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India Inc not investing in labour-intensive sectors: Govt

NITI Aayog action plan: Three-year plan replaces five-year Plans from this Financial year

Sanjeeb Mukherjee  |  New Delhi 

Finance Minister Arun Jaitley
Finance Minister Arun Jaitley

The Union government on Thursday questioned over its “reluctance” to invest in even in states where labour laws had been made flexible. The government flagged the issue at the release of the NITI Aayog’s three-year action plan, which disagrees with the critics who have suggested that economic growth has been jobless so far. 

The action plan, which replaces the five-year plan process of the Nehruvian era from the current financial year, is optimistic that the economy will return to an 8 per cent growth rate in two-three years, if not sooner. 

Releasing the action plan, Finance Minister said the Indian economy would hugely benefit if it managed to adhere to the strict fiscal and revenue deficit targets laid down in the action agenda (2017-18 to 2019-20). 

The action plan, released more than three months after it was first circulated among chief ministers, proposes reduction of the fiscal deficit to 3 per cent of by 2018-19, and the revenue deficit to 0.9 per cent of by 2019-20. 

“Sticking to stiff fiscal and revenue deficit targets given in the action agenda would bring huge benefits for the Indian economy,” Jaitley said. 

Responding to the criticism of inflexible labour laws being a hindrance to private investment, Labour Secretary M Sathiyavathy said when many states had adopted flexible labour laws, industry should also come up and invest in sectors which were labour-intensive. 

She said eight states so far had amended the Industrial Disputes Act, giving more flexibility to firms to fire workers, while the government had extended the benefit of fixed-term employment in apparel and textiles. 

Anand Mahindra, chairman of Mahindra and Mahindra (M&M), said big industries didn’t go to perhaps due to scars from the past. “We need to create bi-focal approach to growth as we need big firms alongside small scale industries, which are in bigger need for flexible labour laws,” he said. 

Outgoing Vice-Chairman Arvind Panagariya said the major impediment in job creation was that simply did not invest in labour-intensive activities.

On growth, the optimistic forecast of the government think tank comes weeks after the Economic Survey said that achieving a 7.5 per cent growth rate would be difficult for the current financial year. 

The economy grew at 7.1 per cent in 2016-17. The data for the first quarter, slated to be released at the end of this month, would give an indication of the growth for 2017-18. 

“Although a combination of global economic developments and domestic policy choices led to a dip in the growth rate to 5.6 per cent in 2012-13, quick corrective action in 2014, followed by sustained policy reforms, helped the economy sustain 7 per cent plus growth during the three years ending on March 31, 2017,” the action agenda says. 

There are good prospects that the economy will return to the 8 per cent plus growth trajectory in another two to three years, it says. 

The action agenda, which starts from 2017-18 and will culminate in 2019-20, says contrary to some assertions that India’s growth has been “jobless”, the Employment Unemployment Surveys (EUS) of the National Sample Survey Office (NSSO), which till date remain the most reliable sources of information on India’s employment situation, have consistently reported low and stable rates of unemployment over more than three decades. 

“Even under the most demanding definition of employment, the unemployment rate consistently remains between 5 percent and 8 per cent,” it says. Indeed, unemployment is the lesser of India’s problems, the agenda says, emphasising that the more serious problem is severe underemployment. “A job that one worker can perform is often performed by two or more workers. In effect, those in the workforce are employed, but they are overwhelmingly stuck in low-productivity, low-wage jobs.” 

The 211-page plan favours a crackdown on people who evade income tax under the guise of agriculture income as the blanket exemption is being misused for generating black money. 

It also focuses on the need for re-calibrating the role of the government by limiting its involvement in activities that do not serve any public purpose. The action agenda says a big portion of the Centre’s total expenditure in the next three years should be on roads and railways where the total spending should rise from Rs 40,000 crore in 2015-16 to over Rs 1.18 lakh crore in 2019-20. 

The agenda also says the expenditure on the health sector should increase from Rs 30,000 crore to at least Rs 100,000 crore to attain the health goals set by the government. 

On health, the document advocates delinking the Drug Price Control Order from the National List of Essential Medicines to enable the Centre to impose price control on more drugs and make drugs affordable for people. At present, only drugs that are part of the National List of Essential Medicines are brought under the Schedule 1 of the Drug Price Control Order (DPCO) 2013, subsequently brought under price control by the NPPA.

action plan
  • Three-year plan replaces five-year Plans from this Financial year
  • Fresh agenda optimistic of 8% growth in 2-3 years
  • Says growth is not without creating jobs, as some critics suggest
  • Underemployment is a more serious  problem
  • Stresses need to check tax evasion in guise of agricultural income
  • Suggests closure of loss-making CPSEs and strategic disinvestment in 20 state-owned companies

First Published: Fri, August 25 2017. 02:44 IST
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