BANASTHALI VIDYAPITH

MBA 1st Semester

Managerial Economics Assignment

Analysing :
• Remigration of Indian labourers during COVID 19 pandemic.
• Its impact on Indian companies.

SUBMITTED TO:- SUBMITTED BY:-

DR. VANDANA VASHISHT Sneha Singh WBMBA20058

Somya Gahoi WBMBA20175

Smriti WBMBA20576

Smriti Singh WBMBA20390

Simran Karamchandani WBMBA20361

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 Abstract

Labour is the amount of physical, mental and social effort required to produce goods and services
in an economy. Labourers represent the human capital of the country. In a densely populated
country like India, labourers are the strength of the economy. They are the suppliers of the
expertise, manpower and service needed to transform raw materials into finished goods and
services. In return, the labourers get wages to buy the goods and services they don’t produce
themselves. Many countries like India have a policy of minimum wage pay to make sure their
labourers warn enough to cover their costs of living.

Desperation led lakhs of people living in cities to move back to their villages in the initial days of
nation wide lockdown. People were in a situation of panic as they lost their jobs and had no
means of livelihood. Most of the migrants are the only earning member and their family depends
on their remittances. Living in cities entailed huge costs which was another major reason behind
the remigration of the masses. As a result, labour crunch will hit capacity utilization for several
firms.

The lockdown didn’t just hamper the operation of MSME’s but bigger firms are also facing the
consequences. MSME’s are badly affected as they rely more on the migrant workers than the
large corporates. Therefore, Indian companies are trying to persuade their workers to return to
the work place.

Government is expected to conduct a study on mass reverse migration and come up with a
consolidated policy to ensure social security and health cover for migrant workers in future. The
State Government has been dependent on the Central transfers and grants for resources due to
limited revenue receipts.

Update- Considering upcoming Bihar elections central government has launched a scheme on
June 2020under which work will be provided to migrant workers for 125 in 25 areas in 16 districts
of six states namely Bihar, Jharkhand, Uttar Pradesh, Rajasthan, Odisha, Madhya Pradesh.

Who are these migrants?

Migrant labourers in India could be classified under three broad categories :
i. Internal migration – These migrant labourers come from (different states) within India.
Example- labourers of Bihar working in the industrial belts of Delhi and Haryana.

ii. Informality – They are low income workers who are informally employed. They lack
formal work contract. Many migrant workers perform daily wage labour like Belarus at
construction site, self employed vendors on streets. Such employment is obviously

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 precarious and day to day in nature with no protection in case of abrupt cancelation as
happened during nation wide lockdown.
Example- Street hawkers selling fast food, vegetables, fruits, etc.

iii. Circularity- most of the migrant labourers generally don’t permanently relocate to the
cities . Expensive and inhospitable urban environments compels them to move without
their families. Instead they circulate between cities and villages several times a year and
remain deeply rooted with their villages.

Where are they migrating to?

According to Professor Chinmay Tumble of IIM Ahmedabad these workers generally migrate to
Delhi, Mumbai, Surat .
As per the reports on the working group on Migration Ministry of Housing and Urban Poverty
Alleviation 17 districts account for top 25% of India’s male out migration out of which 10 districts
are in UP, 6 on Bihar, and 1 in Odisha.

As per a recent survey conducted, migration of labourers are focused in :

States Number of people migrating
Uttar Pradesh 4 to 6 million
Bihar 1.8 to 2.8 million
Rajasthan 7,00, 000 to 1 million
Madhya Pradesh 6,00,000 to 7,00,000

As per the ‘Politics and Society between Elections Survey from 2017-19 by the CSDS:
State Migration rate Interstate migration Within state
migration
Delhi 43% 88% 63%
Mumbai 55% 46% 52%
Surat 65% 50% 76%

Big question in front of Indian Government

Whether the returned migrants will look for jobs outside the state anytime soon or return to
their previous place of work.

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Objective of the study:
➢ To understand the impact of the pandemic (COVID 19) on the human capital of Indian
economy
➢ How the sudden implementation of nation wide lockdown has affected the earnings of
daily wage workers
➢ The various sectors that are facing shortage of labourers
➢ Economic impact on due to excessive demand for labor and insufficient supply of labor
➢ Analysing the future expectations of Indian economy regarding hike in wage rates
➢ Impact on MSME’s profits due to future expectations of hike in wage rates.

IMPACT OF REMIGRATION OF WORKERS / LABOURERS ON VARIOUS SECTORS IN INDIA

Manufacturing: It is one of the most badly hit segment as it employs over 60, 00,000 migrant
workers from other states. As per the data, MSME has a major contribution in manufacturing
covering 8% of India’s GDP. Thus, this shortage may lead to an increase in labour wages in the
near future (according to the economics principles i.e more demand and low supply increases
price of resources). In turn, it will affect the profits earned by MSME as they will have to pay
higher wages to their employees and cost of production increases.

Logistics :The logistics sector is not left untouched by the impact of the nation wide lockdown.
Due to remigration of the labourers, logistics sector is facing shortage of truck drivers and
workers for warehouse, many states are restricting the entry of trucks at their borders during
pandemic like West Bengal state government is imposing strict restrictions in the interstate
trades. All these factors are contributing to lower capacity utilisation of ports which in turn will
affect India’s external trade. Transportation companies are suffering from lack of labour, many a
times trucks with goods are loaded to leave but there are no truck drivers available to transport
them to the designated places.

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Corporates: Corporate with manufacturing facilities concentrated in states with a high migrant
dependency will face higher cost and face pressure on it’s operating margins while those
companies who have have operation in various states are better protected against the scarcity
of labourers. The employers need to ensure higher wages and incentives to draw labours back to
work. This will add extra expenses to the companies and reduce the profit margin. Not only in
manufacturing units but labourers are a part of sales unit, they are employed as sales person,
security guards, packaging staff, cleaning staff, etc. Nearby local workforce accounts just 20%of
the total workforce.

Mining: India has plummeted mining activity due to lower demand and severe shortage of
labourers who are the employees in those mines.

Agriculture: Labours are even essential comp of Indian agriculture. As per the reports, Bihar is
the biggest contributor of migrant labour to the rest of the states in India but it itself depends on
people from other states for it’s agricultural practices. Bihar employees 85 lakhs migrant
labourers in it’s fertile farms.

Automobile :States of Delhi and Haryana have large auto industry and hosting companies namely
Honda motorcycle and scooter India, Maruti Suzuki India, Hero MotoCorp, JCB, Harley Davidson
India and their part suppliers. Not only the car manufacturers are having problems but even the
sub parts manufacturers like tyres, screws, nuts and bolts, etc are also suffering from shortage of
labourers.
This year, India’s production was around 3,63,000 passenger cars from April to July that accounts
for 70% reduction is experienced is comparison to last year’s production.

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Construction : This sector, which employs a large number of migrants, has made a preliminary
assessment of the ground realities with the workers returning home and appears to find a drastic
decline in its workforce by about 70%. As the workers returned to their home, it leads of many
pending processing works. Some how private players have begun work on their pending projects,
work under government sector – construction of bridge, roads, approval for development of new
layouts, apartments and other new projects have not yet begun.

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The graph represents the different sectors covered by labour forces.

IMPACT ON GDP
The International Labour Organization in its report describes the Corona virus pandemic as “the
worst global crisis since World War ll.” As we know migrant workers play a vital role in all sectors
and all sectors contributes a large part of GDP. Workers contributes to construction sector (40
million), domestic works(20 million), textile (11 million), brick kiln work (10 million),
transportation, mining and agriculture sector too. While the COVID 19 pandemic is constantly
growing and showing the adverse impact on economic growth of country will probably be very
serious. The UN warned that the Corona virus pandemic is expected to have a significant adverse
impact on global economy, and most significantly GDP growth of India for the present economy
is projected to decline to 4.8%.

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 How migrant crisis is affecting the demand of workers in various
sectors?

This mass movement of workers back to their villages is only the starting point of India’s troubles.
Migration in India relies on existence of networks which ensure a flow of workers from villages
to urban centres for work. These networks often support mini economies which sustain labour
supply in urban centres as well as add to the aggregate demand in the overall economy.

For instance, a thela (hawker) who makes egg rolls or retails cudi chawal, caters to demand by
migrant workers. This in turn generates incomes for the local economy based on demand from
the migrant consumers. These are considered ancillary services which are essential offshoots of
the migrant networks.

The establishment of these local ancillary service economies is not automatic. They rely on a
critical mass of migrant workers in order to ensure profitability. If there are enough number of
customers, then the street vendor finds it profitable to sustain his service. After the reverse
migration, their incomes would be adversely affected.

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Further, these migrant workers are typically hand-to-mouth consumers — those who earn
subsistence living and spend a large part of their income in the local economy. This contributes
to another layer of demand, which would now cease to exist. Hence neither would the thela wala
earn any income, nor does the migrant earn his livelihood.

Both of these, in their capacity as consumers are a part of an informal economy which generate
and sustain volumes for the FMCG industries. For instance, Parle-G’s already falling fortunes
would dwindle further due to this drop in demand.

This lack of demand from the migrant workers and the mini economies they sustain imply that
forward and backward linkages to formal sector are also weakened. For instance, the informal
sector directly employs approximately 450 million people without formal contracts or job
security. Part of these sustain production in the small and medium enterprises (SME).

After the lockdown, the overhead costs, administrative expenses and mounting debt of the SME
would make it difficult for these industries to survive without adequate support from the
government. Moreover, expecting them to sustain wage payments as advised by the
government, without a corresponding flow of incomes is an unrealistic scenario for the near
future.

Even in the presence of the recently announced moratorium on loan payments, these industries
lie in the grey zone left to the discretion of the banks. Instead, if India could direct its fiscal
resources to support these payments, it might be able to prevent massive drops in demand as
implemented by Australia and France.

Now parts of the economy which seemed to have the capacity to pause during the lockdown
would experience a strain eventually due to their linkages with the SME’s. Unable to obtain
ancillary inputs, the larger enterprises will end up with a clogged value chain. This is the domino
effect of an unanticipated demand drop which permeates into a general adverse effect on the
overall economy.

These spillover effects on the formal economy will only be exacerbated by the disruption in flow
of footloose labour which diminishes the possibility of a revival. The networks of migrant labour
supplemented local workforce and plugged regional resource gaps to expand the productive
capabilities of the region. Without them, this ostensibly demand problem might turn into a
supply bottleneck too.

The exodus and the foreseeable restrictions on migrants not only worsen their own lives, it
affects other parts of the economy which were thought to be shielded from such adverse
outcomes. But this does not end here.

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India comprises of high growth industrial or trade centres, dependent on this constant stream of
migrant labour through these networks. The aggregate growth in GDP relied on these regions
which spearhead production and generate momentum for the rest of the economy. The
lockdown strips these centres of their capability and threatens India’s overall macroeconomic
stability.

COMPANIES GO ALL OUT TO GET BACK MIGRANT WORKERS-

After the exodus, it’s now the return of the migrant workers. They made a difficult trek back
home during the lockdown as factories downed shutters without any warning. But organizations
are now rolling out the red carpet to get them back to work.

Companies are using a combination of measures – right from convincing village heads and the
workers themselves of their safety, to arranging for their transportation – to bring them back
from various states. Hiring agencies TOI spoke to said that with limited source of income back
home, a number of workers had themselves evinced an interest to return to the workplace Faced
with labour shortages over the last three months, a Mumbai based pharma company with plants
in the western belt organized buses to get its employees back. Many of these are working in key
functions of research and development.

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RPG Group Company KFC International, where half of its migrant workers had left for their
hometown has seen a significant returning to the project site. KFC international tapped into its
employee database, engaged with supervisors who handled workers at villages to reiterate that
the workers and their safety will be taken care of on their return. “They are making arrangements
for bringing them back, whether its buses or arranging for their trains tickets. For some location
they are even considering getting them by flights.

JSW Cement also arranged for transportation in mid – may to get a few group of employees for
some of its plants after getting the relevant permissions from local administration. Its plants are
located in Andhra Pradesh, Karnataka, Orissa, Maharashtra, and west Bengal. However, as part
of its risk- mitigation strategy JSW Cement has now decided to employ a greater portion of local
labour for its packing operations. Most of them, employed as contract labour, left for their homes
in UP, Bihar Orissa and Rajasthan.

On the other hand, to ensure that essential commodities reach consumers across the country
during this pandemic, ITC went through an extensive process of mobilizing the entire supply
chain. “There were instances where we had to convince villagers that our facilities adhere to the
highest level of safety norms. We created awareness through videos, demonstrated our safety
precautions by bringing people to our facilities and gave them the confidence required to repose
faith in our operations, “said an ITC spokesperson. Today, the whole supply chain of ITC is running
end-to-end. “Inter-district movement was a challenge.

Dabur India, too, has recruited workers from villages and towns in the areas near its
manufacturing units. Wherever we are facing a shortage, we have sought and received
permission from state authorities to hire workers from other states. They have gone to states
like Jharkhand to hire workers and have arranged transportation from them to reach our
manufacturing units. All safety protocols mandated by each state, like social distancing, etc are
being followed during the transportation till they reach our manufacturing units.

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GOVERNMENT MEASURES TO GET BACK MIGRANTS
Framing a National Employment Policy to look into labour welfare, setting up of a ' Migrant
workers welfare fund ' and enrolling them under Pradhan Mantri Jan Arogya Yojana (PM-JAY )
popularly known as Ayushman Bharat- these are the measures taken by the government to
motivate the workers to get back to work.

National Employment Policy : this could be the vision document providing framework for
an inter- sectoral strategy for employment and economic growth.
The govt. also suggested confidence building measures such as scholarship to children of
migrants for schooling, textbook, school uniform, water and sanitation measures at their place
of stay, ration card portability and recreational activities by the employers.

Recommendations for construction workers

The government also recommended a drive can be launched to around 2 core construction
workers, who are eligible but have not registered the building and construction workers act (
BOCW ). This will provide many benefits like pension, housing loan, education benefits etc

The government also implemented Garib Kalyan Rojgar Abhiyaan, it is one time scheme for
providing employment to migrant workers who returned during the lockdown near their villages.

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CONCLUSION
Privations undergone by our migrant workers have awakened us to urgently address underlying
poverty and inequity and create supportive ecosystems that are disaster-proof.

Rural-urban and interstate development gaps forced people from populous states to move to
urban areas and more industrialized, developed states for employment. Comprising 20% of the
workforce, migrant labour became vital to every economic sector, especially the informal
sector and MSMEs, constituting nearly 50% of India’s GDP.

The Covid-19 triggered exodus is a sudden reversal of this cumulative migration of seven
decades. The resulting churning is an opportunity for India’s socioeconomic renaissance.

UP and Bihar, with largest returnee loads, have realised their shramiks’ asset value. They are
establishing data bases, skills directory and migration institutions. Yogi Adityanath and Nitish
Kumar are working to secure better economic and social security bargains for them and MoUs
with host states. Home states will draw upon the Centre’s Migrant Workers Welfare Fund and
other poverty eradication and economic empowerment schemes, including enhanced
MGNREGA.

The Centre is establishing online portals and databases, and undertaking legislative and
regulatory reform including updating Interstate Migrant Workmen Act, 1979, to redefine their
status.

To give gainful employment to those migrants who do not want to go back to the cities as it
happened during demonetization is a big challenge for the government. Otherwise, they will
return to cities to live in dismal conditions to earn a livelihood. The villages have to be developed
rapidly because otherwise the unemployed will opt out of the labour force as happened in 2016,
making the labour force participation rate go down further.

Notwithstanding the economic ravages of Covid-19, with “whatever it takes” public and private
investment, it should lead to rapid poverty reduction, rise in living standards and GDP.

Investing in migrant workers who reflect the demographic profile of young India – world’s best,
with 65% of population below 35 years of age – is key. They represent a pool of multi-sectoral,
upgradable and valuable skill sets. They are mobile, aspirational, technologically hungry, risk-
taking and entrepreneurial – ideal for powering the Atma Nirbhar Bharat (self-reliant India)
engine.

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REFERENCES :

▪ https://www.hindustantimes.com
▪ https://www.economictimes.com
▪ https://www.bloombergquint.com
▪ www.timesofindia.com
▪ www.sedex.com