Six ‘freedom’ reforms to bolster job creation and employability Editorial 30th Dec’20 LiveMint

Covid highlighted the government’s will to tackle issues taking a long-term view:

  • Covid’s pain reminded us of our economy’s pre-existing issues, including inadequate formalization, financialization, urbanization, industrialization and human capital.
  • In such situations, economists and policymakers often think only of the present, with the belief that current circumstances are special, unique and unprecedented.
  • However, the Indian government has also demonstrated a policy willingness to take the long view by ignoring calls for some quick relief measures, say though unprecedented deficit financing.

Long-term thinking now needed on formal job creation and employability:

  • The next 25 years for our economy will be very different from the last 25 years for many reasons.
  • The upcoming budget has a unique opportunity to take advantage of the covid policy window by amplifying existing long-term thinking on formal job creation and employability.
  • The budget for 2021-22 must build on recent reforms like labour, agriculture and education to grant freedom to our firms and citizens to improve their productivity. 

Freedoms to firms and people for formal jobs and employability of human resources:

  • Despite the covid-induced shortfall in taxes, some non-fiscal reforms that can give freedoms to firms and people for formal job creation and employability.
  • Freedom to employees to spend to invest where they want:
    • The current cycle of enterprise formalization could be accelerated by making employee contributions to their provident fund (EPF) voluntary.
    • This money belongs to employees who should have the freedom to invest it.
  • Freedom to employees to get the insurance they want:
    • India’s largest health insurance programme, Employees’ State Insurance (ESI), has not been helpful during the Covid pandemic because its governance is too large, old and unrepresentative.
    • The budget should announce the modernization of ESI governance.
    • It should also set a deadline after there is freedom to employees from compulsory health insurance contribution deductions from their salary, to allow them to get any insurance they want.
  • Freedom to universities to provide online education:
    • Online degree-linked apprentices are the future of education because they innovate in financing, social signalling, and employer connectivity. Despite the Atmanirbhar Bharat announcement to deregulate online education, only seven of India’s 1,000 universities are licensed for online learning.
    • This, despite the fact that over 200 foreign universities operate online in India, which should be allowed to continue. 
    • The budget must announce that all accredited universities are automatically and immediately licensed for online delivery because covid is reinventing higher education.
  • Freedom to universities for skilling and diplomas/degrees:
    • Skill universities, which are essentially a combination of Industrial Training Institute (ITI), employment exchange and college, are held back by old regulations. 
    • The budget must announce regulations that give unqualified freedom to universities to deliver via four classrooms (online, onsite, on-the-job and on-campus) with various qualifications like certificates, diplomas, advanced diplomas and degrees.
  • Freedom from too many labour codes:
    • India’s four new labour codes will soon be notified and increase manufacturing employment.
    • The budget should announce a three-year time- frame to move to a single labour code.
  • Freedom from over-regulation:
    • India’s huge regulatory system involves 65,000-plus compliance requirements and 6,500-plus filings, and the issue of a Universal Enterprise Number.
    • The budget must announce a cross-ministry compliance commission tasked with the rationalization, digitization and decriminalization of regulations, and provide firms freedom from excessive regulation.

The next budget must give freedom to firms and people put India on the path to prosperity:

  • The 2021-22 Budget coincides with the 30th anniversary of the 1991 reforms.
  • Despite the reforms being much praised, it is important to remember that China and India had similar per capita incomes in 1991 but now the Chinese are four times richer than us.
  • Now, the 2021-22 budget provides another crisis induced opportunity to accelerate the rise of India with long-term thinking around enterprise freedom, and to end poverty.  


GS Paper III: Economy