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  1. Union Budget 2018: Time for big changes and long-term reforms to reduce regulatory cholesterol in land, labour and capital market

Union Budget 2018: Time for big changes and long-term reforms to reduce regulatory cholesterol in land, labour and capital market

Budget 2018: India’s official unemployment at 5% is not an illusion; everybody who wants a job has a job, they just don’t have the wages they want. However, the time is here for big changes in Union Budget 2018; no more a 10-year plan can be 10 one year plans.

By: | Published: January 25, 2018 11:54 AM
Budget 2018: In Union Budget 2018 would wish to see Mr. Finance Minister praying to one god, jobs. And jobs that are formal. Budget 2018: Three very specific labour market interventions in Union Budget 2018 could be reducing the gap between Chittiwali tankha and haathwali tankha. (PTI)

Budget 2018: Earlier today in an electronic debate on India’s job scenario, when I concluded that India does not have a job problem but it has a wage problem I met with my share of expected resistance and defiance. India’s official unemployment at 5% is not an illusion; everybody who wants a job has a job, they just don’t have the wages they want. It should be easy to solve the job problem, we can do more of NREGA, we can throw money from choppers, bust the fiscal deficit. But if the issue is wages we need to focus on formalization, urbanization, industrialization, financialization, and human capital in Budget 2018. Government’s mandate around GST, Bankruptcy, Demonetization, Shell companies ,RERA etc makes it easy for us to appreciate the connections. Each of these has unsettled the status quo that the country had long made peace. Most prior governments have chosen to make this issue above their pay grade allowing India to be stuck in a low-level equilibrium and hence these initiatives have unsettled the status quo and caused short-term pain. However, the time is here for big changes in Budget 2018; no more a 10-year plan can be 10 one year plans.

Also read: This is how government can increase employment & employability

Three Specific Labour Interventions to Reduce Pay Roll Wedge

The government has been an exemplary example of a bold state and hence, should stay the course during Budget 2018; we need to raise the costs of informality and reduce the costs of formality. Three very specific labour market interventions in Budget 2018 could be reducing the gap between Chittiwali tankha and haathwali tankha. The Budget 2018 could reduce the shameful payroll wedge of 40% by giving three employee choices; make employee provident fund voluntary, allow employee choice to pay employer provident fund to NPS or EPFO, and allow employee choice to pay their health insurance to ESI or an insurance company. We also need to reduce regulatory cholesterol by moving all labour laws to PPC (Paperless, Presenceless and Cashless).

Also watch: Budget 2018: Modi Government Can Smartly Lift Economic Growth – Here’s How

This enables ease of doing business besides triggering data transparency and providing government access to real-time information about the labour ecosystem with the country. We could also finally move on the Universal Enterprise Number – a sort of Aadhaar for enterprises – by which a single number would replace the 25+ number every enterprise should have. Long-term reforms to reduce regulatory cholesterol in land, labour and capital markets are the only sustainable solution for formal job creation.

Invest in Innovative Infrastructure of Opportunities

Also read: PSU banks, FMCG, infra stocks may offer good returns, says Shiv Kukreja of Ojas Capital

Automation and artificial intelligence are a reality but they have different implications for countries at the productivity frontier like the United States (with a per capita income of $45,000) and India (with a per capita income of about $1500 and where 50% of our labour force produces about 13% of GDP). At best we are worrying about something whose impact we are still not aware of or sure of. While we should be mindful and agile about future possibilities at this point we should invest in creating an innovative infrastructure of opportunities in Budget 2018 through Employment, Employability, and Education making our youth resilient to prepare themselves for the future. In Budget 2018 would wish to see Mr. Finance Minister praying to one god, jobs. And jobs that are formal.

Rituparna Chakraborty is Co-Founder & Executive Vice President, TeamLease Services Ltd.

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