The Indian government has been fighting various challenges on different fronts. But what is strange is the priorities – while people are dying of flu, the government is busy changing labour laws, laws against NGOs and labour laws. The COVID-19 pandemic, the migrant labour issue and a tanking economy have all been challenges of an unprecedented kind. Handling all these issues would have left the government breathless and with little room to take on new problems. However, what the Agriculture ministry seems to have done is to put its hands into a huge can of trouble by enacting three different laws, each with the intention of unshackling the agriculture market. The credibility of the government is at stake, as it pushes for what it considers are the most significant reform measures since 1991.
However, the opposition to these moves has left the government staggering. Its oldest ally, the Akali Dal has protested vehemently. The carefully built structure that exists today, of commission agents, mandis and Minimum Support Prices is now getting dismantled and that is what farmers are concerned about. The agriculture sector is plagued by issues that these laws do not address, that of lack of credit availability and severe price shocks. At a time when the only sector that seems to be doing well, disturbing the agriculture sector is certainly not something that qualifies as good sense and sensibility.
As if it was not enough for the government to push the farm sector deal through the Parliament so very brashly, we now have a new FCRA amendment bill. This proposed reform will now certainly be opposed by most civil society players. What the proposal says, in brief is that foreign contributions will be even more severely regulated than earlier. While the government wants to ease the entry of FDI into private sector, it wants to do exactly the opposite for the nonprofit sector. The new bill makes it mandatory for all recipients of foreign donations to open bank accounts with SBI in New Delhi. If that was not bizarre enough, the law reduces the administrative expenditure allowed from 50 to 20 percent of the total contribution.
The very idea that the government should decide for the NON government sector what it should spend its money on and how much is unfathomable. There are enough laws on tax filing and on audits that cover all legal entities in the country. To have special laws that discriminate against NGOs suggests a mindset that does not want to see a vibrant civil society operating. The tragedy is that Indians do not donate to non-religious causes as do the Westerners. Therefore, a fair bit of charitable activity, particularly in health and education is funded by foreign individuals and groups. This regular source of money for thousands of NGOs will now get choked.
The Parliament also passed wide sweeping labour laws. These laws had to be passed as the reforms had been pushed in through various Ordinances and those would lapse. In earlier days, the Ordinances could be re promulgated, but after the Supreme Court in Krishna Kumar Singh v State of Bihar, had declared that Ordinances promulgated during the recess of the Legislature must be compulsorily laid before it upon its re-convening, that option had become infeasible. Therefore, the new laws were passed in such a hurry during a time when Parliament is in chaos with COVID restrictions and amidst protests against the farm bills that were passed last week.
The new laws are clearly meant to make doing business easier in India. Several corporate surveys had suggested that strict labour legislation was responsible for keeping Foreign Investment away from India. Therefore, the pressure to bring in new laws. Fixed term contracts, for example are going to take away all protection from those who can now be given short term assignments. The informal construction sector that employs the largest number of unskilled workers, will also now be free to use and fire labour at will. These sweeping changes have been brought in at a time when all minds are diverted towards the health crisis. Such quick amendments will ordinarily not pass judicial scrutiny. However, NewIndia sees this as decisive and sharp decision making. Time will tell a different story.
These labour law amendments were carried out on the back of a similar exercise in Rajasthan six years ago. The Modi government heralded the changes made by the Vasundhara Raje administration but failed to note the impact these laws made in the state. Workers continue to be underpaid, are as vulnerable as they were and wage rates have stagnated. Unemployment has steadily gone up. However, what has also increased is labour productivity, and therefore the employers are celebrating. Increase in per capita output without a commensurate increase in wages is ideal for the firm as it becomes more competitive.
However, the problem is that our workers are far too vulnerable and poorly paid to be able to afford such disproportionate increases in productivity and decreases in real wages. Labour law reform must first address the marginal informal worker who works in difficult circumstances, gets paid lower than even the minimum wage in most circumstances, has no social security and is often rendered unemployed. The chronology for labour law reform should have been the worker first and productivity and mobility next. Instead, as the Rajasthan case showed a number of firms have shown alacrity in using the flexibility given to reduce their workforce and get employees to work harder and for longer hours. It is indeed the intention of the law that matters more than the words.
Amir Ullah Khan is an internationally known Development Economist based in Hyderabad.