In an op-ed page article in the Indian Express of today, Bibek Debroy, the economist and Niti Ayog member, shows that even so called Free Market leaning economists of India are anything but.
He laments jobless growth, but doesn’t tell us what kinds of jobs statisticians monitor.
Labour laws have made sure that Indian manufacturing has not picked up at all. State still remains the chief employer in organised sector, employing almost two-third, with private sector employing remaining one-third of total roughly 30 million people employed in organised sector in India.
He mentions that there are about 50 Centre level statutes which have something to do with labour, and in addition to them are some state level rules. But he fails to recognise each of these laws is basically narrowing of Free Market in labour, with all the attendant consequences.
If he ever takes time to survey Indian labour market, incognito, not as a member of Niti Ayog, he would discover that each labour law is actually a source of harassment to the employer, and bribe for the inspector. Add to that the fact that Indian Trade Union movement is mafia controlled. So entrepreneurs try to go for ventures with very low requirement of labour, or ventures which do not lead to workers working at one compound, so that Unions do not get a readymade mob to unleash on the employers, and labour inspectors do not get to poke their noses around.
All labour laws are against the free contract between the two parties- employer and employee- on mutually agreeable terms. State power is basically power of violence (fine, jail term). When violence is introduced in market, the market dies. Labour laws distort the market in favour of one party, using its power of violence. The result is always unwillingness on the part of entrepreneurs to go for labour intensive businesses or factory type establishment.
Constitution does not permit State to use violence against a citizen to favour another citizen. All labour laws are therefore Unconstitutional. They are also anti-labour, as they have killed the job market, leaving large number of workers chasing very few jobs, leaving it an employers’ market, who as a result are able to exploit the labour by dictating terms. More supply of labour versus less demand also means that wages do not rise.
Application of labour laws is relaxed through payment of bribes. Where they are stringently enforced, or even direct violence by the workers is encouraged, like in West Bengal and Kerala, manufacturing has almost fully died.
So we do have growth, both in GDP and in employment, but in sectors which do not need shop floor labour.
Bebek Debroy is Niti Ayog member. If even the present government has such advisors who are not conversant with even the basics of Free Market economy, that only means that not much is going to change for Indian manufacturing. We will see growth only in Service sector, or in sectors which do not need shop floor labour , or large labour concentration at one place.
Make in India will only remain a slogan.
Read the article by Bibek Debroy here.
