Sins of commission

Last week, the Union Cabinet took a number of economic decisions. From the short-term perspective, inflation was addressed, both in terms of moderating prices of commodities like sugar and edible oils and in granting government employees a 3 per cent hike in dearness allowance (reflecting the fact that consumer price inflation is somewhat lower than wholesale price inflation).

Some states will also benefit from a revision in the rates of mineral royalties. In the longer term, facilitating amendments to some of the laws governing the financial sector are on the cards, while one new council and one new commission have been established.

The Council is the National Manufacturing Competitiveness Council, which will be chaired by V Krishnamurthy. The Commission is the National Commission for the Promotion of Enterprises in the Unorganised/Informal Sector, to be chaired by Arjun Sengupta.

Both were promised in the Common Minimum Programme and the UPA government is simply fulfilling them. But, the enthusiasm with which the government is going about establishing these high-profile panels does give rise to certain concerns and questions about its willingness to address problems whose solutions are well known but which are stuck in the mire of political and administrative resistance.

Councils, commissions, and other such bodies are useful instruments to draw up viable strategies for complex scenarios in which a variety of conflicting stakeholder interests are involved.

Effectively managed, they are able to deal with both conceptual and practical issues simultaneously, providing a bridge over the long gap between idea and implementation.

In the current context, however, when time is running out as far as the fundamental objectives of stabilising growth while accelerating employment are concerned, waiting for these bodies to get to work and begin generating their recommendations is simply delaying the process of change even further.

The fact is that there is already a high degree of consensus on what hinders the country's manufacturing competitiveness. The latest Economic Survey said as much in pretty unambiguous terms""infrastructure, inflexible labour markets, and rules and procedures.

Do we really need a group of eminent people to spend their valuable time revisiting this issue? What is the likelihood that they will come up with either new interpretations of the problem or solutions that can break through the gridlock on these?

Likewise, as far as the unorganised sector or informal activity is concerned, its prominence in the Indian industrial and services sectors is far higher than is desirable.

It is so large because of the enormous barriers and disincentives to formalise. While it does provide a safety valve by employing large numbers of people, the fact is that employees have no claim to the rights and protection enjoyed by a small minority of their colleagues in the organised sector.

Is the government seriously thinking of legitimising and perpetuating this arrangement, when its primary goal should be to eliminate those barriers and disincentives?

Yes, reforms are more likely to succeed when backed by the wide-ranging support that the councils and commissions are supposed to create. But, when hard decisions must be taken, they simply cannot be used as an excuse for delay and postponement.