Need for reforms to reap demographic dividend and alleviation of poverty

Context: Recently there has been an uproar against the new farm policies. They were considered Anti-farmer. But Change is a form of hope. This is a good start. However this protests have shown a major drawback in your attitudes . They are : 

  1. India’s agriculture laws were neither pro-farmer nor pro-consumer but pro-middleman. India’s labour laws were neither pro-labour nor pro-employer but pro-labour inspectors.
  2. India’s education laws were not pro-student or pro-employability but pro-UGC, AICTE and block education officers.
  3. Labour laws were never conducive for employers or employees

This shows that the governance structures were heavily tilted towards government’s convenience rather than the utilizers of those services. 

Need for a change : A wonderful new biography of Dadabhai Naoroji by Dinyar Patel has three lessons for reforming dysfunctional regimes.

  • First, any change needs evidence: Naoroji’s drain theory used government data to prove India’s exploitation.
  • Second, any change must be balanced: Naoroji was too moderate for the radicals and too radical for the moderates.
  • Finally, any change requires openness because you can’t simultaneously regret and defend the status quo: Naoroji became more radical well into his eighties because he embraced new ideas instead of retreating into the safety of his old convictions.
  • Our labour market status quoists chose vested interests over individual freedom, our education, labour and agriculture reforms are deeply connected, and change is a form of hope.

Structural reforms for realising the goals envisioned in constitution

  • Delivering the equality and justice dream of our Constitution needs individual economic freedom.
  • But vested interests create a minority rule in agriculture that only 6 % of farmer benefit from MSP and 45 per cent of our labour force only produces 15 per cent of our GDP.
  • Minority rule in employment (only 22,500 of 6.3 crore enterprises have a paid-up capital of more than Rs 10 crore and only 10 per cent of our workers have social security).
  • And minority rule in education (only 15 per cent of our kids who start Class 1 finish Class 12 and only 10 per cent of Indians have a college degree).
  • Policy change is difficult because effectiveness needs the right balance of conviction with listening.
  • The great sentinel Tagore’s advice to Gandhiji — “Ekla cholo re” or walk alone — suggested courage on the difficult path of the greatest good for the greatest number.
  • It would be unfair to deny that 10 percent of India’s farmers, workers and educators would be adversely affected by the recent reforms.
  • But it would be insane to allow this organised vocal minority to continue their punishment of 90 per cent of India’s farmers, workers and youth.

Opportunity for India :

  • India has a unique chance to create mass prosperity because structural opportunities (a new world of work, organisations and education), global opportunities (capital glut that overvalues growth, China fatigue, toxic politics in ageing countries) and domestic opportunities (young population, productivity frontier distance, and lower corruption) combine to create a potent policy window.
  • Over the next decade, they will combine to
    • Raise manufacturing employment from 11 per cent to 18 per cent of workers,
    • Reduce farmers from 45 per cent to 15 per cent of workers,
    • Raise women’s labour force participation from 25 per cent to 50 per cent, and raise India’s per capita income from $2,500 to $10,000

Way ahead :

  • Change is a form of hope especially as the COVID-19 pandemic destroys fiscal space. The Indian welfare state doesn’t lack ambition but resources.
  • India’s old economic path allowed vested interests to control our land and labour markets, and blunted individual economic freedom.
  • Our new path involves changing our minds, taking risks that expand individual choice for our workers and farmers.