Gig Economy of India – Issues & Solutions in 2020

Project-to-project basis work is soon gaining momentum even in India, as the gig economy is entering its second phase of organised development (with market-wide acceptance and adoption). The application-based platforms offering services like cab booking, house renting, food (doorstep) delivery are estimated to employ over 2 lakh people in companies such as Ola, Zomato, Swiggy, UBER, etc. While profitability has soared for such companies, employee exploitation has also increased resultant to which the government has exhibited mindfulness towards ensuring employee welfare by developing the required legal framework.

The gig economy is here to stay in India, as is evident by the recent initiative taken by the prestigious National Law School of India University (NLSIU), Bengaluru, of submitting draft guidelines for the gig economy. NLSIU is set to submit the draft guidelines to the government in February 2020, thereafter; the Karnataka government would either table a bill in the assembly or frame suitable guidelines under the purview of the incumbent laws meant to protect the rights of employees. Notably, the Karnataka state legislature’s upcoming budget session might see the draft getting tabled, reports Times of India. It has also been clarified that upon the draft being prepared by NLSIU, it might get debated in an open forum.

However, it’s a fair question to ask that has our labour market matched the pace with the incoming of the gig nature of work? Assuming a full-time gig work summons constant development of certain innate skills that are vital for gig workers, these are: entrepreneurship, networking, financials, and a knack of deciphering human psyche. While in India, at present there isn’t any regulation to standardise rates paid to gig workers. This makes mastering the art of negotiation a prerequisite to a thriving gig work career. Soaring tech usage in India has escalated those who have previously worked in the unorganised sector to be able to obtain better employment. However, even then, the jobs created in the gig economy mostly still get developed in the informal space, wherein some red flags do exist when attempting to apply this model in reality.

Essentially, new concepts like the formation of a Universal Basic Income (UBI), skill development programmes, ensuring availability of secured gig-based employment and freelance opportunities, and workplace protection, among others, is necessary to be looked upon. Hopefully the draft guidelines for the gig economy initiative underway at the NLSIU is received well by the Karnataka government and the state legislature, and upon implementation of the same, other states and governments also show active interest in inculcating the same spirit and safety in their respective regional gig workforce. The flexible work economy isn’t going anywhere, with increased adoption of technology and the availability of seamless payment avenues all that is remaining to be dealt with to make the gig economy a thriving market for the workforce is safety, security, and assurance of reasonable remuneration.

The BCG 2019 Report: The New Freelancers, states, “As per a survey of 6500 senior executives worldwide, 40% of respondents said they expected freelance workers to account for an increased share of their organization’s workforce over the coming five years.” (FlexingIT Project Trend Data: 2018-2019.

FlexingIT research also states that, “over a 3rd of companies in India estimate up to 50% reliance on flexible talent in the next 5 years.” Per a study conducted by McKinsey, estimations indicate that up to 20%-30% of the workforce in developed markets is engaged in independent work.Also, as reported by ASSOCHAM recently, the Gig Economy of India is definitely marching towards becoming a strong component of India Inc’s strategy as the sheer size of the gig economy is projected to grow at a CAGR of 17%, whereas it is likely to hit a gross volume of $455 billion by 2023.

FinTech India – Mobile Phones, FinTech & the Incoming of New Players

The economic challenges presented in 2019 coupled with protectionist regulatory measures didn’t actually hinder the development of the FinTech ecosystem of India as the startups in this domain managed raising over USD 365 million in July 2019, while the total investments entering in this sector being USD 1.16 billion, per the research conducted by IBS Intelligence. 

The FinTech sector is poised to witness established firms entering with much optimism. These include companies such as PhonePe and PineLabs (both having raised 100 million), BharatPe (raising USD 75 million), PayMate (raising USD 25 million), and Niyo (raising USD 35 million). As reported by Tracxn, the total investments entering in India’s FinTech sector stood at USD 800 million in the 1st half of CY 2019 (up 14% from the USD 688 million raised in 1st half of CY 2018. Whereas in 2019, FinTech startups raised over $3.2 billion.

However, that’s not all; a couple of top smartphone vendors are also making their presence felt in the FinTech startups space of India. Xiaomi launches MiCredit, in association with domestic startups such as CreditVidya, ZestMoney, Aditya Birla Finance Limited, Early Salary and Money View (to determine credit worthiness and financing eligibility). Xiaomi is intending to offer digital lending (credit in the range of Rs. 1000 and Rs. 100,000 at reasonable interest rates). In March 2019, Xiaomi started Mi Pay (a payments app powered by UPI) in India as a unit of its Mi Finance ecosystem (having around 20 million registered users).

Following the trend of entering the FinTech domain are other popular mobile phone brands, viz. RealMe, OnePlus and lately OPPO, as well. OPPO Kash by OPPO, is scheduled to be launched in June 2020 in India, to offer 1-click micro-loans coupled with flexible repayment features. Realme India started its payments service, Realme Paysa in December 2019, with the aim of being top-5 new financial services offering entity in 3 years.

As reported by AsianAge, mobile wallet transactions in India soared by 40 times in the preceding 5 years. Much of this momentum can be attributed to the mobile phone-based financial services global standard of FinTech, the Unified Payment Interface (UPI – enabling secure, real-time transfers even without a bank account). Mobile wallet transactions in India have increased 40 times in the preceding 5 years. Compared to traditional financial models, mobile finance gives distinct advantages, as follows: 1. Digital transactions generally don’t cost when initiated. 2. In-person services and cash transactions are now innate elements of routine banking expenses. 3. In the case of mobile finance, clients maintain their balance money in digital format. 4. In the absence of transaction costs, sending and receiving money from individual banks or mobile service providers is easy. 5. Mobile communication leads to high-volume of data, usable by banks and service providers to develop optimally profitable services. 6. Traditional credit scores get done away with as the subscribers without financial credit history also obtain the necessary credit to run their small businesses. 7. Mobile platforms have bank accounts linked to their clients on a real-time basis, thereby, banks can process account information. 8. Microfinance is also made accessible to those no credit risk proofs.

As per Financial Express, smartphone users in India are poised to double to reach 829 million by 2022 (growing at a CAGR of 15.5%). Coupled with this, there is also the influx of mobile form factor in the Point of Sale (PoS) devices to accept device-based payments (the growth numbers have been forecasted at a CAGR of 54.2% in the period 2019-23, per the Mobile PoS Payments, Statista, 2019

The Code on Social Security, 2019 – What’s in it for Gig Workers?

The Code on Social Security (“the Code”), having the capacity of impacting over 50 crore workers in India, now stands approved by the Union Cabinet. The Code, introduced by the Labour Minister Santosh Kumar Gangwar on Wednesday (December 11, 2019) in Lok Sabha, swaps 9 laws associated with social security; noteworthy among these is the Unorganised Workers’ Social Security Act, 2008. Social security generally signifies various measures initiated to make sure reasonable access to healthcare and the provision of income security to workers if offered. Establishing a social security fund with the help of the corpus available under corporate social responsibility is advised, so as to offer welfare benefits to all workers. Why this proposal is special is since it also includes gig workers under its purview.

Gig workers

The Code indicates that as for the schemes for gig workers, platform workers, and unorganised workers, the financing of these is planned to be done via a mixture of contributions from the employer, employee, and the appropriate government. However, there is more to it than this; the central or state governments could also, under the purview of the Code, notify specific schemes for gig workers, platform workers, and unorganised workers, say in the form of offering such service professionals with various reimbursed benefits, viz. life and disability cover. The Code identifies Gig workers as those workers who work outside of the traditional employer-employee relationship (e.g., freelancers or independent contractors). Platform workers, for instance, are such workers who access other organisations or individuals via online platforms and earn money by offering them with specific services. Unorganised workers also comprise of home-based and self-employed workers.

Talking about home-based unorganised (gig) workers, it should be mentioned that even though the third-largest economy in the world is amidst a slowdown (per the International Monetary Fund), the skillful housewives of India are joining the promising trend of “cloud kitchens” to feed today’s hungry urbanites (millennials), that also too late in their (ripe for retirement) lives. Various app-based startups such as Curryful (dubbed to be the UBER of home-cooked food), Homefoodi, etc., have started offering a platform to housewives for offering home-cooked meals to the modern millennials. What this means is that the demography of the gig workforce is innovating with each passing month in India as various forms of service professionals are joining the market that erstwhile were expecting retirement in their lives. With such a robust presence of demand and supply matchup in the gig workforce and the startup markets, it certainly makes sense for the government to ensure timely social security measures for its unorganised, independent, young, adult, middle-aged, and also ageing elderly (still zealous) workforce.

This is because in stressed times (as the ones currently being experienced by our nation in the form of unrests), it gets difficult for gig workers who are discharging their duties in the middle of the road as food delivery-agents or cab drivers or e-commerce delivery agents to comfortably and safely fulfill their service obligations. In such uncertain times, it surely makes sense to have social security benefits of the required nature in place to make such vulnerable gig workers be able to protect themselves and safeguard the future of their dependent family members (via referring the code on occupational safety, health, and working conditions). The same goes for elderly home-cooking housewives who juggle with multiple duties, more so in their later years. Where in the western countries the trend of platform (app) economy jobs have been received negatively for having destroyed stable industries – the reasoning being the absence of the following: (i) workplace benefits. (ii) labor unions –, in India, the government has exhibited the necessary mindfulness towards initiating proactive steps (such as the Code on Social Security, 2019) in the direction of addressing these warranted concerns of the gig workers, their families, and various stakeholders.