Mains Paper 3: Economy
Prelims level: RDAT, BOAT
Mains level: Measures needed to improve skill development and apprenticeships
India’s problem is not unemployment this has bounced in the low and
narrow range of 4-7 per cent for 50 years but employed poverty.
Our traditional labour market shock absorbers farm employment and
self-employment are dying because kids born after 1991 are unaccepting of
self-exploitation and recognise the wage premiums, identity, dignity, soft
skills, apprenticeship effect, and financial inclusion of formal jobs. I’d
like to make the case that policy should pray to one god formal jobs.
And since goals decide strategy, our focus areas become clear.
India’s 6.3 crore enterprises only convert to 12 lakh GST registrants,
10 lakh provident fund payers, and 19,500 companies with a paid up capital
of Rs 10 crore or more because of our regulatory cholesterol 58,000-plus
compliances, 3000-plus filing, and 5000-plus changes every year.
We need massive ease-of-doing business that rationalises (cuts down
ministries, compliances, and filings), simplifies (adopts a universal
enterprise number and one labour code) and digitises (adopts a paperless,
presenceless and cashless process for all employer compliance by shifting
from uploads to websites to an API architecture with
Reverse payroll wedge
India’s labour laws have an insane reverse payroll wedge employers are
forced to deduct 40 per cent-plus of gross wages from chithi waali salary
(gross wages) for employees with monthly wages up to Rs 25,000.
Yet, haath waali salary (net wages) are only 9 per cent lower for
employees with monthly wages above Rs 25,000.
This wedge murders formalisation and confiscates property from the poor;
all wages belong to employees in a cost-to-company world.
Fixing this wedge needs competition
EPFO is the world’s most expensive government securities mutual fund
(300-plus basis points for administration fees) and Employees’ State
Insurance (ESI) is the world’s most expensive health insurance programme
(less than 50 per cent of contributions are paid out as benefits).
The reform agenda is clear employee contribution must be made optional,
employees must choose who handles their employer contributions, and social
security programme fees must be capped to their costs.
One driver of 20 million new social security payers has been the Pradhan
Mantri Rojgar Protsahan Yojna this partial reimbursement to employers for
incremental low-wage employees has incentivised social security enrolment,
is easy to verify, and hard to fudge and should be extended for a fixed
period of three years.
Difficulties face before skill development and apprenticeships
Our skill development system faces the difficult trinity of cost,
quality and quantity combining with challenging changes to the world of
In a world where Google knows everything, knowing is not as important as
lifelong learning and hard skills become a necessary but not sufficient
condition for the wage premium.
Apprenticeships are the future of learning, yet India only has 5 lakh
apprentices instead of 1.5 crore (if we use Germany’s number of 2.7 per cent
of the labour force).
Steps towards to improve Apprenticeship
Changes could include merging the two central government initiatives,
Regional Directorates Of Apprenticeship Training (RDAT) and Board of
Apprentice Training (BOAT), operate effective online matching platforms and
reinforcing the regulatory legitimacy of apprenticeships as classrooms to
overcome the trust deficit with employers.
Most importantly, we must enable degree-linked apprentices (skill
universities await clearance for linking apprentices to degrees via distance
and online delivery).
There must also be a focus on financialisation reform and sustainable
Fairly-priced capital catalyses formalisation, yet India’s credit to GDP
ratio is 50 per cent (rich countries are at 100 per cent). Sadly, Arunachal
Pradesh is at one per cent and Bihar is 17 per cent.
Lowering our cost of money has begun but sustainably targeting a higher
credit to GDP ratio needs more bank licences, fixing the governance at
nationalised banks, blunting the asset liability mismatch at NBFCs
(some irrationally funded 30 per cent of their balance sheet with commercial
paper) and restoring the sanctity of the 270-day IBC bankruptcy deadline.
More Indian enterprises need formal financial credit capital investment
and working capital availability drive productivity without replicating the
rash lending between 2008 and 2014 that gave us Rs 14 lakh crore worth of
Sustainably expanding credit at reasonable prices without stealing from
our grandchildren needs thoughtfully-crafted competition.
We should consider making labour a state subject and must continue the
decentralisation of funds, functions and functionaries to states while
simultaneously creating accountability, capabilities and resources in city
We can’t take jobs to people and need to take people to jobs but the
governance deficit of cities is blunting migration.
The 67 per cent-plus turnout in our recent election not only reflect the
invisible threads that hold India together but capture an aspiration that
breaks with India’s economic past. This dua needs policy to pray to the one
god of formal jobs.
What are the steps require improving skill development and apprenticeship
to increase formal employment in India?
Q.1) Which of the following statements is/are correct with respect to the
Deen Dayal SPARSH Yojana? 1. It has been launched by the Ministry of Social Justice and Empowerment
2. It is for the empowerment of the blind for easy accessibility and movement.
Which of the statements given above is/are correct? (a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Q.1) The draft NEP emphasises scientific temper for students, but what happens
when academia itself may lack it?