Column : The age of ironies

Written by Arindam K Bhattacharya | Updated: Sep 20 2012, 06:43am hrs
India has one of the highest unemployment rates but labour policies seem to promote jobless growth

The other day there was a news story about a minister in the central government enumerating the decisions taken recently by the government. He seemed to imply that instead of poor governance, more of the fault lay with the industry that was not doing enough in response, except complaining. But talk to any industry leader, they present a picture of despondency as they enumerate the governance issues impacting their businesses in even very basic areas like land, power and labour, let alone the higher level issues of inflation, interest rates, etc. To an external observer, this may seem ironical if not somewhat comical that, instead of focusing on the task at hand and addressing these fundamental issues, we have started the blame game once again. But the observer should not be so surprised, as our economy is riddled with ironies, big and small.

We have among the highest levels of unemployment, particularly if we include under-employment in agriculture but our labour policies are seen by many as promoting jobless growth. Ask any industry leader and they will unanimously say that, if given a choice, they will invest in automation and reduce the labour intensity of their operations despite the low wage rates in India, which in theory should underpin their competitive advantage in a global market. They want to avoid the enormous hassle of managing the increasingly militant unions and have greater control on their ability to expand or downsize operations to align with market fluctuations, a difficult task under the current labour laws.

We have newspaper articles that headline the huge requirements of trained teachers, health workers, and agriculture extension workers. Their total demand of workers runs in tens of lakh. It is not just these public sectors crying for skilled workers. Private sectors like the construction industry employing millions have been hit by a shortage of workers. At the same time, we continue to have millions of unemployed educated youth and need to create over 200 million jobs for them in the next 10 years. But instead of implementing policies for creating an efficient skilled labour market and filling up these jobs, we seem to be creating a generation of young people who are getting used to government hand-outs of all kinds, and directly or indirectly creating a perverse sense of entitlements, and distorting the efficiency of our labour markets. As one industry leader put it, why should a worker strive for perfection on the shop floor for 8-10 hours a day, often far from his family, when he can get free power, subsidised food, and income under MGNREGA sitting in his village

It is not only the government that is to be blamed. The corporate sector has also contributed to this malaise facing us. Any discussion with them on the state of their business invariably turns to severe shortage of skilled workers. However, recent efforts to scale up vocational skill programmes to meet this demand are not succeeding as the vocational skills industry finds it difficult to get potential employers to pay a premium for the newly skilled workers. This makes their business models unviable and difficult to scale. I asked the CEO of a large real estate company facing a shortage of skilled workers why he does not pay a higher wage to attract and retain them His surprising answer was that if he hired better trained workers and paid for their training, his competitors will poach them and his investment in skilling them would be wasted!

These ironies are not limited to blue collar or lower skilled workers. A recent newspaper article reported a recent study which shows that the growth of Indian students seeking college education outside India is growing exponentially, and they are spending billions of dollars every year. For example, we have a requirement of lakhs of doctors but instead of policies that facilitate setting up of quality medical institutes, we have a situation where the capitation fee keeps on going up and has to be regulated by the Supreme Court. And this situation is repeated in whichever sector you turn to. But instead of making it easier to invest and build new high quality education institutions, we make it enormously difficult to do so. The colleges in countries like the UK, Australia and the US, where most of the Indian students go, must be laughing their way to their banks at this lop-sided policy which encourages these students to go to these institutes and pay in dollars but will not allow them to set up a base in India and charge in rupees. Probe the reasons why, and all kind of reasons are put forth, including one that the current owners of private educational institutions, many of whom have political clout, do not want more competition.

The final, and perhaps the crowning irony, is the kind society we are trying to build in our country and bequeath to our children and grandchildren. We claim with pride, and rightly so, our ancient heritage and the wisdom of our forefathers and ancient seers. But age also brings the potential downside stagnation and loss of energy. It happens to individuals and also to societies. Europe is a classical example in modern times. This may seem highly controversial to some but the recent imbroglio in Parliament on reservation of promotions proposed for the SCs/STs and opposed by the OBC MPs who have taken up cudgels on the behalf of their community is, to my mind, the fundamental flaw in our governance model, where short-term vested interests are allowed to triumph over the long-term development of our economy and society. It is not my contention that a historical wrong on how we behave with sections of our society should not be righted. But it will be really ironical if the means being adopted end up perpetuating this wrong by re-emphasising the identities of the very sections of our society we should assimilate.

Perhaps it is the karma of our nation to live and prosper only with these ironies!

The author is managing director, the Boston Consulting Group India. Views are personal