Budget 2025-26 should be seen in the context of India’s march towards Viksit@2047. While new opportunities such as those in technology, high-tech manufacturing, etc need to be utilised, we must also unlock India’s immense energies held back due to our own inaction.
A difficult labour law regime prevents businesses from managing their operations well. At the core of this sits the Industrial Disputes Act whose Chapter 5 prevents businesses employing more than 100-300 workers, depending upon state laws, from laying off a worker without the permission of the union(s) and the government. Other labour laws such as Contract Labour Act also consequently need to be more stringent to ensure that people don’t circumvent the IDA Chapter 5. Effectively hundreds of rules and regulations, worsened by judicial delays, prevent firms from having the freedom to manage their workers as they need to. If businesses can’t lay off, assign work, or contract easily, productivity is naturally compromised. This also impacts investment and therefore growth. There is enough data to show that the average productivity level of Indian labour is lower than in comparable countries.
There are many ways of protecting workers, but instead of protecting the worker’s job, why don’t we protect the worker’s consumption or income? That is, why not replace Chapter 5 with a comprehensive unemployment insurance for industrial workers?
Unlock Land: Land for manufacturers at Rs 1 per month
Land is extremely expensive in India, many times than that in comparable countries, for one because of the Right to Fair Compensation and Transparency in Land Acquisition Act of 2013 that was implemented in 2015. The year the Bill was passed and implemented reveals that there has been a political consensus on this and therefore we cannot hope to repeal it. The net outcome of the act is inordinately high land prices for manufacturing in India, and a complex process of acquiring large tracts of land. These when combined with poor land records and judicial delays make it extremely costly and cumbersome for businesses to acquire land.
Land for industry is also available in about 4,700 industrial parks spread across India, but most are poorly run, have poor facilities, and are costly. So the government needs to make the land cheap and ensure key facilities and services such as effluent and waste management, lighted streets, etc of good quality are available at low cost for manufacturing units. By getting state governments to privatise industrial parks and the Union government fully absorbing the cost of land both these goals of cheap land and good facilities can be met. If the land is cheaper, investment requirements are lower, interest burden is lesser, thereby reducing the costs of manufacturing and enhancing global competitiveness.
Unlock Cities: 8,000 City-CEOs
The 8,000 odd cities across India are mostly run by officers and not by politicians. They go by different names, but let us refer to them as CEOs who report to the states’ Ministry of Urban Development. They have little motivation to improve their city as their future career is not dependent on their performance as city CEO.
And therefore they spend their times looking for their next transfer rather than improving city’s financial resources, utilities and public facilities. So let us change that. Academic work talks of decentralising cities and empowering mayors. That’s not going to happen due to the politics of it. So let us give more powers to the city-CEOs, and make their next transfer dependent on improvement in their city’s economic growth, employment and basic facilities.
This is broadly how China runs its cities. To do this, monitor economic performance of cities, employment generation, improvement in facilities and services for each of the 8,000 cities well, empower city-CEOs by delegating more authority and resources to them, and motivate city’s CEO better by awarding good performance and punishing bad one.
Something similar happened in Surat and Indore, now let’s do that for the other 8,000 cities.
Unlock Informality: Give them space
The bulk of urban employment is in the informal sector which includes a mix of micro and small units including craftsmen and many service providers. Remarkably, whether it be informal manufacturing, craftsmen, traders, mechanics and many service providers, across India no physical space is allocated to them.
Consequently, the informal sector, both manufacturing and services, operates perpetually in the illegal domain. Municipal inspectors and police personnel are able to therefore harass them. The problem unfortunately is not just corruption, but because of this lack of space-allocation and associated illegality the informal sector participants are perpetually prepared to run, rather than invest in their business improvement.
The MUDRA scheme helped them by providing credit to the informal sector, but that did not address the space problem. The Budget therefore will need to implement a new scheme where the crores of informal sector participants are allocated some space for their livelihood. This space may not be complete ownership but temporary occupation rights along with a basic rental. This would also help solve the 8,000 cities’ financial resource problem.
Unlock Justice: Make the judiciary accountable
Judicial delays are a well-known problem, they are the cause of immense hardship to humans and pull down growth and reduce equity.
Between the government and judiciary there is much finger pointing. On one hand state and Union governments have not allocated adequate funds for ramping up hiring of judges, associated staff, improving judicial infrastructure including IT backend etc. On the other, the judiciary has been lax in cleaning up its act.
Multiple adjournments, rules that delay conclusion of cases such as a rotating roster, not matching judge’s experience with the type of case allocated, are only some examples. The government therefore needs to allocate funds for each state, which only kick in when judiciary is seen to make substantive changes on its end. In other words, either through the Union Budget or through Finance Commission, make allocations to ramp up judicial strength two to three times across lower and even high courts, associated soft and hard infrastructure, and 21 st century IT backend.
These funds will be released to each state only when their judiciary can figure out how to reduce adjournments and other delay causing inefficiencies. No doubt these are not easy reforms, but Viksit 2047 is well worth it.
emale laborers work at a construction site on a hot summer afternoon. (Source: Express Archives) 
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