CEZs sound great for employment growth, but what job creation really needs is easing of labour laws across the country
The Modi government’s plan to tie tax holidays, capital subsidies and other incentives to companies looking to set up manufacturing bases in the 14 coastal employment zones (CEZs) to the number of jobs they directly create should give employment in the country a boost. These employment-, manufacturing- and exports-focused CEZs are envisaged to house projects across 35 different industries, including power, steel, electronics and apparel. The vision that comes under the over-arching Sagarmala (port-led development) programme should seem a key step in generating employment. Proposals for 37 clusters, as reported on the Sagarmala Programme’s official website, have been accepted, resulting in potential investment of upwards of Rs 4 lakh crore. The CEZs, the government believes, will provide jobs to over one crore youth within the next three years, as companies queue up to net the sops the government is offering.
However, these are a way to sidestep the more urgent but politically contentious reforms like the easing of labour laws. For a start, despite recent rationalisation efforts, there are still far too many labour laws. Labour being a state subject, the onus for reforms is largely on the states. But, the BJP-led Centre hasn’t been able to coax meaningful reforms out of them, even though 19 states are ruled by the BJP and allies at the moment. Clustering and rationalising India’s 44 Central labour laws into distinct vertical labour codes (something that is still currently in the process) is the need of the hour. Hiring and firing also must be made much easier than it is at present. For instance, enterprises employing 100 or more people need the government’s approval to shut down. Even though Rajasthan has changed its law to push up the threshold to 300 workers, an amendment to the central law that allows a similar threshold is yet to be passed by Parliament. As per the International Labour Organisation’s India Wage Report, minimum wages are state government-determined for employees in selected ‘scheduled’ employment opportunities and this has led to 1,709 different rates across the country—this distorts the labour market, leading to a loss of any labour advantage Indian industries and their exports can hope for. So, CEZ sops may sound like the right policy, but the costs could prove a deterrent for small players; also, by the time they are up and running, India’s labour advantage would have been long lost to a Vietnam or a Bangladesh.