About Three Reforms

Context: Education, labour and agriculture reforms are connected. Together, they will usher in individual freedom, benefiting youth, workers, farmers and Micro, Small and Medium Enterprises (MSMEs).

Issues with the three sectors necessitating reforms:

• Anti-stakeholder stance:

• India’s agriculture laws were neither pro- farmer nor pro-consumer but pro-middle-man. 

• Labour laws were neither pro- labour nor pro-employer but pro-labour inspectors: Politicisation of trade has rendered the workers as ATM machines for labour inspectors.
• Education laws were not pro-student or pro-employability: but pro-University Grants Commission (UGC), pro- All India Council for Technical Education (AICTE), and pro-block education officers.

• Maintenance of Status Quo: Labour market status quoists chose vested interests over individual freedom. 

• The minority rule (or Distributional Coalitions): Vested interests created a minority rule, For E.g. 

• In Agriculture: Only 6% of the farmer benefit from Minimum Support Price (MSP).

• In Labour: 

• 45 % of the labour only produces 15% of the Gross Domestic Product (GDP).

• In employment, only 22,500 of the 6.3 crore enterprises have a paid-up capital of more than Rs 10 crores, and only 10% of our workers have social security.

• In Education: Only 15% of students who start Class 1 finish Class 12 and only 10% of Indians have a college degree.

• Limitations of India’s older economic path: India’s economic path often cited John Maynard Keynes’ 1923 comment, “In the long run, we are all dead”.

• Unfortunately, this allowed vested interests to control land and labour markets and blunted individual economic freedom. 

• Bigger challenges:

• Employed Poverty in Agriculture:  is a bigger problem than unemployment, since farmers become self-exploiting rather than self-employed.

• Unemployability among labour: is a bigger problem since labour is handicapped without capital and capital is handicapped without labour.

• Government school teachers have no fear of falling or hope of rising.

• The universities are over-regulated and under-supervised at the same time.

Way Forward:

• Lessons from Dadabhai Naoroji: for reforming dysfunctional regimes

• Any change needs evidence: His drain theory used government data to prove India’s exploitation. 

• Any change must be balanced: He was too moderate for radicals and too radical for the moderates. 

• Any change requires openness because you can not simultaneously regret and defend the status quo: He became more radical in his eighties because he embraced new ideas instead of retreating into the safety of his old convictions. 

• Balanced Reforms: Individually, the New Education Policy (NEP), four labour codes, and three farm bills balance extreme positions.

• It also creates a new chance for India’s land, labour and capital to work together and raise “Total Factor Productivity”.

• Utilising the opportunities available: India has a unique chance to create mass prosperity because of :

• Structural opportunities (a new world of work, organisations and education), 

• Global opportunities (capital glut that overvalues growth, China fatigue, toxic politics in ageing countries)

• Domestic opportunities (young population, productivity frontier distance, and lower corruption) combine to create a potent policy window.

• A New National Goal: it should be that our grandchildren living in the world’s largest economy, by achieving $15,000 per capita income.

• Expanding the reforms to other sectors: like  civil service, banking, compliance, decentralisation, and urban reform, as they have the potential to:

• Raise manufacturing employment from 11% to 18% of workers.
• Reduce farmers from 45% to 15% of workers.
• Raise women’s labour force participation from 25% to 50%.
• Raise India’s per capita income from $2,500 to $10,000.

• Maintain harmony between convictions and listening:

• If we don’t listen, seek out hearing aids and surround ourselves with cognitive diversity, we make avoidable mistakes. 
• But if we don’t have convictions, we become a perfectly oiled weather vane who doesn’t get anything done. (leading to status quo)

Conclusion: While making reforms our choices must reflect our hopes rather than our fears.