If one goes by the RBI’s revised projection of the FY 20 real GDP from 6.1 per cent to 5 per cent, the economy is slipping into further slowdown. It’s also a reflection that the multiple doses of stimulus is not yet showing encouraging results. RBI’s Monetary Policy Committee (MPC) last week maintained status quo on policy rates in its fifth bi-monthly monetary policy review of the financial year thus signaling its resolve to curb inflation as well as encourage lending. Prior to this decision, there have been five consecutive cuts. The repo rate remains unchanged at 5.15 per cent. Forex touched a new high of USD 451.08 billion but there has been a decline in the gold reserves by USD 148 million to USD 26.6 billion.
It’s pertinent to quote a recent report from Goldman Sachs which forecast India’s GDP growth at 5.3% and 6.6% in FY20 and FY21, respectively. The report also categorically signals revival of Indian economy out of economic slowdown shortly riding on the waves of global growth and upliftment in sentiment coupled with easing supply bottlenecks, higher consumption, investment and exports in the country.
Budget is less than a quarter away. The Union government, like previous years, is engaging with industry bodies, employers and all stakeholders. It’s another opportunity for these bodies to push for big ticket structural reforms. The US economy is reviving as a result of steps taken over the last couple of years. Our government must push for reforms leading to economic stability, ease of doing business, thus enabling employers to create jobs leveraging our demographic dividend.
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With a view to improving the ease of doing business, the government introduced the Labor Code on Industrial Relations, 2019 Bill in the Lok Sabha. It seeks to consolidate key features of the Trade Unions Act, 1926, the Industrial Employment (Standing Orders) Act, 1946, and the Industrial Disputes Act, 1947. An important feature which might help employers is the amendment of the definition of “strike” to bring “mass casual leave” within its purview. It goes on to recommend that a union will be recognized if it has the support of 75 per cent or more workers.
The Code has recommended no change to the employee threshold of 100 workers but a significant change is suggested in the powers being given to the government to increase or decrease the threshold of 100 through gazette notification. Hopefully, the objective of these changes will simplify the process of hiring or retrenching workers by employers based on genuine reasons. A progressive step recommended by the bill is that of reskilling the retrenched worker to enhance his/her employability. To this effect, a reskilling fund is being proposed. Mere policy recommendation never works and hence it’s heartening to see creation of a fund backing it up, thus, making the suggestion a realistic one.
Employers expect fair play in policy and execution. The access to resources – human, material, finance, other factors of production – have to be fair and consistent to enable employers produce best-in-class products and services at competitive prices. The pluralist political compulsions in our democracy seem to be taking the country in a different direction. Meritocracy is giving way to reservation in jobs for locals in Maharashtra and Karnataka, wherein the governments have taken the populist decision in these two progressive states having a significant presence of talent from all parts of the country. This may reap dividends for the ruling parties but the decision taken without consulting employers is bound to impact quality and overall ease of doing business.
Finance Minister Nirmala Sitharaman says economic stimulus will continue. Till now, it has not shown results in two sectors responsible for maximum jobs – construction and retail. Indicators suggest construction will continue to benefit from the government’s policy changes aimed at reviving the sector. Retail employs maximum apprentices and the sector can benefit from stable interest rates, controlled inflation and increased spending. The minister is also mulling over reducing personal income tax rates to boost consumption which will eventually lead to job creation.
