In the long history of labor relations in highly hierarchical India and the short history of the gig economy, Uber’s announcement of new terms for drivers this week could prove to be revolutionary. To work around the recurring problem of drivers canceling rides because they didn’t want to go to the destination or wanted to pay in cash instead of waiting for a weekly reimbursement by the company, the cab hailing service is providing this information to drivers so that they can Can choose which rides to accept. Changing the payment system so that drivers are paid the next day for most rides and allowing drivers to see destinations is common and humane.
The gig economy and more broadly the startup universe have been hit by storms recently. Firstly, poor working conditions and high fuel prices are making the retention of drivers and two-wheeler delivery personnel an uphill battle. Food delivery companies are estimated to have around 40% each month. Second, the US Federal Reserve’s quick rate hikes this year mean the end of the riches for what seemed as easy as playing Monopoly. India’s low labor costs made the unexpected even more dramatic for startup founders. Unicorns were molded on a rich-world valuation, while the salaries paid to ‘delivery partners’ remained decidedly developing-world. Last year, 40 new unicorns were created in India – companies with a valuation of $1 billion or more.
Such numbers have attracted even seasoned financial commentators. A gibberish briefing in The Economist this month pointed to India’s rapid climb in digital transactions and unicorns as a sign of India undergoing a transformation from as “epic” as America in the late 19th century. did. It was not that far-fetched. Its extrapolating from a data point that riots do not harm India’s economy. But, as magazine covers sometimes unintentionally do, The Economist may actually mark the end of India’s unicorn craze. As The Economic Times reported on April 28, March and April, “four unicorns were mined in India, compared to 10 during the same period last year. So far this month, there were eight new unicorns in April 2021.” No new unicorn rounds have been announced as of now.”
The backdrop of this recession is the global bear market. The Financial Times last weekend cited research from hedge fund company Mann Institute showing that since 1960, S&P 500 and US government bonds had not fallen together for five or more consecutive weeks until early May. One can see why the people of New York and London want optimistic stories of growth in far-flung places.
In India, many of the less affluent in our cities were getting re-employed, and we seemed poised to reshape our unevenly-sized recovery when Omicron took a hit and prices went up earlier this year. As an otherwise optimistic article by Reserve Bank of India (RBI) deputy governor Michael Patra and colleague Indranil Bhattacharya noted, by the end of 2021-22, India’s economy will be “barely” 1.8% from its pre-pandemic level of GDP. will be more. (GDP) growth is projected by research firms at around 3.5% in the quarter ended March 2022.
There were also signs that at least the large companies, which have become stronger during the pandemic years, are starting to increase investments. Factory utilization rates were climbing, but retail inflation will rise to 7.8% in April, a surprise even after March’s 6.95%. Large consumer goods companies are reducing package sizes or raising prices for biscuits and detergents. As volume and margin growth slows and interest rates rise, new investments will be shelved. Core inflation, especially of medical services and education, has been frozen for some time and is likely to cut middle class spending on goods. The steady increase in taxes on petrol and diesel by the central government over the years may have been necessary to keep its fiscal deficit under check, but it has also acted as a consumption tax. Such markers of middle class prosperity are reducing sales of entry-level cars and two-wheelers.
As I wrote in this paper in October 2019 (bit.ly/3GfDJYN), our middle class has been shrinking for a few years now. Last March, Pew estimated that 32 million Indians had dropped out of the middle class amid a global decline in the size of the middle class. This year’s sharp rise in Indian inflation even before Russia’s invasion of Ukraine may have undermined the recovery in earning power for those working in restaurants and hotels, even a welcome move in those industries. A rebound is visible. Pranab Sen, India’s former chief statistician, told me that the RBI, except for its first interest rate hike by the end of this month instead of a hike at the beginning of the year, “is so far behind the inflation target that (there is) no room for it.” to give effect to the policy.” Thus India is prepared to bear inflation in excess of 6% for the foreseeable future. As in the US, where workers in labor-intensive industries are demanding and getting a better deal, the cost of petrol is being indexed to pay in India. Gig economy drivers and delivery riders and giving them better working conditions signifies a welcome socioeconomic change.
On Monday, I called a taxi on my app to see that it had suddenly stopped moving towards my front gate. After a few minutes, I asked why. Back came the reply, short for text-speak: “Wait. Have tea.” I admired his straightforwardness upon his arrival. In return, they promised me a good passenger rating. I have neither the courage nor the stamina to be a social reformer in India, but I appreciate these early signs of change.
Rahul Jacob is a Mint columnist and a former foreign correspondent for the Financial Times.