Budget Must Focus on Creating Employment

Politics demands that jobs be created through growth, enabled by good policy and governance. Economics dictates that growth can only come on the back of investment and employment generation. There is no contradiction between the needs of politics and the needs of the economy. What is missing is the connectivity between growth and equity. I believe this can be achieved if the government focussed all its policies on one primary objective: employment generation. A sixth of India’s population resides in rural areas dependent on agriculture. It is imperative that the policies of the government of India are aimed at shifting at least a section of these people from farms to factories.

This demands focussed investment promotion, so that the economy creates jobs. India needs and badly needs better road connectivity, more power, an efficient supply chain system to connect the farms to the markets. The economy must find the resources to invest. The Budget of 2012 affords India the opportunity to refocus its energies and resources towards creating assets, income and growth. The economy cannot live beyond its means forever. The Budget 2012 must institute fiscal consolidation, cut unproductive government expenditure and subsidies. Those who can pay must pay market prices for fuel, fertilisers and food.

Fiscal tightening is not about denying the poor but about empowering them by creating employment and income opportunities instead of making them dependent on dole. Consolidation will achieve two results: it will free resources for investment in infrastructure and will bring down the cost of money for entrepreneurs and consumers. One only has to compare India with China to understand the gravity. The cost of money in China is barely 4 per cent while in India business pays 14 per cent as interest on borrowings. That is a straight 10 per cent advantage for Chinese business. To survive, business must be competitive.

The combination of lack of power, infrastructure, high capital costs and inflexible labour policies are making India uncompetitive globally. India currently has a current account deficit of over 3 per cent of GDP exposing the country once again to vulnerability on the balance of payments front. India needs to earn more in dollars, find consumers for its produce. This means we need to export more and unless manufacturing is made competitive by enabling policy exports won’t pick up.

Every year, around 15 million young people join the job market but we don’t create the jobs, and industry cannot create jobs unless policy is restructured. There is an immediate need first at the centre to debottleneck policy stuck at different levels. Policy on land acquisition, labour reforms, environmental clearances are all trapped in political debates that need resolution. We need to relook at labour laws to create employment. Why not allow 30 per cent contract labour with the proviso that companies institute training programmes to make labour employable?

Two decades back, India dismantled the licence permit raj but the raj continues at the state level. A wide gamut of clearances and permits reporting to different authorities and regulators delay investment and deny jobs to the poor. Every business is subject to inspections under 12 different acts on any given day of any month. Compare this with Thailand where only three inspections are allowed and only on specified days. Why can’t certification be handled by certified engineers just as accounts are audited by chartered accountants? We must re-look at the gamut of permits and clearances used by state government to hold business to ransom.

India needs to revive the idea of reforms that lost its way after 1991. We need to find it, revive it and refocus it to suit the imperative of growth and equity. If India fails to harvest the demographic dividend, it will not just lose the opportunity for growth. It will also expose the country to political unrest. Growth is both a political and an economic imperative for India.