Minimum wage |MGNREGA

The Indian economy has been facing economic crisis due to continuous sluggishness for some time. It is also decreasing the growth rate of GDP. For this, the continuous decrease in demand side has been considered responsible. The government has recently made two announcements to improve the demand side and deal with this economic crisis. First, under the MGNREGA program, the wages of the people will be increased, at the same time it will also be increased at a certain time by fixing it according to the Consumer Price Index (Rural). Second, the government has also cut the corporation tax rate so that industries can be cost-effective, as well as be able to provide employment to the people. The above steps of the government point towards the effort to link people with minimum wages.

Concept of minimum wage

According to the International Labor Organization (ILO), an agreement made with a group or at the individual level, wherein the employer pays a minimum wage to an employee or laborer in return for that work if he works for a certain period The noun is given. The above definition underlines the restrictive nature of minimum wages. The minimum wage can be determined by any competent authority. However, state governments determine the minimum wage through legislation, keeping in mind the inflation of their state, whereby providing wages below is considered illegal.

Why the need for minimum wages?

Minimum wage

The minimum wage is needed to provide protection to workers from extremely low wages. Many times, due to excess unemployment or due to lack of employment, the employees are available to the employer even at low wages, this causes the employers to exploit the employees through extremely low wages. Apart from this, all the interest groups attached to it have the right over the profit arising from any enterprise or work. This right can be in different proportions but through a reasonable minimum wage, the working class can also be linked to this benefit. After the recession of 1929, Keynes’s ideas also got a boost, according to which if the demand for industries is to improve, they will have to come out of the mindset of high profits and give their workers a fair salary, so that the demand will remain constant. In developing countries like India, employment and salary are also used as tools to eliminate poverty and reduce inequality. The minimum wage enables people to pay proper attention to their family’s proper nutrition, as well as their education, health. Apart from this, efforts are made to empower the workers by providing minimum wages to the status disparities like social, gender etc. at various levels. This results in reduction of inequality and helps in the establishment of a more just society.

MNREGA program

growth rate of gdp

The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was implemented in 2005. Under this, the MNREGA program was started by the central government. This program is a rights-based program providing employment in rural areas. This program was implemented in rural areas across India in the year 2008. Under this, 100 days of guaranteed employment is provided. Which has been extended up to 150 days in some areas. A minimum wage of Rs 220 is given under this, although it may vary from state to state. This scheme reserves 33 percent employment for women. Thus, this scheme has proved useful not only in stopping migration for employment but also in poverty alleviation and women empowerment. It is important to note that a central budget of 60 thousand crores has been set for the financial year 2019-20.

Corporation tax deduction

Corporation tax

Corporation tax is a type of direct tax that companies have to pay to the government on their profit. Corporation tax has been cut under the Taxation Laws (Amendment) Ordinance 2019. The Income Tax Act, 1961 and the Finance Act, 2019 were amended through this ordinance. The base rate of corporate tax was reduced from 30% to 22% for companies, reducing the effective rate of corporate tax from 34.94% to 25.17%, including surcharge and cess. The base rate of corporate tax has been reduced from 25% to 15% for companies established on or after October 2019 in the field of manufacturing. This will reduce the effective corporate tax rate for these companies from 29.12% to 17.01%.

The economic crisis presently facing the Indian economy has negatively affected the situation of private sector enterprises. Corporation tax cuts will help enterprises to survive in this crisis, as well as will not be forced to cut jobs due to the economic benefit from tax cuts. In addition, industries have an important role to play in the economic development of an economy. If the state of the enterprise is good, it will accelerate the growth rate of GDP, as a result, the government can improve the profitability of its priority sectors including social welfare.

Wage listing

Along with economic growth, inflation also has a tendency to increase. This inflation is seen in the case of food items as well as non-food items. If people’s incomes do not increase in proportion to inflation, then people’s welfare is affected. This is often taken care of in public and private sector jobs, but in the unorganized sector and workers, this fact is completely ignored. The MNREGA program is playing an important role in providing employment to the people in rural areas, but its income level is low, due to which people are not able to meet their needs in a reasonable amount. As a result, it produces double effect, on the one hand there is a decrease in the purchasing power of the rural people, on the other hand it also slows down the rural demand for industries. Due to this, there is a possibility of a slowdown in the economy. It is important to note that 70 percent of India’s population still lives in rural areas. Therefore it becomes necessary to ensure that programs like MNREGA, under which the average wage for the year 2019 was Rs. 179, for the year 2020. Therefore, an appropriate criterion is needed for determining wages. For this, the items consumed by rural communities can be made the basis (Consumer Price Index-CPI-R), but there will be problem because this income will improve the nutritional level of the people but not raise their standard of living. Will be able to In order to raise the standard of living, it is necessary that at least education, health, housing, sanitation, drinking water, social security etc. are also taken care of. For these things, linking the income level with the consumption of goods is not enough, but the minimum income limit has to be raised.

Listing challenges

Rural incomes cannot be effectively increased by increasing the wages of the MNREGA, unless the basic income of the MNREGA is increased. Take the example of Kerala, which is recognized as a state where more wages are provided under MNREGA. In the year 2019, a wage of Rs 271 is provided daily under MGNREGA in Kerala, even if it is increased by 10 percent, it will still reach only Rs 298. While it is worth noting that if the MGNREGA wages in Kerala are equal to the minimum wages of the state, then it will increase from Rs 490 to Rs 540. Thus it will be necessary that a reasonable increase in the wages of the MNREGA should be done, along with it be linked to the Consumer Price Index (Rural).

Corporation tax cuts and economic disparity

  • Corporation tax cuts have also been considered to be helpful in increasing economic inequality in addition to other benefits. Some reports present the following facts about it-
  • According to Oxfam’s Inequality Report 2018, the income of one percent of India’s wealthiest people has increased by 20.91 lakh crore rupees in one year period, this amount is equal to India’s Union Budget 2017-18 is.
  • According to Crisil (CRISIL) estimates, 1000 companies will be able to save around 37 thousand crores from the current corporation tax cut.
  • According to the 2015 International Monetary Fund (IMF) report, if the income of the top 20 percent of the people in an economy increases, it reduces the growth rate of GDP over a period, while the income of 20 percent of the bottom. If GDP increases, it accelerates the growth rate of GDP.

The conclusion

The Indian economy has been under recession for some time. Against this backdrop, the lack of rural demand was considered to be the main factor. Lack of employment on the one hand and lack of proper salary in the available jobs on the other hand, was the reason for the decrease in demand. The impact of MNREGA has been incomparable in terms of providing employment in rural areas. But there have always been questions on its wage rate. Currently the government is planning to increase it so that the overall rural demand can be increased by providing fair wages in rural areas. Apart from MNREGA, workers are not provided proper salary even in unorganized sector, this often deprives people of their right to live dignified life. It is necessary that the government should bring the wages rate of MNREGA and other areas at par with the state wage rate and take measures for its implementation. Also, the government will have to increase spending for the social sector. Increase in social spending is not only necessary for social welfare and its empowerment, but it is also important from the point of view of the essential aspect of the economy. Thus it will be possible to establish a just society in India, in which economic disparity is limited and people are also provided with fair wages to live a dignified life.

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