacturing sector. Tamil Nadu had the most balanced growth model with manufacturing and high-tech services each contributing nearly one-fourth of the GVA. Maharashtra’s growth was tilted towards high-tech services, although less than that of Karnataka’s.

The comparison of the sectoral GVA and employment shares for 2017-18 highlights a well-known fact: that construction, trade, hotels, restaurants, and manufacturing are the most labour-intensive sectors, outside of the farm sector. Economic development, especially based on manufacturing, tends to create better quality jobs and benefit people more.

In contrast, professional and financial services are inherently more productive, thereby requiring fewer people. While these segments create the largest GVA nationally at nearly 22 per cent, they directly employ the lowest proportion of labour at four percent. While the forward and backward linkages of high-skilled sectors do create jobs in other sectors, the indirect job creation tends to be in low-skilled services and construction.

Read this article to understand how micro-enterprises can become significant engines for job creation.

Fundraising & Communications: The Ministry of Home Affairs (MHA) has issued a circular extending the validity of FCRA registration certificates to September 30th, 2021. This applies to all FCRA licences that have expired or will expire between September 29th, 2020 and May 31st, 2021. The decision to extend the deadline has been driven by the exigencies arising from the COVID-19 situation.

FCRA refers to the Foreign Contribution (Regulation) Act 2010, which permits charitable organisations based in India to raise funds from foreign sources.

The order also clarified that nonprofits that have already opened an account and have the requisite permission to receive foreign aid, can henceforth receive it only in these newly-opened accounts.

The FCRA law was amended in September 2020 to include a clause that mandated that all nonprofits receiving foreign aid must necessarily open an account in State Bank of India’s New Delhi Main Branch. The government had initially set the deadline for this account opening as March 31st, 2021; it later extended it to June 30th, 2021 after several nonprofits argued in court that there had been delays because necessary approvals from MHA had not been received.

Several organisations have not been able to receive foreign funds during the crisis caused by the second wave, and this has impacted their COVID-19 relief efforts. Relaxing the foreign funding rules could significantly help organisations ramp up their operations to help individuals, supply critical healthcare equipment, and respond to communities in rural areas.

Read this article to know how amending the FCRA can have unforeseen implications.

Philanthropy & CSR: The Ministry of Corporate Affairs (MCA) has issued a circular that allows corporate spending on health infrastructure for COVID-19 care to qualify as corporate social responsibility (CSR) expenditure.

This includes setting up medical oxygen generation and storage plants, manufacturing and supply of oxygen concentrators, ventilators, cylinders, and other medical equipment to counter COVID-19.  

The announcement comes at a time when all efforts are being directed towards expediting efforts to support the country’s healthcare infrastructure.

According to the circular, companies can now undertake projects and activities in collaboration with other companies using CSR funds. Additionally, they can contribute to specified research and development projects, as well as publicly funded universities and certain organisations that conduct research in science, technology, engineering, and medicine.

The government had earlier clarified that setting up makeshift hospitals and temporary COVID-19 care facilities would also be considered a CSR activity. Rajesh Verma, the Corporate Affairs Secretary, has requested businesses to consider converting vacant office buildings into COVID-19 facilities to cater to the rapidly increasing caseload.

Read this article to understand why media attention on COVID-19 deaths due to lack of oxygen in big cities has skewed donor priorities.