Skip to main content

What if Modi comes to power? Workers may have to further tighten their belt, social security net may be diluted

By Rajiv Shah
In case Gujarat chief minister Narendra Modi comes to power and takes over reins of Prime Ministership, which many believe is most likely, India’s working class should be prepared to further tighten its belt under an aggressive liberal economic regime. Also, few of the social security steps, such as for guaranteeing rural employment, taken by the Government of India in the recent past, albeit to “woo” the electorate, would start losing their sheen, and may even been dropped. And if proof is needed for this, say informed sources, one finds an outline of this happening, as reflected lately in the views expressed by two well-known economists known to be close to Modi.
Prof Jagdish Bhagwati and Prof Arvind Panagariya, known worldwide for their thinking on reviving an era of laissez faire at a time when even the US, one of its firmest protagonists, is seeking to move away from it, in their book “India’s Tryst with Destiny: Debunking Myths that Undermine Progress and Addressing New Challenges”, have not just vociferously defended the aggressive Modi growth model of development, but have argued why is it necessary to take it forward in India. While a lot has been written on the book, the reviewers have missed out a few important points which Prof Indira Hirway, a top Gujarat-based scholar, has noted in her critique (click HERE).
Arguing in favour of reforms, the authors of the book say, the primary focus of reforms should be on labour laws in order to bring about a dramatic upswing the economy and development. Admitting that there is some need for a few labour reforms, Prof Hirway says, “to believe that the root cause of the current malaise is labour laws would be wrong.”
In their book, the Bhagwati-Panagariya duo say, the Government of India has made many reforms, such as removing licensing, reducing trade protection, opening up to new technology, and removal of reservation of goods/ services for the small sector, yet it has done almost nothing in labour reforms. According to them, the worst law is India the Industrial Disputes Act, 1947, and particularly its Chapter V B of the Act, that does not allow flexibility in hiring and firing workers if the units have 100 or more workers.
Panagariya with Bhagwati
Prof Hirway says, “The authors have suggested amending the Industrial Disputes Act to provide easy labour flexibility and easy exit for firms. We believe that the diagnosis of the problem as well as the solution suggested by the authors is partial. One major reason for large units using capital-intensive technology is that capital is made cheap through large incentives offered to them by governments. Our study on incentives and subsidies to industries in Gujarat shows that the officially accepted goal of industrial development in Gujarat is to promote state-of-the-art global technologies (highly capital- intensive) in the state.”
She adds, “The rates of incentives and subsidies increase with the size of the units. In addition, the definition of capital has expanded considerably for the purpose of giving capital subsidies, and conditions regarding location and employment have been watered down to promote growth of capital- intensive industries.”
According to Prof Hirway, “According to our analysis of the official data, these incentives add up to 40 per cent of the total public expenditure while incentives to small and medium units constitute a mere 2.27 per cent of the total incentives given to industries. Though there are high subsidies on capital, land and water, there are no subsidies on labour or on employment. This is nothing but crony capitalism where allocation of resources is determined by incentives and subsidies and not by competitive market forces. A consequence is that small industries, which are labour-intensive, do not get a level playing field in the economy.”
Prof Hirway argues, “Though one agrees that labour laws need to be streamlined, this should happen only when workers are protected against their vulnerability. It appears to us that the authors have paid attention only to the interests of producers. It is equally important to recommend a minimum package of social security (at least in the thriving export industries to start with) along with a flexible labour market. There is no reference to this aspect at all.”
Coming to yet another major reform the pro-Modi economists want India should go in for, the Bhagwati-Panagariya duo recommends cash transfers – mostly unconditional except for vouchers for education and insurance for illness – instead of wage employment programmes. They argue that this will reduce leakages, give freedom to people to use their purchasing power according to their priority, and will also leave their labour with them to use it the way they want. 
Hirway
In this framework, they cite strong reasons to discard the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) as (1) there are huge leakages and corruption under it, (2) workers have limited choice to choose their assets/ activities, (3) high wage rates lead to a premature shift to capital-intensive technologies, and (4) the labour on MGNREGA is usually wasted.
Comments Prof Hirway, “We agree that cash transfers are important in many cases, but substituting MGNREGA with cash transfer will not be desirable. The economic logic of this programme is to use surplus labour for capital formation to expand the labour absorbing capacity of the mainstream economy. When this is planned well, it can contribute significantly to economic growth in all sectors. It can also promote labour-intensive sectors in the economy in the next round.”
She adds, “Also, MGNREGA is expected to empower the poor, the local bodies, and decentralize democracy. With the new flexibilities introduced in the programme under MGNREGA-II, people have ample room to select the work. Instead of focusing on cases of corruption, the authors should also have looked at some success stories of MGNREGA.”
The pro-Modi economists further argue in favour of land market reforms, which say are badly needed to facilitate changes in the present land use pattern to help economic growth. However, Prof Hirway says, “First, land has limited supply but multiple uses. It is necessary for the government to formulate a land use policy keeping in mind the long-term needs of the economy for agriculture, for human settlement, for infrastructure, for industries, and for environmental sustainability. However, in the absence of a well-designed land use policy, land is allotted on the basis of bargaining power and political pressures exerted by different users.”
Secondly, according to Prof Hirway, “In the absence of structural changes in the employment structure, the farming population has limited scope to enter the modern non-primary sectors. It is not only unfair but also criminal to allow private corporate units to grab farmland from farmers. In short, the land market, which is imperfect and has been distorted further in recent years, needs reforms to incorporate the above points also. The analysis of the authors shows poor knowledge of the prevailing realities.”
At the same time, regrettably, “natural resources are outside the purview of the book though sustainable use of natural resources is critical for sustainable development as well as for protecting interests of the majority of the population.”

Comments

TRENDING

Campaign group urges INDIA alliance to release Jharkhand manifesto to counter BJP’s 'divisive' agenda

By Our Representative  The Loktantra Bachao Abhiyan, an advocacy group, has issued a press release urging the INDIA alliance to release a Jharkhand-specific manifesto to counter the BJP’s "divisive" electoral agenda. With just two weeks remaining before the assembly elections, the INDIA coalition has yet to announce its plans and priorities for the state. Meanwhile, the BJP's campaign, according to the press release, is centered around communalism, divisiveness, and distraction from Jharkhand's core issues.

Tributes paid to pioneer of Naxalism in Punjab, who 'dodged' police for 60 yrs

By Harsh Thakor*  Jagjit Singh Sohal, known as Comrade Sharma, a pioneer of Naxalism in Punjab, passed away on October 20 at the age of 96. Committed to the Naxalite cause and a prominent Maoist leader, Sohal, who succeeded Charu Majumdar, played hide and seek with the police for almost six decades. He was cremated in Patiala.

Israel's 'war crime': 18,000 children died not just from bomb explosions but also starvation

By Sandeep Pandey*  Last year 6 years old Madiha was a guest during Diwali at our home in Lucknow. Listening to the sound of fire crackers bursting outside she remarked, ‘It appears as if we’re in Gaza.’ She has probably no idea of the extent of damage and loss of life that has taken place in Palestine but can relate to sound of crackers as bombs exploding over Gaza.

Swami Vivekananda's views on caste and sexuality were 'painfully' regressive

By Bhaskar Sur* Swami Vivekananda now belongs more to the modern Hindu mythology than reality. It makes a daunting job to discover the real human being who knew unemployment, humiliation of losing a teaching job for 'incompetence', longed in vain for the bliss of a happy conjugal life only to suffer the consequent frustration.

Will Left victory in Sri Lanka deliver economic sovereignty plan, go beyond 'tired' IMF agenda?

By Atul Chandra, Vijay Prashad*  On September 22, 2024, the Sri Lankan election authority announced that Anura Kumara Dissanayake of the Janatha Vimukthi Peramuna (JVP)-led National People’s Power (NPP) alliance won the presidential election. Dissanayake, who has been the leader of the left-wing JVP since 2014, defeated 37 other candidates, including the incumbent president Ranil Wickremesinghe of the United National Party (UNP) and his closest challenger Sajith Premadasa of the Samagi Jana Balawegaya. 

A Hindu alternative to Valentine's Day? 'Shiv-Parvati was first love marriage in Universe'

By Rajiv Shah  The other day, I was searching on Google a quote on Maha Shivratri which I wanted to send to someone, a confirmed Shiv Bhakt, quite close to me -- with an underlying message to act positively instead of being negative. On top of the search, I chanced upon an article in, imagine!, a Nashik Corporation site which offered me something very unusual. 

Will Bangladesh go Egypt way, where military ruler is in power for a decade?

By Vijay Prashad*  The day after former Bangladeshi Prime Minister Sheikh Hasina left Dhaka, I was on the phone with a friend who had spent some time on the streets that day. He told me about the atmosphere in Dhaka, how people with little previous political experience had joined in the large protests alongside the students—who seemed to be leading the agitation. I asked him about the political infrastructure of the students and about their political orientation. He said that the protests seemed well-organized and that the students had escalated their demands from an end to certain quotas for government jobs to an end to the government of Sheikh Hasina. Even hours before she left the country, it did not seem that this would be the outcome.

United organisations oppose privatisation of health services in Madhya Pradesh

By Our Representative  In a strong show of opposition, multiple health associations under the umbrella of the United Organisations for Action against Privatisation of Health Services have condemned the Government of Madhya Pradesh’s recent moves towards privatising public health facilities. They argue that these actions, including outsourcing and the Public-Private Partnership (PPP) model, will compromise the availability and accessibility of essential health services for the state’s citizens.

Why Han Kang refused to celebrate her personal accomplishment: Nobel Prize in literature

By Bhabani Shankar Nayak*  South Korean Nobel laureate Han Kang has declined to celebrate and refused to address a press conference after winning the 2024 Nobel Prize in Literature, citing the deaths, destitution, pain, and suffering of people affected by the wars in Ukraine and Gaza. As reported by the Korea Times, Han Kang’s father Han Seung a renowned Korean writer conveyed her daughter’s message that “with the war intensifying and people being carried out dead every day, how can we have a celebration or a press conference?” She said that “she won’t hold a press conference”.