GS Paper 3
Syllabus: Significance of Agriculture Sector in Economy, Employment & Unemployment in India.
Source: Indian Express
Directions: This is taken from the editorial section of Indian Express. Go through it once, you can use it for value addition.
Context: Recently Chile rejected a draft utopian constitution — giving free housing, a number of rights and freebies that would have led to huge government debt.
- Similar economic decisions have caused current pain in Punjab, Sri Lanka, Venezuela, Mexico, and Bolivia.
In this context, what is needed is not freebies and guaranteed employment but better wages. And wages will not rise without balanced targeting of policy-induced price distortions.
Reforms needed are:
State governments must sustainably create high-paying jobs by raising the productivity of five places i.e. states, cities, sectors, firms, and skills where the country’s wage differentials reflect massive productivity differences.
- Reduce inequality between States: In the next 20 years, six states in South and West India will account for almost 35 per cent of GDP growth but only 5 per cent of population growth because economic complexity breeds higher wages.
- Reduce inequality between cities: Hyderabad has a higher GDP than Odisha and four times that of J&K.
- Reduce inequality between different sectors: Software — an oasis of high firm productivity — employs only 8 per cent of our labour force but generates 8 per cent of GDP,
- While agriculture has 42 per cent of our labour force but only generates 16 per cent of GDP.
- China raised its per capita income 80 times in 40 years by moving 700 million people from farm to non-farm employment.
- Reduce the huge difference between firms: India’s largest and smallest manufacturing companies have a 24 times difference in productivity.
- States that replace deals with rules by reducing regulatory cholesterol will attract high-paying jobs.
Other reforms needed for the Indian economy are:
- Increasing Soft skills: Wages are higher for using minds than muscles. States with high populations of residents with skills in demand will attract more high-paying jobs.
- Empowered mayors — this pertains to the devolution of funds, functions, and functionaries.
- Creating the supply that will attract demand (providing skills to workers in advance for the manufacturing boom just like South India did for software with its 1980s engineering college deregulation).
- Formalisation — state governments generate more than 75 per cent of India’s 67,000 plus compliances, 6,700 plus filings, and 26,410 employer criminal provisions.
- A rational HR in the Civil Services — don’t punish good performers by promoting bad performers.
- Digitise: Set a 12-month target for paperless and cashless for all citizen interfaces by leveraging India’s unique stack of digital public goods.
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Q. Do you think there should be a law to ensure minimum wages applicable to all employees across that country including sector-specific minimum wages for industrial workers? Comment (15M)
