- While there are many refreshing improvements in NITI Aayog’s ‘Strategy for New India @ 75’ from the erstwhile Planning Commission’s plans, there are also concerns about some of the strategies recommended.
A mass movement for development:
- NITI Aayog recently released its ‘Strategy for New India @ 75’
- The strategy affirms that “policymaking will have to be rooted in ground realities” rather than economic abstractions
- The intent to change the approach to planning from preparations of plans and budgets to the creation of a mass movement for development in which “every Indian recognises her role and experiences the tangible benefits” is laudable
- The strategy emphasises the need to improve the implementation of policies and service delivery on the ground, which is what matters to citizens
- Its resurrection of the 15 reports of the Second Administrative Reforms Commission and recommendation that they must be implemented vigorously are welcome.
Employment led growth:
- Employment and labour reforms, the second chapter in the strategy, have rightly been given the highest priority, which was not the case in the previous plans
- Overall growth is also emphasised by NITI Aayog: “Besides having rapid growth, which reaches 9-10 per cent by 2022-23, it is also necessary to ensure that growth is inclusive, sustained, clean and formalised
- The employment-generating capacity of the economy is what matters more to citizens than the overall GDP growth rate
- There is no joy for citizens if India is the fastest-growing economy and yet does not provide jobs and incomes
- The growth of industry and manufacturing is essential to create more employment, and to provide bigger opportunities to Indians who have been too dependent on agriculture so far
- Here, too, it is not the size of the manufacturing sector that matters but its shape. Labour-intensive industries are required for job creation
- If the manufacturing sector is to grow from 16% to 25% of the GDP, which the strategy states as the goal, with more capital-intensive industries, it will not solve the employment problem
- The strategy does say that labour-intensive industries must be promoted, but the overall goal remains the size of the sector
- The goal must be clearly set in terms of employment, and policies and measurements of progress set accordingly
- Indian statistical systems must be improved quickly to measure employment in various forms, formal as well as informal.
- The strategy highlights the urgency of increasing the tax base to provide more resources for human development
- It also says financial investments must be increased to strengthen India’s production base
- Managing this trade-off will not be easy
- If tax incentives must be given, they should favour employment creation, not more capital investment
Boosting mid-level industries:
- A big weakness in the Indian economy’s industrial infrastructure is that middle-level institutions are missing
- Rather than formalising small enterprises excessively, clusters and associations of small enterprises should be formalised
- Small enterprises cannot bear the burden of excessive formalisation — which the state and the banking system need to make the informal sector ‘legible’ to them
- Professionally managed formal clusters will connect the informal side of the economy with its formal side, i.e. government and large enterprises’ supply chains
- NITI Aayog’s plan for industrial growth has very rightly highlighted the need for strong clusters of small enterprises as a principal strategy for the growth of a more competitive industrial sector.
Reorienting labour laws:
The strategy on labour laws appears pedestrian compared with the ambitious strategy of uplifting the lives of millions of Indians so that they share the fruits of economic growth.
- It recommends complete codification of central labour laws into four codes by 2019
- While this will enable easier navigation for investors and employers through the Indian regulatory maze, what is required is a fundamental reorientation of the laws and regulations — they must fit emerging social and economic realities
- First, the nature of work and employment is changing, even in more developed economies
- It is moving towards more informal employment, through contract work and self-employment, even in formal enterprises
- In such a scenario, social security systems must provide for all citizens, not only those in formal employment
- Indeed, if employers want more flexibility to improve the competitiveness of their enterprises, the state will have to provide citizens the fairness they expect from the economy
- The NITI Aayog strategy suggests some contours of a universal social security system. These must be sharpened
- Second, in a world where workers are atomised as individuals, they must have associations to aggregate themselves to have more weight in the economic debate with owners of capital
- Rather than weakening unions to give employers more flexibility, laws must strengthen unions to ensure more fairness
- Indeed, many international studies point out that one of the principal causes of the vulgar inequalities that have emerged around the world is the weakening of unions
- The NITI Aayog strategy mentions the need for social security for domestic workers too
- This will not be enforceable unless domestic workers, scattered across millions of homes, have the means to collectively assert their rights
- Third, all employers in India should realise that workers must be their source of competitive advantage
- India has an abundance of labour as a resource, whereas capital is relatively scarce
- Human beings can learn new skills and be productive if employers invest in them
- Employers must treat their workers — whether on their rolls or on contract — as assets and sources of competitive advantage, not as costs
- The shape of the development process matters more to people than the size of the GDP
- Development must be by the people (more participative), of the people (health, education, skills), and for the people (growth of their incomes, well-being, and happiness)
- How well India is doing at 75 must be measured by the qualities of development, as experienced by its citizens, along these three dimensions.