The major reforms in agriculture markets, labour laws and definition of MSMEs – provide unparalleled opportunity to grow and prosper now and thereby contribute to job creation in the primary and secondary sectors. The modified definition of MSMEs facilitates expansion and growth of these enterprises without them fearing the loss of government incentives, thereby avoiding the phenomenon of dwarfs among MSMEs. The resulting economies of scale can enhance productivity without the MSMEs losing out on several government incentives including interest subvention, collateral-free loans, market support, export promotion, preferential procurement in the public sector and enabling of IT ecosystems.
Labour Reforms: The historic labour reforms discussed for three decades after the conditionality in the 1991 loan from IMF but never implemented thus far – will benefit MSMEs to increase employment, enhance labour productivity and thereby wages in MSMEs. The use of fulltime equivalents provides flexibility to MSMEs to tailor their labour strength to market conditions and thereby enhance employment. The increase in the size thresholds from 10 to 20 employees to be called a factory, 20 to 50 for contract worker laws to apply, and 100 to 300 for standing orders enable economies of scale and unleash growth. The drastic reductions in compliance stem from
(i) 41 central labour laws being reduced to four
(ii) The number of sections falling by 60 per cent from about 1200 to 480,
(iii) The maze due to the number of minimum wages being reducing from about 2000 to 40
(iv) One registration instead of six
(v) One license instead of four, and
(vi) De-criminalisation of several offences.
These reforms balance the interest of both workers and employers. These codes provide social security, protection, safe and working environment and effective conciliation dispute mechanism to workers.
Agricultural Sector Reforms: The reforms in the agricultural sector were more overdue than even the labour reforms as the existing laws kept the Indian farmer enslaved to the local Mandi and their rent-seeking intermediaries. While every other category of producer in India had the freedom to decide where to sell his/her produce, the Indian farmer did not. The local monopolists created by this legal infrastructure enabled the intermediaries to prosper at the cost of the farmer, especially the poor ones without the wherewithal to store their produce. The agricultural reforms enable the farmer to sell where he gets the best deal and thereby enable competition that is sine qua non to create welfare for the small farmer. The reforms in agriculture markets will enable creation of ‘One India one market’ for agri-products, create innumerable opportunities for farmers to move up the value chain in food processing – from farm to fork, create jobs and increase incomes.
Mining Sector Reforms: The proposed structural reforms in the mining sector aim to increase participation of the private sector in mineral exploration, redefine the norms of exploration for auction of mineral blocks to ensure a seamless exploration-cum-mining-cum-production regime.
They will also redefine the standard of exploration required for auctioning of blocks for prospecting license-cum mining lease and open acreage licensing policy for allocation of mining rights which will give a major boost to the production of minerals in the country.
These reforms aim to reduce dependence on imported coal, to create a strong, self-reliant domestic energy sector, attract private investments, generate jobs and stimulate the economic growth in the medium-term.
At the same time, production-linked incentive (PLI) schemes have been implemented in ten key specific sectors to make Indian manufacturers globally competitive, attract investment in the areas of core competency and cutting-edge technology; ensure efficiencies; create economies of scale; enhance exports and make India an integral part of the global supply chain. These Schemes provide incentive to enhance production and create wealth and jobs. The proposed privatization of Public Sector Enterprises in non-strategic sectors recognizes the need for efficient allocation and use of resources. All these reforms are intended to bolster the productive capacity of the economy, and create wealth and jobs especially at the bottom of the pyramid. This would, in turn, lead to inclusive growth and sustained demand generation in the economy. The policy package ensures that the regulatory environment is conducive to ease of doing business with simpler, transparent and timebound procedures for doing business.
Most of these reforms have long been recommended for enhancing the efficiency and achieving economies of scale in various sectors. Specifically, economic surveys of previous years have made the case for these reforms by highlighting carefully the economic benefits from the same. The time of the ‘crisis’ was utilized to take some ‘bold’ decisions to actually implement these reforms to propel the growth of the Indian economy.