Under the political stewardship of the father of India's economic reforms, it is surprising that this government has violated some of the very basic good economic governance principals. Or is it that this government became so delusional about the amount of wealth or the consistency of maintaining the growth of the heady days of 2006 and 2007 that it took gamble with its finance, which are now coming back to haunt it. Or is it that the people who pushed for some of these economic programs (Sonia Gandhi and Coterie) came from non economic backgrounds and with no leadership vision to see what is right for the nation over next many decades vs. the here and now. Have we again squandered our chance of providing decent living to our people that is not based on grants, but rather on providing people the opportunities to earn it themselves?
Government came up with a bill NREGA - National Rural Employment Guarantee Act - 2005, that guarantees 100 days employment to any adult in the Rural area. However, it is missing one crucial component, guarantee of commensurate output from the States/ Municipalities that execute this program. For all practical purposes, central government just provides wages to people, if they show up for work, even if there is no work.
On one side, people get paid for doing mostly nothing productive, on the other side, the productive part of economy is being starved of labour. People from the farmlands of Punjab and Haryana can testify this. No labourers for the sowing and harvesting seasons.Whosoever is available asks for wages that are many times over what was normal. Labour intensive construction industry is hit equally bad.
It is a double whammy, while the govt is spending tax payer's money on unproductive work, that too something that is locked down for years to come, it is creating supply side constraint for productive part of economy that depends on flow of labour. In a labour surplus country the government policies are creating labour shortage. We are squandering our only competitive advantage in the world, large pool of cheap labour. It is not surprising that we see high inflation in these areas.
Another bad economic decision - Petro products price regulation - When UPA came to power in 2004, under Manmohan Singh, it brought the petro product priving under government control. Contrary to what one would have expected from an economist of Manmohan Singh's stature, he turned the economic logic on its head and killed the open market that was created by the previous NDA regime for the petro products. Many private companies lost their investment and many foreign companies that wanted to enter India, in petro retailing, just pulled their investments out. Now, for last few years, the government is trying to undo its doings by deregulating the petro prices. Once step forward, one step back and a decade lost.
There are so many such instances of economic blindness that it is not funny.
Government came up with a bill NREGA - National Rural Employment Guarantee Act - 2005, that guarantees 100 days employment to any adult in the Rural area. However, it is missing one crucial component, guarantee of commensurate output from the States/ Municipalities that execute this program. For all practical purposes, central government just provides wages to people, if they show up for work, even if there is no work.
On one side, people get paid for doing mostly nothing productive, on the other side, the productive part of economy is being starved of labour. People from the farmlands of Punjab and Haryana can testify this. No labourers for the sowing and harvesting seasons.Whosoever is available asks for wages that are many times over what was normal. Labour intensive construction industry is hit equally bad.
It is a double whammy, while the govt is spending tax payer's money on unproductive work, that too something that is locked down for years to come, it is creating supply side constraint for productive part of economy that depends on flow of labour. In a labour surplus country the government policies are creating labour shortage. We are squandering our only competitive advantage in the world, large pool of cheap labour. It is not surprising that we see high inflation in these areas.
Another bad economic decision - Petro products price regulation - When UPA came to power in 2004, under Manmohan Singh, it brought the petro product priving under government control. Contrary to what one would have expected from an economist of Manmohan Singh's stature, he turned the economic logic on its head and killed the open market that was created by the previous NDA regime for the petro products. Many private companies lost their investment and many foreign companies that wanted to enter India, in petro retailing, just pulled their investments out. Now, for last few years, the government is trying to undo its doings by deregulating the petro prices. Once step forward, one step back and a decade lost.
There are so many such instances of economic blindness that it is not funny.
I totally agree with every bit of your blog. However I do see a silver lining in "agricultural labor shortage". This is perhaps Punjab and Haryana farmers' opportunity to "think of the box" (and I sure they will). They will move on to using better richer functionality machinery like Tractors, Combines and other agricultural paraphernalia. This way they will get rid of the need for labor once and for all.
ReplyDeleteSo no more waiting on railway platforms of Amritsar, Bhatinda and Jalandhar in harvesting season for few Bihari workers to trickle out of Amritsar-Saharsa Garib Rath Express and showing them a list of gadgets & household appliances, that will be provided to them in makeshift accommodation, to lure them to your farm.
Jyoti, I wish these events push adoption of automation on farms, but my fear is, with ever reducing land holdings, automation wont help.
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