Explain demonetisation impact on the money supply of the country?
Answers
Restrictive labour laws – which promote contract hiring in order to circumvent rigid hiring and firing provisions.
Predominance of service-sector led growth – which requires skilled labour that was available with a miniscule section of the population.
Absence of thrust on manufacturing – which can lead to creation of formal employment for millions looking to move away from agriculture.
Market-mechanisms and competition led to closure of obsolete industries such as textile mills, reducing formal jobs. The newer industries were capital intensive rather than labour intensive, thus absorbing lesser workforce than what they laid to retrenchment of.
Lack of an exit mechanism such as insolvency and bankruptcy laws has led to firms remaining small, barely breaking even, and not scaling up. Such small firms can circumvent formal sector laws such as mandatory registrations with the EPFO etc. rendering them informal.