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Unlocking Economic Growth
Context : Economic Growth
Employers in India often resonate with Bahadur Shah Zafar’s poignant lament: “Umre daraz maangkar laaye the chaar din, do aarzu mein kat gaye, do intezaar mein” (after negotiating a life of four days, two were spent dreaming and two waiting).
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- State governments are responsible for 80% of criminal provisions, 65% of filings, and 63% of employer compliances.
- However, chief ministers (CMs) can dramatically improve the landscape for high-wage employment through three decisive reforms: decriminalisation, digitisation, and rationalisation.
Case for Reforms
- History suggests that economic prosperity is tied to location—wages depend on geography (country, state, and city) and industry (sector, company, and skill).
- While long-term reforms in education, healthcare, law, and infrastructure are necessary, immediate legislative action targeting compliance burdens can deliver quick, high-impact results.
- Addressing inefficiencies, subjective interpretations, and uncertainty in compliance will ease the strain on businesses and foster growth.
Decriminalisation: Reducing Employer Risk
- Currently, India has 26,134 employer-related jail provisions, of which CMs can eliminate 80%.
- The Jan Vishwas Bill made minimal progress, removing only 110 out of 5,239 central employer-related criminal provisions due to bureaucratic inertia and vested interests.
- A more effective approach would involve a “reversing the gaze” principle—removing all criminal provisions except those that meet the following criteria:
- Physical harm to individuals
- Intentional fraud against stakeholders
- Severe societal externalities (e.g., public order, national integrity, property rights violations)
- No employer should face imprisonment for procedural errors, delayed filings, incorrect calculations, or non-standard formats.
- Applying these filters retroactively and proactively to laws would enable a significant reduction in compliance burdens.
- Jan Vishwas 2.0 could eliminate 40% of the remaining 2,000+ employer-related criminal provisions.
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- States like Madhya Pradesh and Tamil Nadu have initiated decriminalisation efforts, while Gujarat, Karnataka, and Odisha are considering similar steps.
Digitisation: Streamlining Compliance
- A staggering 65% of India’s 69,233 employer compliances could be made paperless, presence-less, and cashless.
- India’s Digital Public Infrastructure (DPI) has already transformed vaccine distribution, highway tolls, welfare records, and digital payments (UPI’s target has shifted from one billion monthly transactions to a billion daily transactions).
- The introduction of PAN 2.0 and EntityLocker—a centralised, tamper-proof document repository—sets the stage for further digitisation.
- CMs should establish State Employer Compliance Grids (SECGs), leveraging open architecture similar to DPI to manage filings, registrations, and regulatory approvals seamlessly.
- SECGs would also enhance data tracking, allowing governments to detect defaults, delays, and frauds more effectively.
- States like Gujarat, Maharashtra, and Andhra Pradesh are exploring SECGs with flexible integration timelines based on departmental digital maturity.
Rationalisation: Cutting Bureaucratic Red Tape
- India’s civil service structure, once a backbone of governance, has become a hindrance to efficiency.
- With over 20 million civil servants, many operate under a mindset where everything is prohibited unless explicitly permitted, and individuals are guilty until proven innocent.
- While broad civil service reforms are challenging, reducing bureaucratic complexity is a tangible first step.
- Comparing global governance structures: Japan: 15 ministries, UK: 22 ministries, USA: 25 ministries
- In contrast, Indian states have an excessive number of departments: Uttar Pradesh: 72, Uttarakhand: 63, Assam: 54, Punjab: 51, Madhya Pradesh: 47, Maharashtra: 35, Andhra Pradesh: 31 and Gujarat: 27.
- Streamlining governance will improve decision-making and reduce unnecessary compliance burdens.
Path to Economic Growth
- Renowned philosopher Karl Polanyi argued that economic systems are deeply influenced by social and political factors.
- Prime Minister Narendra Modi’s assertion that “29 chief ministers matter more than one prime minister” underscores this idea—labour markets are local, and state-level reforms can drive significant change.
- India’s issue of “employed poverty” stems from: Excessive agricultural employment, High self-employment rates, A shortage of mid-sized cities (2-4 million people), Too few megacities, Low factory employment and Insufficient high-productivity, non-farm employers.
For ambitious CMs seeking to drive mass prosperity, Nobel laureate Daniel Kahneman offers apt advice: “We instinctively step on the accelerator to go faster, but get better results by taking our foot off the brake.” By decriminalising, digitising, and rationalising compliance, states can unlock economic growth and foster a thriving employment ecosystem.
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The Source’s Authority and Ownership of the Article is Claimed By THE STUDY IAS BY MANIKANT SINGH
