Devangshu Datta: State of the unions

BEATING THE STREET

The CMP makes it clear that the UPA's chief priority is boosting employment. But while that goal is laudable, some steps are counter-intuitive.

There will be political difficulties whenever conflicts arise between increasing productivity, creating future employment opportunities and the protection of existing jobs.

When new assets are created, some employment expansion is automatic. Build a new road; that means new dhabas, new petrol pumps, motels, etc. The road building and port-building programmes will thus continue; these generate employment, keep the pork barrel full, and improve overall living standards. No constituent of the UPA has problems with NHDP or Sagarmala.

But conflicts are very likely whenever there is an attempt to improve productivity from extant physical infrastructure. The more efficient use of physical assets leads to slimmer workforces.

Better infrastructure and improved services also create more downstream jobs and in an ideal world, labour would migrate to growth areas. But unionised workforces will strongly resist any threats to current job security.

This is where the ideological orientation of the UPA is a hindrance. The UPA will protect existing jobs at the cost of creating fewer future jobs. Attempts to improve usage of existing infrastructure will slow.

The slippage of the June 30 deadline for state electricity boards (SEBs) is no surprise. But the "review" of the Electricity Act may go beyond setting a new deadline. If the review means a lack of commitment in quick restructuring of bankrupt SEBs, the biggest hole in India's finances stays unplugged.

SEB workforce insecurities could lead to a blocking of measures like introducing power trading, open access and the spin off of T&D functions.

India's ports will also remain in charge of vastly bloated workforces. Increasing mechanisation and containerisation could deliver huge gains that translate into the ability to handle much larger volumes, more ships, etc. But if the unions hold up mechanisation and the new Sagarmala terminals are manned in the same way as existing ports, gains will be low.

The downshift in FDI limits for airport privatisation to 49 per cent is an exercise in futility. Nobody expects serious action. The FDI limit isn't the only stumbling block and even 100 per cent FDI wouldn't guarantee airport privatisation projects.

Governments consider it a prerogative (with good reason!) to retain control of communication and transport channels. Most governments also consider the management of resources like water and fuel supplies too sensitive to be left entirely to the market.

So even if the airwaves are liberalised, and roads, water supply systems, power distribution networks, consumer gas supply systems and port terminals are built and managed by private entities, governments will always retain control through the setting up of regulatory authorities and policy mechanisms.

Those policies must stay on the thin line between being business-friendly and consumer-friendly. This is difficult for populist governments.

As India's employment opportunities shift from big factories and farms to coding antfarms and call-centres, unionised workforces will become increasingly insecure.

This will make the implementation of future reforms more difficult. The global trend is frightening. In developed, service-oriented economies like the US, blue-collar compensation peaked 25-30 years ago!

If Indian labour policies don't rapidly become more flexible to induce large-scale migrations, that situation could be replicated here.