July 11, 2014 2:42:22 am
Job creation is a child of five aligned “geographies” of jobs — physical, sectoral, firm-size, education and legislative. To paraphrase Samuel Huntington, the gap between India’s ideals and its reality is not a lie but a disappointment. And it is only a disappointment because our ideals are high. India’s recent election results represent our population’s — particularly our young people’s — impatience with the pace of job creation. This budget made interesting down payments on all five geographies:
On the physical geography, the key points were urbanisation, infrastructure and clusters. China has 400 cities with more than a million people whereas India has only 50. Urbanisation is about taking jobs to people, not the other way round, which the budget rightly emphasised: industrial corridors, SEZs, smart cities, industrial cities, low-cost housing for youth, village internet connectivity and rural housing. The two biotech clusters, six textile clusters and five new tourist circuits are great ideas because job creation explodes with infrastructure, knowledge and supplier clusters. These models could be replicated and scaled for other industries. The budget highlighted infrastructure projects: 24×7 power, industrial corridors, Northeast rail connectivity, village roads, drinking water, warehousing capacity, ports, highways, etc.
On the sectoral geography, the two defects in India’s labour markets — 12 per cent engaged in manufacturing and 50 per cent in agricultural employment — are closely related, because people have not been able to move off farming due to a lack of alternatives. The budget stressed the importance of manufacturing employment through its many improvements to “the ease of doing business”: GST, retrospective taxation, etc. The higher ceilings for FDI are important — more than 60 per cent of China’s exports come from multinationals and salaries there have increased at 17 per cent in dollar terms every year for the last five years. The shift in focus of the MGNREGA to productivity will involve asset creation and skills and should accelerate non-farm rural job creation.
With firm-size geography, redefining the limit for MSMEs was important; India’s firms are mostly dwarfs rather than babies. We cannot compete with China as long as 85 per cent of manufacturing comes from firms with less than 50 employees. Access to capital is an important constraint; the proposal for licensing small banks and the fund for startups are relevant on this count. The budget deals at length with “plumbing” to remove regulatory cholesterol. An electronic eBiz portal integrating government ministries by December 31, 24×7 customs clearances, streamlining tax administration to avoid harassment, etc, should be complemented by aggressive recommendations from the MSME committee.
As far as education geography is concerned, unemployability is a bigger problem than unemployment. Fixing the lousy Apprentices Act, converting employment exchanges into career centres and the convergence among various skills schemes into a national multi-skill mission are long overdue. The allocation for school assessments and for teacher training are probably inadequate but signal an imminent shift from the enrolment- based discourse of the RTE to an outcome-based right to learning act. The new IITs, IIMs and AIIMSs are welcome; in a country where these institutes largely provide signalling value, this expansion can happen without damage. The new medical colleges are interesting but hopefully only a preview to a strong pushback against those who want to regulate medical education. The allocation for virtual classrooms signals acceptance of MOOCs and may lead to overdue distance education reform.
On legislative geography, there is widespread disappointment that the budget did not have more to say about labour law reform and its provident fund announcements were inconsistent with its big message of living within means, as it made an actuarially untenable decision to raise the pension provided by the Employees’ Pension Scheme. On the first, I believe the budget is an inappropriate forum to signal specifics; labour law reform has been killed many times by incomplete and badly sequenced announcements. Real action on labour reform was begun many days ago on the website of the Central ministry of labour and in states like Rajasthan. On the second, the unified account scheme was positive but creating competition for EPFO and ESI were clearly a missed opportunity because they don’t have clients, but hostages.
Fixing our five geographies of work requires differentiating between a recipe (how) and the list of ingredients (what). The list of ingredients is well known. But a recipe is about proportioning, sequencing, and choosing. Unfortunately, the budget speech made it sound like a list of ingredients, even though the details clearly show that it was more of a recipe. One clear takeaway for next time: a professional speechwriter. This budget recognised that plumbing (execution) is more important than poetry (strategy).
The writer is chairman, Teamlease Services
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