After much political wrangling, the government has finally been able to pass the GST Bill after almost a decade of when it was first talked about. Touted as a major reform towards Ease of Doing Business, the GST might still not be enough. Although India is being talked about as the fastest growing major economy, it’s the jobs growth that still lacks. With more than a million people joining the workforce each year, the government can ill afford to ignore this major demographic drain.
The keys to reform are held in the regressive Land Acquisition Act and the leftist labour laws. The Modi government tried to overturn these laws early in its tenure but got bogged down by an opposition blitzkrieg focused on painting the government as a ‘suit boot ki sarkar’ which translates into a pro-business or pro-capitalist government. Such a government is of course the need of the hour after decades of a left to centre policy leading to the infamous Hindu rate of growth. “A government survey found that job creation fell by more than two-thirds in 2015. Analysts at HDFC Bank estimate that for every percentage point the economy grows, employment now adds just 0.15 of a percentage point – down from 0.39 in 2000.”
The fact is that the farming economy’s good days have gone by and to usher in an era of development India needs to focus on manufacturing. The government has effectively given up amending any acts that seem even slightly anti-farmer (which follows ‘once burnt twice shy’) which is effectively stalling reforms. Any move to dilute stake in government organisations to improve their effectiveness is opposed by leftist elements prompting a strike by unions. There are several industries where the government need not be in business but the cushy job security of a government job makes the unions jumpy at even the slightest mention of privatization.
Once jobs dry up and efficiency runs into the ground, only then will the government realize that inability to deliver on growth will lead to its own doom. The Central government has passed on the buck to the state governments for making land acquisition easier and labour more flexible. While this has promoted competitive federalism, it still is not nearly enough to a centrally mandate reform.