From growth-less jobs to jobless growth


N Sathiya Moorthy, 30 June 2017

Twenty five years after the overnight launch of the ‘economic reforms’, the nation now has an opportunity and need to review the entire process. The state of the economy now should give the government and the nation the confidence to do it lest India should well go downhill just as it did during the earlier era of ‘democratic socialism’.

There is a difference, however. When the fiscal crisis of the late Eighties forced the nation into a sudden review, if any, and a quick lunging into market capitalism, we believed that there was no option. Today, if capitalist model too fails us, there would be none else to take the blame — other than the present generation and the political leadership of its choosing. Incidentally, both are purportedly different in attitudes and approaches from the generation and polity that launched the reforms process.

The paradox is striking. The socialist model produced jobs, and jobs provided for social sector growth at the level of the individual, too. Constitutional protection, judicial pronouncements and huge social sector spending by governments at the Centre and in the States, which is now dubbed and dismissed as ‘subsidies’, provided the base and basis for such climb up. But it did not show up results in terms of GDP growth and other measurable qualifiers, for governments to boast of, as has happened since the advent of economic reforms.

Today, successive Governments have claimed credit for high levels of GDP performance, but they do acknowledge, though sheepishly, that job creation has suffered. Translated, it means that higher the GDP, fewer are the people in whose hands the moneys rest. Figures are often quoted by the very protagonists of reforms to prove this point — not argue against it. Even the founder-leader Manmohan Singh gave an early call for ‘reforms with a human face’ after the first tranche of quick-fix policy changes did not produce the promised/desired results. It still remains vague if Prime Minister Manmohan Singh achieved what he conceded Finance Minister Manmohan Singh did not — or, could not — achieve. The less said about his successor Finance Ministers, and his lone successor Prime Minister in incumbent Narendra Modi the better.

Back to ‘subsidy raj

It needs no great study to conclude that we are back to the era of ‘subsidy raj’, after blaming it as the cause for the nation’s economic backwardness. Specific studies could, however, well show how much more of subsidies that the government has been handing out to various sections of the population in the name of ‘social welfare’ and industrial incentives.

It is also needless to point out that industrial NBAs are far ahead of farm loans and farm loan waivers. No policy analyst in any government, this one or the previous, in the States or at the Centre, is talking about the moneys lost to NBAs, but everyone is agitated over farm loan waivers, as used to be the case under the fading years of ‘socialist raj’. Both need to go if India has to progress. Both need to go if there has to be a level-playing field, in politico-electoral terms.

The era of social media has hit the nadir, especially in terms of the political results that it was capable of producing in the past. Political tough-talking too does not matter anymore to the voter, who is wiser by each election. Finding an escape route is not an electoral option, either. Fixing economic ills is the only way out, both for political leadership(s) and the nation as a whole — but a deliberate one-sided approach, as if it were deliberated, too, does not matter, either.

The electoral defeat of P.V. Narashima Rao, the ‘father of economic reforms’, the Vajpayee leadership and the Manmohan Singh government all stand out. In each one of their cases, the political Opposition could identify their weak electoral link, and exploit them.

Purchasing capacity

Unlike many other economies, India seems to be having an internal market for manufactured goods. ‘Manufacturing’ alone creates jobs, and jobs mean more money in circulation, to strengthen the economy, both in terms of growth and further investments. These moneys do not get rested and rusted in bank vaults, nearer home or afar. Next only to blood in a human body, money in an economy/society is meant to circulate. Else, the economy and the nation die.

Not that the Indian investor was shy of paying reasonable wages to his employees and making profits. Instead, changing labour laws and introducing ‘outsourcing’ as a tool to rationalise the pay-structure has not led the industry anywhere. If it is not for labour trouble and lockouts, industries are closing down for bad managements’ bad decisions, all the same.

In present-day Indian conditions, of course, thanks also to the changed mind-set that reforms era has induced, the average Indian is willing to spend more on consumables and other manufactured goods, without shoring up his earnings in bank deposits. There is thus a market for the products that he himself manufactures on the shop-floor of his investor-employer. It is a chain that reasonable pay in well-paid jobs of local industrial investor can sustain. Cutting down on labour costs to encourage FDI and FDI-induced exports has only choked domestic earnings and purchasing capacity after a point.

The true ills of the ‘socialist era’ owed to the unwillingness of the Government to open up to private investments, basically Indian. To be fair to the Government in the early years after Independence, an economy with a total of Rs 2000-crore investments in the First Five Year Plan could not have expected the private sector to take big initiatives and great leaps. Nor could have been big-ticket deficit financing wished away.

When it was ready, the Government did wind up a model that did not help growth. Economic reforms as an idea had been in the making since the Rajiv Gandhi era, if not earlier, and came about a decade later in full swing. The ‘fiscal crisis’ provided the immediate impetus. As Rajiv Gandhi’s Finance Minister, V.P. Singh also tested reforms with tough-talking against the Indian big business of the day. It is a model that is being modified and magnified since.

When the economy opened up, FDIs became the preferred route than greater privatisation with faster mobilisation of internal resources — and through more secured routes of investor participation. The revived ‘Bombay Club’ that first protested soon found a viable via media, and accepted it without much ado. The ‘Harshad Metha episode’ and ‘Chetan Parek incident’ all destroyed investor confidence, yes, but the investors did not run away. But where are those investments? What is the contribution to individual home-welfare from highrise Sensex figures is also yet to be clearly understood. It is anybody’s doubts if any Government in the country at all wants to understand it, and apply brakes and correctives.

Creating jobs, locally

It is not only Trump’s America that do not want Indians grabbing Americans’ jobs. Most other job giving nations have followed suit. India can still thrive locally but taking away those overseas jobs if Indian corporations are ready to cut down on their margins and pay their domestic employers more.

The service sector-centric approach to encouraging investments and job creation has meant that IT and ITE education and employment benefited, but the earnings from them at the employee-level mostly did not return home, either as investments or bank deposits. It is a sad truth that citing various reasons, the Indian IT professional was/is more eager to obtain a western citizenship than he was in clearing his qualifying education and examination.

All this has meant that Indian manufacturing jobs and sector have all suffered. It does not end there, either. In the name of building up our ancillary and tertiary sectors, and thus create more jobs, successive governments have only facilitated big ticket FDI investor of luxury cars and the like to bring in their own captive SMEs with fewer jobs after killing our own flourishing small and medium-scale sectors. The current generation does not know cottage industry was making money, both locally and through exports – and was creating jobs and incomes, and also arrested maddening urbanisation.

Social revolution

It is not as if governments were not cautioned or warned. Even as reforms-facilitated education led to the spread of social enlightenment, there were adequate alerts that inadequate job and income creation in the changed environment could lead to social revolutions, by whatever name and brand they go. It is not as if some of this environment-driven social causes and consequent protests are aimed exclusively at destroying the economy from within, but that is already happening, all the same.

The spread of leftwing militancy across vast areas of central and east India was the first bugle-call. The recent revival of Kashmir protests too has a local element that goes beyond crossborder terrorism. In both cases, knowledgeable people claim that not all protestors are militants in the conventional sense of the term that governments understand. Better education, job creation and higher family incomes over a sustained period is said to be among the solutions even as the Government fights out militants and their sources, including those across the borders.

Again, it does not stop there. The greater the risk of social revolution and street protests, faster is the way FDI investments diminish and disappear, with the promoters packing up without trace, not long after. It is this possibly that the real, ‘anti-national’ brains behind individual protests too seem to be aiming at — all leading to achieving their unachieved dream of a ‘Stateless law’ after making it a ‘law-less State’. To them, ideology is religion and militancy is the modus to achieve it.

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N Sathiya Moorthy is Senior Fellow and Director, ORF Chennai A double-graduate in Physics and Law, and with a journalism background, N. Sathiya Moorthy is at present Senior Fellow & Director of the Chennai Chapter of the Observer Research Foundation. Starting his journalism career in the Indian Express – now, the New Indian Express – at Thiruvananthapuram as a Staff Reporter in the late Seventies, Sathiya Moorthy worked as a Subeditor at the newspaper’s then sole publication centre in Kerala at Kochi. Sathiya Moorthy later worked in the Times of Deccan, Bangalore, and the Indian Express, Ahmedabad. Later, he worked as a Senior/Chief Sub at The Hindu, Chennai, and as News Editor, The Sunday Mail (Chennai edition). He has thus worked for most major English language national newspapers in the country, particularly with the advent of Tamil Nadu as the key decision maker in national politics demanding that all newspaper had a reporter in Chennai that they could not afford to have full-time. This period also saw Sathiya Moorthy working as Editor of Aside magazine, Chennai, and as Chief News Editor, Raj TV. In the new media of the day, he was contributing news-breaks and analyses to since its inception. Later, he worked as the Editorial Consultant/Chief News Editor of the trilingual Sri Lankan television group MTV, Shakti TV and Sirasa. Since 2002, Sathiya Moorthy has been the Honorary/full-time Director of the Chennai Chapter of the Observer Research Foundation. In the course of his job and out of personal interest, he has been studying India’s southern, Indian Ocean neighbours, namely Maldives and Sri Lanka, as well as the South Asian Association of Regional Cooperation (SAARC). He regularly writes on these subjects in traditional and web journals. He has also authored/edited books on Sri Lanka, and contributed chapters on India’s two immediate southern neighbours. His book on Maldives is waiting to happen. As part of his continuing efforts to update his knowledge and gain greater insights into the politics and the society in these two countries in particular, Sathiya Moorthy visits them frequently. Among other analytical work, he has been writing a weekly column for over 10 years in the Colombo-based Daily Mirror, first, and The Sunday Leader, since, for nearly 10 years, focusing mainly on Sri Lankan politics and internal dynamics, and at times on bilateral and multilateral relations of that nation. Expertise • Indian Politics, Elections, Public Affairs • Maldives • Sri Lanka • South Asia • Journalism and Mass Media Current Position(s) • Senior Fellow and Director, ORF Chennai Education • BGL, Madras University • BSc, Madurai University