The Proposed EU India FTA and Effect on Vulnerable Groups in India:

Some Issues

Ranja SenguptaCentre for Trade and Development

(Centad), New Delhi, India

Draft (not to be quoted)

Concerns from a Specific Perspective: Vulnerable groups and Human Development• I will deal with three issues mainly from a pro poor

and gender perspective.

Poverty Equality Health

• poverty has received more attention in this FTA discussion,

• Inequality and health less

Poverty in India: Current context

• Extensive Poverty• National Poverty line estimates: 27.5%• Decline is lower 1993-94 to 2004-05 compared to

1983 to 1994• Alternative estimates higher • 77% (Rs. 20 per day), 87 rural (2400 calorie/ day)• World Bank 1.25 USD PPP: 41.6% • Increase in absolute numbers • ADB 55-65% (poverty line critical)

• Increasing feminisation

• HDI 0.619, Adult Literacy 61% (developing 68.2)

• Calorie consumption per capita falling, undernourishment 20%

• Increased distress linked to trade liberalisation

Poverty in India: Current context

Agricultural Crisis in India: Farmers’ Suicides linked to Trade Liberalisation

Source: Utsa Patnaik (2009)

India: Registered Unemployment rates (rural men ; urban men / = ; women )

(Ghosh 2008)

Rural India

Urban India

15-19 20-24 All 15+ 15-19 20-24 All 15+ Males

1993-94 3.3 4.9 2.0 11.9 12.6 5.4 1999-00 5.5 5.2 2.1 14.2 12.8 4.8

Usual Status

2004-05 7.9 6.2 2.1 14 12.5 4.4 1993-94 9.0 10.3 5.6 16.2 17.0 6.7 1999-00 13.1 11.7 7.2 19 17.1 7.3

Current Daily Status 2004-05 15 12.9 8.0 18.4 15.8 7.3

Females 1993-94 1.9 2.8 1.3 12.8 21.7 8.3 1999-00 3.2 4.9 1.5 13.2 19.4 7.1

Usual Status

2004-05 6.7 9.3 3.1 15.6 25.8 9.1 1993-94 8.3 8.2 5.6 18.6 28.5 10.4 1999-00 12.8 12.1 7 18 25.9 9.4

Current Daily Status 2004-05 12.6 14.9 8.7 16.4 27.3 11.6

EU-India FTA and Concerns about Poverty• Better to have larger spread of new jobs• ECORYS (2008) projects decline in poverty• Benefits to services sector employees and textile and

garments, leather, and from investment• Losses to agriculture ( 80% or 290 million small-

landless), dairy, fisheries, retail, maybe leather lower value chain (export tariff)

• 10% sensitive listSkill Biased FTA• FDI in skill intensive sectors will bypass poor• Low HDI, low skill, most cannot benefit • Shift costly as no security net

• Relatively low skilled jobs created only in manufacturing (But labour intensity )

• ing informalisation, about 92.4% of labour force (all in employment in informal sector)

• Impact on natural resources and environment, will impact poverty, food production, livelihood

EU-India FTA and Concerns about Poverty

Even textile gains may be limited: Face NTBS employment (capital intensity), wage growth lower 93/94-2004/05

Women’s share but work conditions, wages (similar in leather)Garments: Employment but growth rate ( 1984-97: 7.01 p.a./ 1997-2007 4.79 (MFA impact not caught)

Employment in India's Textile Sector

By Gender Overall Men Women Men Women Overall Men Women Fourth Round(1987) 1673350 1607472 65878 96.06 3.94 Fifth Round(1994) 1130675 1069365 61310 94.58 5.42 67.57 66.52 93.07 Sixth Round(2006) 782382 691422 90960 88.37 11.63 69.20 64.66 148.36

By System of Payment Overall Time Rated Piece Rated Time Rated Piece RatedOverall Time RatedPiece Rated Fourth Round(1987) 1673350 1166236 507114 69.69 30.31 Fifth Round(1994) 1130675 842666 288009 74.53 25.47 67.57 72.26 56.79 Sixth Round(2006) 782382 624331 158051 79.80 20.20 69.20 74.09 54.88Source: Authors's calculation based on data from the Occupational wage Survey 6th round (Textile Industry)

% shares in employment Employment as % of previous Year

% shares in employment Employment as % of previous Year

Textile Industry: Except in

Synthetics, wage growth in 1994-2006 compared to

earlier period

Garments: Wage growth

Men 7.96% p.a. (‘94-07)/5.04 (‘87-97)

Women 10.29% p.a. /6.90 p.a (same

periods)

Men Women Time Rated Piece RatedCotton Textiles1975 to 1987 7.23 5.41 7.23 7.15!987 to 1994 9.51 13.81 9.66 9.721994 to 2006 6.03 0.34 5.22 4.11Woolen Textiles1975 to 1986 9.06 9.35 9.39 9.09!986 to 1994 10.01 5.71 10.11 9.251994 to 2006 7.47 7.51 7.64 3.66Silk Textiles1975 to 1987 8.23 13.41 9.24 3.54!987 to 1994 10.77 7.82 9.99 14.281994 to 2006 7.11 7.21 8.05 6.76Synthetic Textiles1975 to 1987 -- --!987 to 1994 6.79 0.53 6.62 7.791994 to 2006 9.55 6.91 9.67 10.49Jute Textiles1975 to 1986 9.63 9.61 9.84 9.40!986 to 1994 9.84 8.87 9.74 9.921994 to 2006 8.99 4.47 7.21 9.22Source: Authors's calculation based on data from the Occupational wage Survey 6th round (Textile Industry)

Textile Industry in India: Growth Rates in WagesCurrent Price (Rs)

Inequality in India: Why is it important?• Inequality constrains rate of poverty reduction, • Adds to civil strife • Even the World Bank has now recognised this.• India already facing high and growing inequality

• National Gini 36.8% (UNHDR 2007/08)(EU-25 31%: 2005), and rising

• Rural & Urban inequality: high and rising• Top 20/Bottom 20: 5.6 Top 10/Bottom 10: 8.6• Regional, sectoral inequality growing• Wage inequality growing, return to skilled rising

Regional Inequality: Both rural and urban inter state inequality has since ‘93-94

State Gini varies from 19.9 to 38.3 (rural) 31 to 44 (urban)

India: Sectoral growth rates of employment

(Ghosh 2008)(Annual compound rates per cent)

High Wage Inequality

Indices of real per worker incomes(1993-94=100)

80

100

120

140

160

180

200

220

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

GovernmentEmployees

Pvt Org.SectorEmployees

Self-emp Non-agri

Self-empAgriculture

Other InformalLabour

AgricultureLabour

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

Rura

l

Illite

rate

Urb

an

Illite

rate

s

Rura

l

Pri

mary

Urb

an

Pri

mary

Rura

l

Seco

ndary

Urb

an

Seco

ndary

Rura

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Gra

duate

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Urb

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Gra

duate

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Real wages of Regular Male Workers

1993-94 1999-00 2004-05

Wages of only the very skilled has increased (Sen and Himanshu (2006))

Other estimates say while all wages growth rate of graduates and above is the highest

Gender Inequality in India• For trade benefits to reach women, there must

be (Das, UNCTAD, 2007) – Access to employment opportunities in all sectors;

– Returns to labour (wage equality);

– Access to basic services (e.g. health and education);

– Access to resources (e.g. land, credit, business services);

– Empowerment (participation in decision making); and

– Distribution of income inside and outside the household

Reality:• GDI as % of HDI: 97• Adult Literacy Rate, Female as % of Male: 65.2• Combined Primary, Secondary and Tertiary Gross

Enrolment Ratio(%), Female as % of Male: 87.7 (skills lower)

• Sex Ratio: 933 /1000 (2001 census)• Female employment in public and private sector

only 23.39% of men (2005, Economic Survey)

Gender Inequality in India

Wage Disparity for Women Also has much to do with education (Das, 2007)

India: Real wages of regular workers (Ghosh, 2008)

Average real wages per day of regular workers (at constant 1993-94 prices)

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00

110.00

1993-94 1999-2000 2004-05

Rural males Rural females Urban males Urban females

India: Real wages of casual labour (Ghosh, 2008)

Average real daily wages of casual labour (at constant 1993-94 prices)

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

1993-94 1999-2000 2004-05

Rural males Rural females Urban males Urban females

Equity Concerns: Current issues in India

• High inter sectoral inequality: Services /Agriculture. Manufacturing employment share low

• High regional inequality: Both rural-urban as well as city specific

• So a) difference in income growth + difference in infrastructure development b) migration

c) high pressure on urban areas -- growing informalisation of work -- increasing feminisation of agriculture and of poverty -- food insecurity

• Adds to already high gender inequality

The EU-India FTA and Equity ConcernsA) Very few sectors benefit: the already created

‘enclave’ type of growthB) Main focus on skill intensive sectors already

present wage inequality and gender inequalityC) Inter-sectoral and inter-regional shifts become

necessary: Costly. Skill differences. No comprehensive social security net. Especially costly for women.

D) IPRs and Equality: • Strengthens patent regime and linkages. Data

exclusivity. • Will hit the poor and women more as will further

limit access to knowledge/technology

EU-India FTA : Equity concernsE) Increase inequity in access to food (also serious

poverty concerns)

F) Public procurement in India used as a tool for equity: Advantage to SMEs, local producers, scheduled castes, scheduled tribes, women

G) Competition Policy: STEs and State aid will be hit. Space needed to grow infant industries. Small and medium industries will be hit

EU-India FTA: Equity Concerns

G) FDI is also largely in-equalising as it goes to safer locations. If we want FDI, on what terms?

a)Retail: Loss of livelihoods for many small traders while a few will gain employment

a)Banking: Will reduce equity in access as discriminates against ‘unsafe’ sectors: Agriculture/ rural, SMEs, women as they do not own assets to offer as collateral

No frills Account Number % share

State Owned Banks 11026619 87.39Private Sectior Banks 1560518 12.37Foreign Banks 30260 0.24

12617397 100.00Banking Assets % shareDomestic Banks (Public plus private) 92Foreign Banks 8Distribution of Bank Branches in India (%)

Rural Semi urban Urban MetropolitanState Owned Banks 35 25.9 20.5 18.9Old Private Banks 18.2 33.5 28.6 19.4New Private Banks 6.3 25.4 32.3 36Regional Rural Banks 77.9 17.6 4 0.4Foreign Banks 0 0.7 17.9 81.4Source: Data from Kavaljit Singh (2009)

End December 2006

Share of Domestic and Foreign Banks in No-Frills Accounts, Banking Assets and Coverage

Employment and Equity: Issues for the poor and women under the EU-India FTA

• Agriculture: Gender sensitive, also large no poor: Can get hit by import competition, most cannot export because of EU subsidies, standards

• Also price shocks, import surges, need protection (SSM)

• Manufacturing: relatively high demand for women and less skilled labour in textiles, leather but conditions of work, disparity (labour laws flexible)

• Services: How real are gains for Mode 1 and 4? Temporary/ Professionals (skilled). Care workers?

Textile & Garments: Textiles: High female employment only in Cotton textiles

Gender Disparity in Wages (around 50% of men)Garments: Women’s wages 75% of men

Time Rated WorkersPiece Rated WorkersTotalBy System of Payment 95.22 4.78 100

By Gender Men Women Total Overall 88.37 11.63 100Time Rated Workers 87.56 12.44 100Piece Rated Workers 91.6 8.4 100Piece Rated Workers-Cotton Textiles 43.32 56.68 100

Average Daily Wage Rates (Rs)

By Gender Men Women

Women's wages as %

of Mens'Overall 150.72 73.86 49.00Time Rated Workers 136.94 70.07 51.17Piece Rated Workers 202.77 96.03 47.36Source: Authors's calculation based on data from the Occupational wage Survey 6th round (Textile Industry)

Distrubution of Work Force (%) between Men and Women and by System of Wage Payment

The State of Health in India• Underweight Children: 43.5% (2006)• Child mortality: 76 out of 1000 (2006)• Under-5 mortality rate (Probability of dying aged <

5 years per 1000 live births) difference lowest-highest wealth quintile, 2006: 66.7

• Under-5 mortality rate (Probability of dying aged < 5 years per 1000 live births) ratio lowest-highest educational level of mother, 2006: 3.2

• Incidence of critical diseases: tuberculosis, cardiac • Gender: underweight children 48.8 for females

(45.5 for males), MMR: 450, high anaemia 950-90% of pregnant mothers, lack of pre natal care

• Income inequality also critical for health

Access to Health has a Clear Relationship with Income Inequality

Poorest 20% Richest 20%

Poorest 20% as proportion of Richest 20%

Births Attended by Skilled Health Professionals (%) 16 84 0.190One year olds fully Immunised (%) 21 64 0.328Children under Height for Age (% under age 5) 58 27 2.148Infant Mortality Rate (per 1000 live births) 97 38 2.553Under Five Mortality rate (per 1000 live births) 141 46 3.065Source: Data compiled and calculated from UNHDR (2007/08)

Inequalty and Maternal and Child Health in India

Health: Critical Issues for the Poor and Women under the EU-India FTA

• The Role of a TRIPS PLUS Regime (data exclusivity, patent linkage, seed protection): Access to medicine, traditional medicine and food

• Working condition in export industries: ECORYS report shows adverse impact on health in textile sector, we need a detailed sector specific analysis

• The loss of Tariff Revenue inhibits Government’s ability to spend on social sectors

• Loss of livelihood and incomes will affect health adversely

Health: Critical Issues for the Poor and Women

• Services and investment liberalisation in health & Pharma Sector: WE NEED MORE INFORMATION, MORE ANALYSIS

a)Increased FDI in health sector may be forthcoming but higher user fees, not of use to the poor (75.2% of exp on health is private 2003, HHs bear 68.96% of the burden). Very low compared to EU countries.

b)Issues of medical tourism (surrogate motherhood) plus many other complicated issues we need to look at in more detail even in the domestic arena.

Implications of and Recommendations for the Trade Deal

• Agriculture, dairy, fisheries included at the cost of increasing poverty and inequality

• IPRs included at the risk of increasing poverty, inequality and health

• Public procurement included at the risk of increasing inequality; general as well as gender

• FDI in retail included at the cost of increasing poverty, inequality loss of jobs

• FDI in banking included at the cost of increasing inequality

• Need more development concessions

• Need gains to be more widespread, protection for large employment segments

• Need to ensure real gains in services and textiles for the vulnerable: NTBs, coverage extended, wage and employment gain

• Address conditions of work, wage disparity (but cost advantage declines)

• Health sector needs special attention: Information and analysis

Implications of and Recommendations for the Trade Deal

Domestic Prerequisites for the Vulnerable to Get Benefits from this FTA• India cannot afford higher levels of poverty,

inequality and worse health indicators for vulnerable groups

• Improved access to health in terms of access to food and public health facilities

• Improved access to education, skill level upgradation

• Comprehensive social security net

• For trading, standards upgradation apparatus needs to be in place, but costly

• Finally, policy space for growth and employment creation, and develop tools to address inequality