Whither Indian Economy ?

By Dr DC Sah*

I am concerned with the way the economy is unfolding in the last couple of months. Did I say months ? I mean in the last 73 years. The economic thinking, to put mildly, is in a confused state. It has neither been pro-workers, nor pro-capital. As a result, we never could protect either.


The post-lockdown situation demands new thinking and new ways to revive the Economy. Praxis also demands raising questions that could help us understand what is the reason for this confused economic thinking; and provide a blueprint for getting out of the rut, that we find ourselves in.


There are mainly two distinct approaches, that we can think of.

First approach is to continue with the confused economic thinking of the past and accept that a large population of Indians will as in the past continue to have a low level of economic and social existence for a long time. The second approach is to give up the prevailing confused economic thinking and bring the unfinished reform agenda of 1992, in operation.

Indian economy needs encouragement for maximising production, distribution and consumption of goods and services.

But, at this juncture, it is also important to examine if our pro-poor policies are really helping them. Or put differently, are these policies harming more than benefiting the poor labourers?

I believe that the way, generation after generation of migrant labours have lived a occupational-mobility less existence, is a proof enough that the first approach has provided the labour class not more than just a low level of existence. The probability of success of this approach, in future, is also low.


Freedom to “choose” where one lives and works is probably one of the most crucial freedoms available to a human being.

However, for the twelve crore seasonal migrant workers this freedom has been curtailed for long. Many believe that migrant workers bring to the city poverty, filth and a pressure on the limited civic amenities. But without these low wage earning seasonal migrant workers the wheels of city economy would come to a grinding halt.


We all aware of the poor living and working conditions of seasonal migrant labourers and their human right violations. However, nothing noticeable has been done to protect their rights and give them the dignity they so rightfully deserve. There plight is visible yet invisible to the state and the industry.


The lockdown has made their lives even more miserable. Since the lockdown, they have been forced to live in their cramped over crowded living quarters, without work, without money and some times, even without food.

These seasonal migrant labourers are currently in the process of getting back to their native villages on foot, cycles, hand pushed carts, rickshaws, trucks, in taknker, buses and now on special trains that the state is running for them.

We see so much of politics and debate happening each day. The high decibel emotion filled din and noise that is created is drowning some of the silent positive work done by the state governments (irrespective of political leaning), non governmental organisations and individuals to make this reverse migration less painful.

This is the our reality. And this has been going on for years…

There will a shortage of labour once the industry kick starts post lockdown as migrant workers would not be available. Most of them will either be in their native places or on the way to their homes. They will be scared and hesitant to return to cities for work.


Industry may have to wait for another six to eight months, before the migrant labourers are mentally prepared and ready to move back to cities.

There are many ifs and buts for such reverse migration would take place. It may happen after the kharif sowing operations are over provided the Corona crisis is in control by then.

For a migrant worker it would take a very long time to get out of the feeling of desperation, economic hardship and psychological trauma that he has undergone during the lockdown.

Some basic questions that need to be asked

Why in the first place it is so important to migrant workers to go back to their naive places?

Why, do they return each year to their native places work for few months on their fields or as labour on the fields of other farmers, and then move to cities, to work in the same jobs, as construction workers, industrial labours, helpers in municilal corporations, loaders, rickshaw puller and similar jobs, year after year?


Probably, two policies, both taken up in good faith, first one in 1950s, land distribution to tillers and sharecroppers, and another, taken up, some time back, NREGA, are the reasons for this.


A small, economically unviable piece of land and a promise of hundred days manual labour per family, is lure enough for migrant workers to return to their native places rather than getting absorbed in the industry, where they work.

In this process, migrant workers do not get opportunity for skill upgradation, necessary, first, for getting absorbed in the industry, and for moving up in the occupational hierarchy.

Since there is not much scope on their part and efforts in skill development by the organised sector of industry or the state these twelve crore migrant workers are forced by the policies and they have no option other than to return to their homes. This the misery continues tear after year.


It is, therefore, imparatve on the state to develop policies, that attract migrants to stay in industrial areas, where jobs are, and get skills, necessary to be absorbed there and grow with the economic prosperity.

A way out is by encouraging them to lease their uneconomic land, either to other farmers or to corporates, interested in vertically integrated marketing systems (for example growing potatos to selling chips, or producing milk to marketing ice-cream, cheese, as a unit). But an important question is, should we continue, with this confused thinking or it is time to abandon it.


This takes us to our second alternative Reform or Perish.

Time to grow up and get rid of confused mindset


We understand that (1) Indian Economy is in a very bad shape; (2) Center is coming out with stimulus stimulus to kick-start the Economy; (3) Centre is keen to attract industries, likely to be displaced from China; (4) States are out of funds and asking for a financial support; (5) financial sector is unable to support debt-redden trade, business and industry; (6) Centre is inclined to borrow big from various sources (7) Human Resources, in the country particularly in Health and Education sector are in a poor state.


But even if our Policymakers take up all these reforms it will not be enough to bring back the Indian Economy to pre 2016 level, soon enough. To get the economy back on track, and that too as fast as possible, India needs reforms that were avoided for years. Moreover, these proposed reforms are over and above the economic package India Inc and states are expecting from the Finance Minister post lockdown.


This is most opportune time to take a plunge into new reforms for, as with high unemployment, low returns, low purchasing power and low consumer demand, the shocks of proposed reforms, can be absorbed, by different section of Economy and Society, smoothly:


For making a conducive environment for business and industry to grow, labour reforms, land acquisition reforms, and banking reforms are a must.

But Industry-friendly labour laws would hurt interests of labours. Therefore, strengthening of social security norms for labourers will be necessary. A PPP approach, wherein both industry and state create a corpus for the purpose, will be necessary.


As the business and industry must retain profits for reinvestment, rationalising taxation will go a long way for improving the business sentiments and confidence of investors.

Equally important is resolving litigation between various government departments and the investors quickly.

Not doing this results in poor investment environment and undue delays in setting up business. Moreover, it ought not to be the business of the government to be in business. Privatising state enterprises and making foreign investment more acceptable should be one of the objectives of the Centre.


Growing mistrust, post-corona, on China, is going to result in relocation of some foreign manufacturing units out of China. It will be myopic on the part of Indian state not to move quickly and attract them with promises of cheap labour, easy capital, enough infrastructure to operate and laws that make them feel welcome.

If government does not accommodate them, they are likely to move to East Asia, Bangladesh or South American countries. Some say this already is happening!


Agricultural reforms, that link farmers with the urban consumers breaking the monopolistic hold of traders on agri-marketing, is one reform that will increase farmers’ share in consumer’s rupee. Another area is Investment, by Centre, for developing technology, espacially storage and food processing, that increase farmers’ share on consumer’s rupee.


Subsidies on inputs — fertilisers, electicity and irrigation -results in inefficient input use, and are also a burden on the Government. Regionalising subsidies both for inputs and for consumers will provide much needed resources to the Government for investmrent in technological transformstion of Indian agriculture.


The much needed administrative and election reforms will help government in plugging the loopholes in its fight against corruption and black-money. The sooner these reforms are taken up, the better will it be for businesses and industry.
And lastly, it is the need of the hour to invest heavily on education and health system of the country. Otherwise, India will be unable to meet the industry’s demand for skilled and healthy youth. Such investment is also nessasary to take advantage of the demographic dividends we currently have in India.


*Contributed by Dr. . D.C. Sah, Professor Emeritus at MPISSR Ujjain. He was earlier, Professor & Director at M.P Institute of Social Science Research Ujjain, Associate Professor at CSS Surat and GIDR Ahmedabad; and has also worked at Samarthan Bhopal, NDDB Anand and IIM Ahmedabad. His research interests have focused on Socio-economic aspects of Agricultural development in India; Second-generation problems of development displacement; and Chronic poverty. He has published seven books and over 65 articles on Vertically integrated output marketing systems, Technology transfer in Indian Agriculture, R&R of displaced persons, and Chronic poverty in India.


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