Palliatives are no solutions

Early in his tenure as Prime Minister, Narendra Modi had called the Mahatma Gandhi National Rural Employment Guarantee scheme as a living monument of the failure of the country's effort to tackle poverty. The heavy sarcasm was, of course, directed at the Congress. By the end of his tenure, the Modi government had progressively increased the allocations for MGNREGA and to top it also announced the Pradhan Mantri Kisan Samman Nidhi Yojana to transfer Rs.6,000 per year unilaterally into the accounts of farmers.

This is perhaps, the most eloquent evidence of an admittance of the failure of the Modi government to raise the well-being of rural folk. If MGNREGA was a monument of failure, what is the PM-KSNY on top of a bloated MGNREGA if not band-aid over a festering wound?

NYAY by the Congress raises the bar of support to Rs 6,000 per month. And there is a growing argument that the MGNREGA should be extended to urban regions.

One suggestion is that employment may be guaranteed and that it may be guaranteed at living wages, not just minimum wages. This is possibly a better means of achieving the minimum income guarantee that what NYAY seems to suggest.

A mere transfer, that NYAY seems to suggest, would be a bad idea. If the source of household incomes would be largely benevolent transfers from government, who will be willing to work? Wouldn't it get a lot more difficult to raise the labour force participation rate if households have fewer reasons to look for jobs? India's labour force participation rate is among the lowest in the world.

Political parties are competing to provide direct transfers to households because they have failed to address the problem of lack of quality jobs. But, competitive unilateral transfers to households is a race to the bottom.

A far more promising and sustainable way of providing quality jobs that may be expected to pay living wages is to spur investments by the private corporate sector.

The Indian private corporate sector has stopped, for all practical purposes, creating new fixed assets. Growth in net fixed assets was at its lowest in 2017-18 and there is no reason to believe that the situation could have improved during 2018-19.

Net fixed assets of the private corporate sector grew by 6.5 per cent in 2017-18 and before that, at 7.2 per cent in 2016-17. These are the two lowest annual growth rates of net fixed assets in the private sector in the past 14 years. Growth in plant and machinery assets was even lower at 7.1 per cent and 5.7 per cent in 2016-17 and 2017-18, respectively.

Let's place these statistics in some perspective. During the first four years of the Modi government, the average annual growth of plant and machinery of the private sector was 9.2 per cent. In UPA II it was 13 per cent and in UPA I it was 19.5 per cent.

The impact of the sharp fall in investments on employment by the private corporate sector is direct. Growth in compensation to employees fell from 23 per cent per annum during UPA I to 18.8 per cent per annum in UPA II to 11.4 per cent per annum during the Modi government. Growth in employment in the private corporate sector was worse. This grew at 10.5 per cent per annum during UPA I. It then dropped to 6.5 per cent per annum during UPA II and further to a mere 1.3 per cent per annum during the Modi regime.

The Indian private sector is the best provider of quality jobs. And to ensure that the private sector does continue to provide quality jobs it may be a good idea to review the impact of increased contractualisation on quality jobs by the corporate sector.

It is likely that contractualisation has not helped much in growing employment in the private corporate sector. But, even if it has helped a little or substantially, it may not be a good idea. Contractual jobs are not good quality jobs like regular corporate jobs. If the private corporate sector does not provide quality jobs then there would be no quality jobs in India. The government is outsourcing jobs and the private sector is contracting out jobs. If this continues, India may be turned into the sweat shop of the world. This is not the future that we may aspire to.

If labour has to be motivated to gain education and skills, then it needs assurance that the end outcome would be quality jobs.

Employment guarantee and income transfer schemes could be a short-term palliative to extreme distress but these are not a solution to the need for quality jobs.