Context: Covid reminds us that national strength needs massive, non-farm, formal job creation.

Issues with Indian Economy

• Low wealth and power: Our 148^th country ranking in hospital beds per capita closely tracks our 142^nd country ranking in per capita GDP.
• Historical misconception of economic development:
  • 1955 Congress party resolution assumed that development was a “kind learning environment” where rules are fixed, patterns recur, goals are finite, and feedback is immediate and accurate.
  • On the other hand, economic development is what psychologist Robin Hogarth called a “wicked learning environment”; the rules are not fixed, patterns change, the goals are multiple, and feedback is often delayed or inaccurate.
• Impactful but incomplete reforms: Change began in 1991 when China and India had the same GDP per capita; the average Chinese is now five times more prosperous.
• Low productivity in various sectors:
  • Regions (Karnataka and UP have the same GDP though Karnataka has a fourth of the population).
  • Sectors (IT employs only 0.8% of the labour force but generates 8% of GDP while agriculture employs 42% of the labour force but only generates 15% of GDP).
  • Firms (our largest and smallest manufacturing firms have a 24 times productivity difference).
  • Individuals (sales is the fastest growth entry-level job with salaries varying four times based on skills.
• Highest payroll confiscation: Our laws mandate the world’s highest mandatory payroll confiscation, 42% for low-wage employees (this deduction is only 9% for employees with salaries higher than Rs 25,000 per month).
• Regulatory cholesterol: The employer regulatory compliance universe across the state and central governments is 60,000+ compliances, 6000+ filings, and 6000+ annual changes.
• Vulnerability to skills: Covid has hurt education but accelerated online learning, non-exam assessments and made skills more valuable.
• Issues with civil service: Civil service structures currently treat good and bad performers equally, promote too many to top ranks, front load training, sabotage urgency with too many ministries, and undervalue specialisation.

Way Forward: Here are five flick-of-pen reforms with immediate impact and no fiscal requirements:

• Raise take-home Salaries: We should modify Clause 6 of the EPF Act and Clause 39 of the ESIS Act to make employee contribution voluntary.
  • Salary is individual property, payroll deductions cannot exceed savings, and PF loans solve a problem that should not exist.
• Attack Regulatory Cholesterol: Change has begun; Punjab recently abolished 479 compliances, and central ministries are culling.
  • But this needs acceleration with a compliance commission mandated with targets for rationalisation, decriminalisation, and digitisation.
• Massifying Employability:
  • The proposed 15-year glide path, under The National Education Policy, 2020, should be reduced to three years.
  • Immediately license every university for online learning (currently, only 32 of our 1,000 universities are).
  • Enable degree Apprentices (UGC Act 2F and Apprentices Act Rule 2) and legitimising Skill Universities (UGC Act Chapter 8 and Section 22).
• Accelerate Civil Service Reform: Set a deadline for differentiation (can’t rank 98% outstanding), delayering (retirement if not shortlisted for promotion beyond thresholds), and decluttering (cutting central ministries to 25).
• Execute Privatisation: This will control government debt by taking advantage of strong investor and FDI attraction to India arising from unrealised growth potential, China fatigue, and a global capital glut.

Conclusion:

• While we have remarkably built the world’s largest democracy on the infertile soil of the world’s most hierarchical society, but we have not yet revised our socialist economic history that has sabotaged formal, private, non-farm job creation.
• To paraphrase Swami Vivekananda, the pain and helplessness of Covid is hopefully a fire that stirs up a fresh vigour in billions of veins; we are responsible for what we are, and we have the power to make ourselves whatever we wish ourselves to be.
• Wealth and power define the capability of a state – As poet Ramdhari Singh Dinkar wrote, “Kshma shobhti us bhujang ko jis ke paas garal ho” (Snakes without venom cannot be kind, generous or benevolent).