A Historic Opportunity 2: Labor & Land Reforms
When we see the heart rending scenes of tens of thousands of migrants trudging stoically through highways to somehow reach their hometown or village, it is but natural for any citizen with a conscience to be outraged and curse bureaucrats and politicians. And we are not long in lambasting them. But have we paused to ponder over this: India has some of the toughest and most stringent labor laws in the world that are supposed to protect workers' rights. Many of our politicians, trade union leaders and "left liberals" staunchly defend these laws. And yet, where were these stringent laws when migrant workers were thrown to the wolves?
The fact is: our labor laws, like many such laws, rules and regulations that need inspectors, policemen and courts, exist only on paper. They usually line up the pockets of officials and politicians while workers and other "protected" groups continue to struggle. Against this backdrop, states like Uttar Pradesh, Madhya Pradesh, Gujarat and Karnataka have passed ordinances that virtually abolish most of the provisions of the labor laws.
The move has attracted widespread criticism. Some of it related to safety and protection of workers may be right. A noisy debate will perhaps lead to that happy compromise. But the existing labor laws have to go. Take just one example. If an entrepreneur with more than 100 employee has to fire even a single worker, a permission is required from the labor department. Why, even if a worker has to be transferred to another office or factory, it is not "possible" without a permission from the labor department. Now imagine global supply chains that supply readymade garments to western markets. They comprised of a series of massive factories each emptying tens of thousands of workers in China which doesn't offer any protection to labor that India does despite being socialist. Those factories have been shifting for a while to countries like Vietnam, Thailand and Bangladesh with no one coming to India. In fact, many large ready made garment export companies in India have shifted factories to Bangladesh, a country which outclasses India now in readymade garment exports.
Change labor laws laws and see the miraculous changes that will happen ( of course if other reforms are implemented together). India has a working class population of about 500 million out of which possibly more than 90% work in the informal sector where labor laws either do not apply or are defied with impunity. It is these informal sector workers that we see today on Indian highways walking back home. Of the 50 odd million workers in the organized sector, only a minority remains well,paid and well looked after with all benefits. Even here, the best known and most reputed companies have resorted to "contract hiring" whereby a contractor "employs" workers and sends them to work in these "blue chip" factories. They are paid far less, and enjoy no protection or benefits. So who is benefiting from the labor laws and how are the laws protecting them?
We have tried something for almost 70 years and it simply hasn't worked. Why not try something else? The same applies to land laws. Now both the industrial and services sector require vast amounts of land for expansion, growth and green field projects. Most of the land lies traditionally in the agriculture sector. Now, like labor, land acquisition laws in India were very rough on paper. But crony capitalists and their patrons in the form of politicians and bureaucrats routinely sidestepped or flouted the laws and fleeced the original landowners. So paying the usual obeisance to socialism in the name of the poor, the UPA government made land acquisition laws even more stringent by passing a new law in 2013. Under this, the consent of 80% of those whose land needs to be acquired by a private company is a must. Besides, social impact assessment and environmental impact assessment is also a must. In other words, an entrepreneur now finds it an uphill battle, if not an impossible task to acquire land for a project. Which foreign investor would be interested in coming in with such draconian provisions when dozens of other countries offer attractive packages?
By all means protect the original landowner who is usually a farmer. An overwhelming majority of almost 90% of them now own less than a hectare, find agriculture unsustainable and want their children to move away from farming. The reverse migration that we are witnessing today will be a bad memory in a few years when normalcy returns. If labor laws are changed and land laws remain the same, domestic and foreign investors will remain skeptical. India's ranking in the Ease of Doing Business Report of the World Bank was 154th out of 190 countries when it came to "registering property".
We have talked of the abolition of inspector raj along with labor, land and judicial reforms. But perhaps the most challenging is hinted at by our rank in the Ease of Doing Business when it comes to starting a business. It is 136th out of 190 countries.
As the next piece in this series will show, the last frontier in administrative reforms, or not allowing our bureaucracy to sabotage even this attempt to revitalize, recreate and recharge the Indian economy in the aftermath of the Covid pandemic.
