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Costly Holidays

India experiences the most disruptions to businesses due to bandhs and public holidays and there are huge economic costs attached to it.

Public holidays are usually a cause for celebration. Workers get a day off to put up their feet, relax, catch up with family and pending chores. A study revealed that India holds the distinction of being the country with the most number of public holidays in the world with 21 days off and at times more depending on the state. Mexico comes in last with 7 holidays in a calendar year.

However, not everyone equally welcomes a public holiday. In August 2015, Victorian Premier Daniel Andrews pushed a legislation to declare October 2nd 2015, the eve of the grand Australian Football League Final, as a public holiday. Many Victorian businesses and ordinary citizens protested against this. Earlier, the draft proposal was put up for comments and review by the public and an overwhelming 90 percent of the respondents were against the move. One would normally expect jubilation instead of protests for an additional holiday. The reason for the protest is purely economical. The opportunity cost of an additional public holiday is staggering $852 million worth of lost production to the state, says accounting firm PricewaterhouseCoopers. Australia has a total of 9 national public holidays.

Similarly, in the UK, many analysts subtly remarked about the economic costs of celebrating the Diamond Jubilee of Queen Elizabeth II (60th anniversary of accession). In fact, Sir Mervyn King, the then Governor of the Bank of England told the House of Lords that he expects a fall in output in that quarter due to the lost working day. A report by Centre for Economics and Business Research, suggested that each bank (public) holiday costs the UK economy about £2.3 billion and removing all ten public holidays in the UK could add up to £19 billion to the GDP.

These two countries debating the cost of additional public holidays have lesser number of public holidays than the global average and far lesser than India. In India, checking the documents by Ministry of Personnel, Public Grievances, and Pensions, there are about 15 compulsory national (gazetted) holidays, 3 additional holidays from a list of 12 and about 34 restricted (optional) holidays. In addition to this, there are numerous nationwide bandhs called by trade unions, youth organisations, political parties and any other organisation that seeks to disrupt daily life in order to achieve their objectives. Then, there are state-specific bandhs, which seek to register a protest against a regional problem. Karnataka has seen many such bandhs in the previous few years over the Kaveri issue.

What is the cost of these holidays and bandhs on the Indian economy? The CII, FICCI and Assocham have at various points come out with estimates of cost to the economy and the number ranges from Rs.10,000 crore to Rs.26,000 crores[i]. The cost of public holidays will be much lesser, as there is no complete cessation of economic activity, as it does in a bandh. The method of estimation might not be entirely correct and the actual number might be much lesser. Even if we assume a number that is a tenth of the estimated, it is deeply significant, considering the sections of society that are most affected by such disruptions.

Many businesses get adversely affected by public holidays and bandhs.

Many businesses get adversely affected by public holidays and bandhs.

A more pertinent question is: who is affected the most by these holidays and bandhs? The salaried employees of either private or public companies do not lose their wage for the day and would thus welcome a holiday. However, it is the small businesses and the poor who get most affected by these disruptions. The average daily wage earner has quite a lot to lose by ceasing his/her normal activities and losing a day’s wage.  The small canteen which relies on daily trade by the big office next door cannot make up that trade on another day. Contracted or casual factory workers often cannot afford to lose a day’s pay. Public holidays can also be severely damaging to business continuity and momentum.

Resolving the situation requires two acts:

First, implement Supreme Court’s judgement on bandhs, which held those who called the strike liable for the disruption or damage, and observed that organisations calling the strike will have to compensate for the loss. This should be expanded to include the opportunity cost as well and not just tangible damage to property. It should also be firmly established that bandhs are unconstitutional and should be banned from public life.

Second, reduce the number of public holidays and simultaneously increase freedom to choose holidays. The G20 average for number of public holidays stands at 12. That could be adopted here. However, except three national holidays (Independence Day, Republic Day and Gandhi Jayanti), the rest of the seven days should be a choosing of each individual, based on their preferences. Mandatory religious holidays do not make sense in a secular democracy.

Reducing the loss of business days can add significantly to the GDP, provide a stable environment for business and most importantly, can help the poor earn that extra day’s income.

Anupam Manur is a Policy Analyst at Takshashila Institution and tweets @anupammanur

[i] For a brilliant exposition of the calculations behind estimating the cost of a bandh, read this brilliant piece by Prof. Bibek Debroy

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4 Responses to Costly Holidays

  1. Powergames and Human security September 28, 2015 at 8:39 am #

    A little too myopic, if the agenda of the article was to focus on labour productivity per se and too focussed on business than the employees. Its not the Indian worker works exactly(as per labour laws) with an 8 hours schedule, with 30 min lunch and two 15 min break in between, with an Overtime pay for every extra hour, as prescribed. Every one slog 10 to 12 hours minimum(unorganized which is about 70% of the workforce work more), some voluntarily and others involuntarily. At the end of it, working/earning is to rejoice life, with the earnings, instead of hitting the treadmill again.

    The bandh on the other hand, could have been avoided, if the needs/concerns were addressed proactively, even if the consideration is that, its politically motivated, for any protest, there has to be a sizeable populations concern that these politicians optmise on.

    So instead of hitting it hard on the “stretched out employee of the private sector’, the focus could be on, how do we improvize opportunities, technology, growth factors, such that the number of days/hours(holidays leading to loss) are not the determining factors for production(in case of manpower intensive units) or knowledge intensive units..

    • Anupam Manur September 30, 2015 at 12:01 pm #

      Thanks for your responses. The point that you are missing out on is that holidays in fact hurt the poor the most and not the private sector employees. Private sector employees get a fixed salary irrespective of how many public holidays there are in a month. It is the small businesses and the poor people who rely on daily trade or wage to get the bread on the plate who get affected the most.

  2. Christopher Lingle November 19, 2015 at 6:14 am #

    This invites a discussion of the “Rule of Law” (ROL) … as it is, many bandths are supported by either threats or actual violence … such aggressive acts must be condemned as illegal, per se … in turn, the perpetrators should be prosecuted & punished … to ignore such unlawful acts constitutes malfeasance or nonfeasance on behalf of public officials that should also be held accountable for not protecting all citizens … .

    If the ROL is interpreted as being the absence of privilege or differential treatment before the law, then a group of workers should not be granted rights that supercede those of other citizens … in a world of class action suits, citizens should be able to demand monetary damages from the financial assets of those groups that initiate or incite such behavior …

    • Anupam Manur November 26, 2015 at 7:28 am #

      Absolutely agree. The courts in fact ruled in such a favour. It believed that any organisation that is initiating a bandh should be made liable for all damages to private parties. It should also ideally include the opportunity cost of a lost working day.

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