The Ahluwalia report and the quixotic expletives

By S. Swaminathan

Whoever had any doubts about internal cohesion on economic thinking surviving at all within the National Democratic Alliance (NDA) must now cast away all illusions. Last week, there was, amidst all the frenzied consultations on economic revival of the Vajpayee Government with diverse cross-sections of the business community and economic experts, a ``parallel theatre'' at work too. This was the Swadeshi Jagran Manch show where the NDA convener and the former Defence Minister, Mr. George Fernandes, is reported to have fulminated against the report of the Taskforce on Employment Opportunities, submitted to the Planning Commission on July 2. This was, by no means, an uncharacteristic fusillade fired by Mr. Fernandes at whoever provokes his outdated ideological proclivities. In his earlier incarnation as Minister in the Janata Government under Morarji Desai, Mr. Fernandes, of course, secured global recognition as an iconoclast thundering against multinational corporations a la IBM and Coca Cola. He has, of course, traversed far through the wilderness of ideological space over the years and now finds himself in the position of an enfant terrible in the NDA and more so, for the Tehelka rip-off. As a former Minister in the NDA Government and as its convener, it would indeed be unbelievable if Mr. Fernandes were to assert that the main thrust of the report of the Planning Commission's Taskforce on Employment Opportunities headed by the well-known professional economist, Mr. Montek Singh Ahluwalia (until recently a member of the Planning Commission), ran counter to the reform agenda of the Vajpayee Government or even that the recommendations regarding labour policy reforms are inconsistent with the Government's own declared intentions. It is indeed vulgarising the much-needed national debate on employment strategy for the future to impute motives for the chairman of the Taskforce or to scream that the report is the voice of the World Bank, as if all thinking on India's development strategy can only originate in Washington.

The taskforce and the prognosis

The fundamental trend about employment in the economy, confirmed by the taskforce, is that during 1993-94 to 1999-00, unemployment has increased even as there has been some deceleration in the growth of the labourforce. The data presented by the Ahluwalia panel show that the annual average growth rate in employment during 1994-00 slipped to 0.98 per cent overall as compared with 2.04 per cent for 1983-1994. In agriculture, there had been a decline in employment from 242.46 millions in 1993-94 to 237.56 millions in 1999-00. Slippages had also occurred in mining and quarrying, electricity, gas and water supply, community, social and personal services. In absolute numbers, there had been an increase in employment in manufacturing, construction, trade, transport, storage and communication. Much of the increase in employment during 1983-94, according to the panel, occurred outside the organised sector. The question is brought up whether employment policy should seek additions to job opportunities ``of low quality'' (low income, unsecure, casualised and even self- employment of a fragile nature). Given the poverty ratio of around 30 per cent, can there be a significant difference between ``jobless growth'' and ``growth with only jobs of low quality''?

The Ahluwalia panel is not making an explosive revelation when it says that if employment growth is to be accelerated, it can only be done in the ``private organised sector'' given the reality that the downsizing of the Leviathan called ``government'' has become an urgent fiscal imperative. Nor can employment growth take place in the private sector unless an enabling policy environment is created, particularly with regard to labour laws which are perceived to be inhibitive of new investments.

The case for labour reforms

Are there only two models of legal framework for governing labour relations in industry - one which is the inherited Indian model of paternalism which puts the State in the position of the benevolent guardian of the workers regardless of productivity and global competitive efficiency and the other, ``the hire and fire'' model where the employer is practically insulated from all accountability for his engagement of labour? The Ahluwalia panel is certainly right in making a plea for a comprehensive review of the ``jungle'' of labour laws in India - 47 labour statutes - which have made for inflexibility in the contract of employment and comparatively high cost of labour (owing to low productivity standards). That the subject is now under examination by the Second Labour Commission needs to be underscored.

Nevertheless, the Ahluwalia panel has made the point that amendments to the Industrial Disputes Act, 1947, the Trade Unions Act, 1926 and the Contract Labour (Abolition and Regulation) Act, 1970, cannot brook further delay since new investments, particularly foreign direct investments in export industries and labour-intensive manufacturers, would critically depend on how we move towards flexible labour laws which are in vogue in other countries, especially China.

It is no doubt a difficult political terrain, this process of moving away from a pattern of labour laws which have fettered restructuring of Indian industry in the face of severe competition emerging from import liberalisation and of astounding advances in technology. Political parties and not only trade unions, are bound to oppose the concept of dilution of existing pro-worker provisions in labour laws, regardless of how deleterious such provisions are in terms of generating new employment opportunities in manufacturing and in the services sector. But to censure the Ahluwalia panel for tabling an agenda for reforms for generating new employment opportunities merely because it has strongly argued for labour law reforms, is to lose sight of the imperatives of strengthening the economy both as a huge domestic market and as a vigorous entity in global trade.

The agenda set out by the taskforce can be rejected out of hand only if the entire process of liberalisation is to be mindlessly debunked. The issues posed by the Ahluwalia panel need to be debated if the country is to steer itself intelligently away from jobless growth which will be socially disruptive and equally from employment diffusion without rapid growth which will be economically debilitating.

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