The Economic Survey generally kindles expectations of what could figure in the Budget. The Universal Basic Income as a worthy replacement for generally inefficient subsidy schemes is a sort of a teaser for consumption only.
The survey is a shocker for two reasons. One, while advocating the possible reclamation of the low-skilled-labour-intensive manufacturing space in the global trade — since a dominant player such as China has vacated it thanks to rising wages — it does not reflect indignation that minimum wages even in the progressive States in India hover around what prevails in Bangladesh and is lower than what it is in Vietnam.
Two, in another chapter, it recognises that the growth in employment was due to growth in vulnerable categories such as contract and casual. Blaming labour regulation for failure on the economic front does not sit well with this reality. The Budget, however, indicates a slight change for the better at least in the policy rhetoric.
Worsening situation
The situation is grim. The Employment and Unemployment Surveys of the Labour Bureau show rising unemployment and poor quality of jobs even during 2011-2015. Reports indicate that the demonetisation drive worsened the plight of the vulnerably placed in the labour market in several ways, the most stress arising out of closure of establishments.
For a change, both the working class and the salaried class were frustrated by demonetisation and sops in the Budget were expected. The manufacturing sector, the traditional bastion of labour laws, has not been doing well of late. And the sword of labour law reforms has hung over the working class perennially. These factors rendered this year’s Budget more interesting.
On the job front, the Budget has taken less explicit measures. For example, the peak level allocation of ₹48,000 crore for MGNREGS is surely expected to boost work (not jobs) rates and hence rural incomes, even at the poor current intake of 47.8 or more days of work in drought-prone areas as well.
The farmers’ lobby has lashed at the Government’s insensitivity to the continuing woes in the agricultural sector. The farm sector is least likely to provide jobs in rural areas. The rural sector is not likely to witness much job creation in the non-farm segment, apart from construction of roads. Migration from rural to urban areas is unlikely to be contained in this context.
Fuzzy and focussed
High and rising public investment, especially in the infrastructure and the affordable housing sectors, will create jobs both directly and indirectly. The rural thrust in the Budget will enhance the market base of FMCG companies, but this may not not contribute as much to employment figures as it would to its financial curves.
While the Budget lacks focus on manufacturing save its mention of encouragement to the three sectors just mentioned, this sector is hoping to cash in on the rise in public investment.
Further, the abolition of the Foreign Investment Promotion Board which anyhow became irrelevant thanks to the high share of automatic routed foreign investment and the policy signal of new FDI policies, have raised hopes of foreign investment; this could generate some jobs.
Corporates and the salaried class were watching out for the tax proposals with interest. Those earning more than ₹5 lakh annually were disappointed as the Government provided decent relief to micro and small firms, and employees earning less than this figure.
The revenue loss due to this will be mopped up by surcharges on the high-salaried; it’s a kind of progressive measure. The drop in income tax for micro and small enterprises could result in a surge in investment which in turn could generate jobs.
Significant matter
Interestingly, perhaps for the first time, ever a finance minister emphasised the need to ensure a labour rights regime and harmonious labour relations to enhance productivity as opposed to peddling the usual stuff on the dire need to have a flexible labour regulation regime to boost productivity. This is a significant recognition of the role of the “mutual survival” thesis widely known and taught in the field of industrial relations: capital requires labour cooperation as much as labour needs investment for the creation of jobs.
Further, the minister stressed on the need to simplify, rationalise and amalgamate the existing labour laws into four codes. It is interesting, though, that he did not mention the labour flexibility agenda in the restructuring programme. It indicates an important change in the policy language.
It is another question as to how the Government (at the Centre and in the States) will ensure a regime of labour rights when the enforcement machinery has been systematically diluted in the post-reform period, and how industrial harmony can be maintained with the rising incidence of contract and casual labour.
The outlay on the enforcement and training regime in particular and the labour ministry in general ought to witness a steep rise in budgetary allocation; this does not appear to be the case. The special thrust on labour-intensive industries needs to be seen in the context of high reported labour rights violations and poor labour standards.
It is interesting to note that the Railway Board recently barred “safety officials” from becoming union members; this measure is expected to hurt the two recognised trade unions in the Railways. That’s how much significance the Budget attaches to enhancing safety. This too rankles labour rights activists.
Clearly, Budget 2017 offers little cheer to workers.
(Sundar is a professor at XLRI, Jamshedpur, Sapkal is an assistant professor at the Maharashtra National Law School, Mumbai. The article first appeared in The Hindu BusinessLine.)