THE GIST of Editorial for UPSC Exams : 21 November 2019 (Let us prioritize employment over labour protection (Mint))

Let us prioritize employment over labour protection (Mint)

• Mains Paper 3: Economy  
• Prelims level : Not much 
• Mains level : Coordinated efforts to liberalize the engagement of labour

Context

• The Narendra Modi government, at the start of its first term, did attempt land reforms; it promulgated nine ordinances, one after the other, which eventually lapsed after failing to get Rajya Sabha approval. 
• Recently, Parliament legislated a new labour code, amalgamating the provisions of several acts. 
• Provident Fund benefits have been extended to temporary/contract employees. 

Coordinated efforts to liberalize the engagement of labour:

• Labour reforms tend to have political consequences. The vice-chairman of NITI Aayog, while talking about labour reforms, has been clear that there would be no “hire and fire" policy. 
• While wages in India are low, the cost of labour is higher than in other Asian countries. 
• Improving labour productivity, which is a serious impediment to the expansion of manufacturing, warrants investment in technology and scaling up the size of Indian enterprises.

Indian economy scenario:

• India’s quarterly gross domestic product (GDP) growth has fallen to 5% in the first three months of the current fiscal year, with obvious consequences. 
• The country now faces the challenge of low aggregate demand—caused, inter alia, by rising unemployment. 
• While the Code on Wages, 2017, which stipulates a national floor minimum wage, has the potential to mitigate the effects of declining demand, without large-scale employment generation, its benefits cannot be realized.

Steps taken to boost up employment: 

• Trade wars between the US and China, and Japan and Korea, have combined with demographic issues in those geographies to inspire significant shifts in manufacturing locations, particularly away from China. 
• This offers an opportunity to welcome factories to India and join global supply chains. 
• The Modi government has taken the bold step of bringing down corporate tax rates to a level comparable with other jurisdictions, especially in Asia. 
• This decision is expected to aid the economy in the medium to long term, its full benefits can be reaped only if manufacturing units move to India.

If there is no employment, whom do we protect? 

• Currently, 95% of employment in India is generated by agriculture, businesses in the informal economy, and micro, small and medium enterprises (MSMEs). 
• No aspect of India’s labour protection law, except perhaps the minimum wage, applies to them.
• This is not to suggest giving a complete go-by to labour protection laws. 
• However, employment may rise if companies could hire well beyond 300 people without worrying about restrictions on layoffs during downturns. 
• Ask an unemployed person whether he wants a job or job protection, and most likely he would want a job first. 
• Once adequate employment opportunities are created, the government can deal with welfare issues. 
• It could create a fund from the extra tax revenues, for example, for the purpose. Simply put, the order should be reversed from “first protect and then employ" to “first employ and then create welfare measures". 
• This is exactly what China, Vietnam, Cambodia, Bangladesh and other Asian Tigers have done to attract global manufacturing.

Case study – China:

• China created special economic zones and allowed businesses complete freedom to perform, with no conditions imposed. 
• This attracted hordes of investors. 
• The model has since been replicated countrywide. India’s Special Economic Zones, in contrast, have largely been tax-saving and land-grabbing exercises.
• More than 80% of the export of manufacturing goods from China was done by enterprises that were 100% foreign owned. 
• China has benefited from the employment of Chinese labour and the value addition involved. It would be worthwhile to explore a similar approach.

Way forward:

• The earnestness of the Modi government to enhance the economic prosperity of India is undoubted.
• It has taken bold steps to improve the fundamentals of India’s economy. 
• However, without land and labour reforms, the speed of economic growth cannot be accelerated, nor can the country’s demographic dividend be maximized. 
• Every opportunity has a timeline. And the daring harness it optimally.

Prelims Questions:

Q.1) With reference to the Overseas Citizen of India (OCI), consider the following statements:

1. OCI is a person who was a citizen of India on or after January 26, 1950; or was eligible to become a citizen of India on that date; or who is a child or grandchild of such a person, among other eligibility criteria.
2. An applicant is eligible for the OCI card if he, his parents or grandparents have ever been a citizen of Bangladesh.

Which of the statements given above is/are correct?
A.1 only
B.2 only
C.Both
D.None 

Answer: A

Mains Questions: 
Q.1) For boosting up economic growth, land and labour both are require. Critically examine the statement.