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Gig Economy

Can new age digital companies meet India’s massive workforce needs?

Print edition : Aug 05, 2022 T+T-

Can new age digital companies meet India’s massive workforce needs?

App-based food delivery workers wait near a restaurant to pick up orders for customers in Hyderabad in February 2021.

App-based food delivery workers wait near a restaurant to pick up orders for customers in Hyderabad in February 2021. | Photo Credit: NAGARA GOPAL

Business models of companies reveal precarious working conditions and exploitation of employees.

“Swiggy the food”, “Don’t drive, I will Uber it home”, “Hasn’t she Wefasted the package yet?” “Hang on, let me Dunzo the bread and eggs.” —Most residents of urban India will agree that these brands-become-verbs are now an intimate part of their daily vocabulary and by extension their fast-paced lifestyles.

The convenience of getting products and services via mobile apps is clearly addictive. This has led financial experts to proclaim that the gig economy, to which these digital companies belong, is the answer to an economy on the downturn and the spiralling unemployment crisis. Yet, if the reality is anything to go by, the gig economy is not the messiah it is being made out to be.

From 2019 to 2021, especially through the pandemic period, India saw an exponential growth in digital businesses. It held the third position in the world for the total number of start-ups and unicorns ($1 billion companies) created—105 as per government data. But 2022 started badly due to a variety of factors and financiers began pulling out of new age companies, and that’s when the “funding winter” set in. As these new age companies continue to haemorrhage financially, the number of layoffs, from unicorns in particular, has been concerning. Analysts estimate that over 50,000 people will be laid off by the year end.

The ‘funding winter’ has exposed the sector’s vulnerabilities.
The ‘funding winter’ has exposed the sector’s vulnerabilities. | Photo Credit: DHIRAJ SINGH/Bloomberg

The crisis has exposed the sector’s vulnerabilities. Companies have business models which is their secret of profitability, and that reveals the underbelly of exploitation of employees, as Vinod Shetty, a labour lawyer, points out. Shetty, who works with several unions, says: “Providing employment by using terms such as ‘partners’ to circumvent labour laws is to exploit the vulnerability of the worker. Checks and balances with stringent labour laws are a must for this sector. There is a steady supply of youth below 30 years ready to do this work. It is a new category of worker. I don’t think they even know what their rights are.”

Sonal Shah (name changed) who worked for a delivery service says: “These are the only jobs available. Even though I have an engineering degree, I could not get a proper job. At my company I had no benefits such as health insurance. If they want to sack us, it can be done without notice. I worked in the customer service division. When the company decided to downsize, they reduced the department replacing us with bots to answer questions. We were given an hour to pack and leave.”

Data from combined sources such as the start-up tracker Inc42.com and business media agencies find that 11,363 employees have been laid off by 34 start-ups and unicorns across market segments so far in 2022. Ola, Meesho, Cars24, Vedantu, Mobile Premier League (MPL), Udaan, Blinkit and Trell are among the companies that have seen retrenchment.

The largest number of pink slips (4,068) were given by 11 edtech companies, which thrived during the two years that Indian schools remained shut. With physical schools restarting, online learning petered out, and edtech companies took a hammering. Unacademy laid off 1,000-plus people. Byjus, the $22 billion mega edtech company, fired 600 employees.

Founder Byju Raveendran. The $22 billion mega edtech company Byju’s fired 600 employees.
Founder Byju Raveendran. The $22 billion mega edtech company Byju’s fired 600 employees. | Photo Credit: The Hindu Photo Archives

An investment banker says: “Many start-ups have been advised to cut back on costs. Typical of business models, the first to be affected is labour. But the gig economy is here to stay as its reach is expanding into smaller towns. With more people getting hooked to online services, there is huge potential in India for these companies. Just as traditional companies are making way for new-age businesses, traditional jobs will be replaced by gig workers.”

The gig economy 

Usually associated with musicians or small jobs, economists have adopted the term “gig” to label a new free-market system where employers hire independent contractors or workers for short periods. Essentially, each piece of work is akin to an individual “gig”. Workers are broadly classified into platform (those who work on online apps or digital platforms) and non-platform based workers (casual wage workers in conventional sectors).

The NITI Aayog report titled “India’s Booming Gig and Platform Economy” said India has an estimated 77 lakh workers engaged in the gig economy.
The NITI Aayog report titled “India’s Booming Gig and Platform Economy” said India has an estimated 77 lakh workers engaged in the gig economy.

Several reports on the gig economy in India say the country’s massive and low-cost human resources make it an ideal place for online and mobile-based companies that need large-scale labour. India is also enjoying what is called its demographic dividend, young people who have reached the employable age. According to a NITI Aayog report published in June 2022 titled “India’s Booming Gig and Platform Economy”, the country has an estimated 77 lakh workers engaged in the gig economy. The report says this workforce is expected to expand to 2.3 crore by 2029-30.

A joint report by the Boston Consulting Group and Michael and Susan Dell Foundation published in March 2021 says: “Gig work is not a new concept in India. With its large informal economy and ‘casual workers’ segment, India has always had the equivalent of gig work across urban and rural areas—from temporary farm workers to daily-wage construction labourers to household help.” It says: “Based on inputs, we estimate that the gig economy has the potential to service up to 90 million (nine crore) jobs in India’s non-farm economy alone, transact over $250 billion in volume of work, and contribute an incremental 1.25 per cent (approximately) to India’s GDP over the long term.”

“There is no doubt these are job opportunities. But we do need to think through the human aspect of it. Several of the unicorns are going public; money is coming in from foreign investors. Some companies are labour-intensive. Is cost effectiveness the only focus? Shouldn’t the lowest rung worker who ensures the delivery actually happens be given some consideration?” says Shetty. “Many delivery men and those who provide home services have come to us with problems. We are hoping to organise this section of workers and demand proper rights,” he says.

Sheikh Salauddin, president of the Telangana Gig and Platform Workers Union, says the pandemic wiped out jobs in sectors like construction, transport and small businesses. Online companies discovered that gig workers are much more cost-effective than full-time or contract employees.

““Is cost effectiveness the only focus? Shouldn’t the lowest rung worker who ensures the delivery actually happens be given some consideration?” ”Vinod Shetty, labour lawyer

“This is a major shift in India’s workforce and in the informal economy. It is a critical time as the number of workers is increasing. For the past four years we have been making representations to the central government for regulations and laws for gig workers. They need to address areas such as minimum wage, health and safety, social security. Unfortunately, there is no response; neither does there seem to be any inclination,” says Salauddin.

Rs.30 a trip

Prakash Jha, 20, arrives on a bicycle wearing a bright orange t-shirt with a company logo on the back. He is perspiring and exhausted. He has pedalled hard to deliver a package within 30 minutes as per the company policy. It is a box of ice cream which must not melt; otherwise he will be made to pay for it. For this trip he will earn Rs.30. Jha needs to make at least 20 deliveries to earn a living wage. “I stop for a quick tea or snack but there is no time for anything else,” he says.

The delivery executive is a vital connection in the fast moving world of on-demand food.
The delivery executive is a vital connection in the fast moving world of on-demand food. | Photo Credit: SRINATH M

“A year ago, my father lost his job at a restaurant that shut down due to the inability to recover from the COVID lockdown. My mother is not well. I have younger brothers who go to school. I completed my 12th standard and wanted to do a data entry course. We had no money and I had to work. A neighbour suggested this company. I thought I am healthy and fit, let me try it. I could not afford a motorbike, so I bought a second-hand bicycle. This allows me to take deliveries only in a small area. Other than the Rs.30 a day, I get nothing else from the company. The ice cream I delivered costs what I make in one day. I sometimes wonder what kind of life this is.”

Sunil Singh (name changed) is a masseur with a company that sends services to people’s homes. Singh was a full-time employee at a recreational club in Mumbai. He was laid off after the pandemic when the club cut back services and manpower to reduce costs. The full-time laundry, housekeeping and serving staff of many posh clubs were out of jobs during the lockdown and had to seek gigs or household work.

Since freelance jobs did not earn enough as people were still afraid of COVID, Singh applied for post with the online service provider. Singh explains that if the cost of the massage is Rs.1,400, he earns about Rs.600 out of that. On a good day he does about four massages but he does not get work every day. He earns Rs. 35,000 a month, but his overheads, which include fuel and servicing for his bike, the cost of the massage table (he had to pay Rs.30,000 as a deposit), the oils and disposable towels, all eat into his earnings. “I spend almost half on the material required for the job. I get nothing other than my payment from the company. I could do freelance work and earn more. If the company finds out, they will blacklist me and I fear I will never get work with any online company.”

Zomato delivery personnel wait on a street. The convenience of getting products and services via mobile apps is clearly addictive.
Zomato delivery personnel wait on a street. The convenience of getting products and services via mobile apps is clearly addictive. | Photo Credit: The Hindu Photo Archives

A Zomato worker says the new offers such as Insta-mart, which promises delivery in 10 minutes, is causing a further strain on workers. “We are so desperate to do as many jobs as possible in a day, that we immediately take the call. Then we rush to the restaurant or shop and try our best to make it to the delivery location. If it is even a minute over the time, we have to pay the penalty. Sometimes the restaurant causes the delay but it will still be our fault. It has become very risky on the roads, our lives are always in danger.”

A look at the Swiggy business model reveals the low margins and hence the need to be cost-effective at every stage. Swiggy operates on what is universally known as a “hyperlocal on demand food delivery business” model. It aggregates restaurants and organises fleets of delivery partners. A unicorn start-up worth close to $11 billion, it was among the first to provide a service where a user has the choice to order from hundreds of restaurants and shops in their city and have the product delivered to their doorstep.

Swiggy charges a restaurant between 15 and 25 per cent of a bill for the service. If a meal costs Rs.400, Swiggy keeps Rs.100. Of this they pay the delivery person Rs.20-30. Pankaj Gupta, a restaurateur in Colaba, Mumbai says they have to work on volumes to make money. The human angle, as he says, is hardly of any consequence in this cut-throat business.