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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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