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Finance Minister P Chidambaram may have steered clear of populism in an election year, forcing upon himself harsh fiscal prudence to contain the deficit, but his government isn't shying away from making sweeping populist gestures in a bid to restrain the electoral drubbing that's staring it in the face.
Last week Congress Vice President Rahul Gandhi openly sought an increase in the number of subsidized LPG cylinders from 9 to 12. Yesterday, his cabinet approved the grant of minority status to the Jain community, a long pending demand. The party's state machinery in Maharashtra also slashed electricity prices by 20% following the AAP's move to cut power tariffs and dole out free water in the capital. If many of these proposals are being called ruinous competitive populism by the opposition and sections of industry, the Congress's latest plan for job quotas in the private sector has been dubbed 'economic insanity' by one observer.
"This is economic insanity. It would amount to labour market suicide" Manish Sabharwal, founder of Teamlease - a recruitment consultancy told Business Standard. "As it is, there is 90% informality in the jobs market, if you bring in quotas, there will be a further explosion of informal employment. Companies would simply not show staff on rolls. It has been tried in many parts of the world but never worked."
So what exactly is the Grand Old Party up to? According to a report in the Economic Times, the Congress's election manifesto is likely to include a proposal to legislate job reservations for SC/STs in private companies with investments worth Rs 100 Cr or employing 1000 people besides introducing reservation in private schools for class 1 admissions, free post-matriculate education and a Rs 25,000 voucher for every graduate.
"It will sound the death knell of meritocracy and performance which have been the hallmarks of private sector jobs. We need the best brains to come in to generate innovative ideas and take Indian companies to the next level. Using affirmative action could be helpful in building skills and capability, or in giving education to the disadvantaged but not for employment generation in the private sector." said a CFO of one of India's largest steelmakers seeking anonymity.
Besides being detrimental to private sector performance, the proposal may not even end up having the desired effect of generating large scale employment for the backward classes feel experts. Barely 29 million of India's 484 million strong labour force is part of organized sector employment of which only about 11.5 million are employed in the private sector - i.e. less than 3% of India's total labour force. Only a myopic, opportunistic government will mull such a scheme and peddle it as being a game changer in empowering the historically disadvantaged.
If there is any legislation needed at this juncture, we need one that will look at amending our archaic labour laws that are restricting employment creation, not one that enables positive affirmation in the private sector that comprises a miniscule part of the jobs market. It is a shame that this government has presided over a decade of jobless growth. Rather than manipulating the existing labour markets further, the drafters of Congress's manifesto could do themselves great service by glancing through the latest report put out by CRISIL for fresh ideas on how to tackle the ticking jobs time bomb. The report projects an apocalyptic scenario of millions fleeing back to farms as an economic recovery isn't followed up by sufficient job creation with the manufacturing sector stuttering, labour absorption falling and automation rising.
A roadmap to address these long to medium term challenges in the manifesto will instill far greater confidence in the electorate than blinkered short term objectives of vote bank politics. India's economically and socially backward sections will be carried along the road of prosperity only if the country as a whole gets back to the high growth path and creates opportunities for its young (not withstanding caste, religion or class.)
That's the first battle to be won.
