Budget 2018: Employment generation must figure high on Narendra Modi govt's agenda
When both endogenous and exogenous factors conspire to prevent industrial and employment revival, the only course left for the Modi government to announce a big bang reform that can take off without much resistance if the BJP ruled states show the way
Rahul Gandhi’s pet statistic---30,000 Indian youth emerge everyday seeking employment --- may sound out of the hat but the unemployment scenario is indeed grim. It is hovering between 5 percent and 6.5 percent on an all-India basis which is quite alarming in a country where 65 percent of population is below the age of 35.
It is not enough to provide doles through MNREGA the UPA government’s flagship social security program that swore by the Keynesian aphorism dig trenches only to fill them up so that people get employment. MNREGA is at best a stop gap arrangement and not a permanent solution for generating employment. It treats labour with pitiful eyes whereas it should be treated with respect conferring on it retirement benefits and other facilities that come with decent employment.
Nor is the Modi government’s pride in Mudra Yojana under which it gives microfinance credit for self employment the complete answer. Under Pradhan Mantri Mudra Yojana (PMMY), loan worth Rs 3.92 lakh crore was sanctioned to 9.52 crore beneficiaries up to 15 September 2017. This scheme was launched by Prime Minister Narendra Modi on 8th April 2015. PMMY - ‘funding the unfunded’ is a scheme which empowers entrepreneurs through financial assistance. Prime Minister Modi is right when he says neither the government nor the private sector can be expected to provide employment to everybody. Self employment does in the long run leads to employment for others as well but it is a long haul with a very high attrition rate.
There are reports that the Modi government is writing a new social security code that would encompass employees from the unorganised sector as well. Fine, but this begs the question---where is employment first?
When both endogenous and exogenous factors conspire to prevent industrial and employment revival, the only course left for the Modi government to announce a big bang reform that can take off without much resistance if the BJP ruled states show the way. The Modi government should put in place quickly a model corporate farming law that can be adopted by states given the fact that agriculture is a state subject.
Let corporate farming be permitted, the one rooted in leasing of land as its major plank. This would avoid controversies over usurpation of poor farmers’ land and poor compensation. Let corporates enter into a long term contract for leasing of farmers’ land for a fair rent as well as a fair share of profits with land being their capital. In other words, farmers would have three sources of income from the land they have leased to the corporates:
1. Wages on fair terms including retirement benefits;
2. Rent for the land leased to corporates; and
3. Dividend for their investment.
The model law must balance the requirements of corporates who are obviously not in business for charity with those of the farmers. The model must be win-win. It should also compel corporates to set up food processing industries alongside agricultural lands so that those who cannot be employed on land can be given employment in the food processing industries. More important farm wastage would be minimised. Walmart like stores would be the upshot in the urban areas but belonging not necessarily to Walmart.
The suggestion might take well over a year to take off but the Modi government has no time to lose with 2019 general elections not far away. The BJP ruled states can quickly swing into action. Quick results shown by them can be the envy of opposition ruled states. It would show government’s seriousness in fulfilling its promise of doubling rural income by 2022.
And on non-farm related employment front, budget 2018 can tweak the existing income tax incentive of 130 percent deduction for additional wages paid through engaging additional hands by a refreshing new formula---for every 5 percent increase in employment provided, 0.5 percent reduction in corporate tax rate including in MAT. This would galvanise the corporate sector like nothing else.
For full coverage of Union Budget 2018 click here.
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