Investors must be wondering what promise New Delhi will break next as the ruling party tries to win the upcoming state elections. First, the government rejected three laws that Prime Minister Narendra Modi wanted to use to correct the stagnating farm economy. Next, he could delay the implementation of four rules that have been billed as “the biggest labor reform in independent India,” as Bloomberg News reports. Does Modi momentum finally work against the wall?
Consider the labor law that was passed by parliament last September. So far, only 10 of India’s 28 states have finalized rules on industrial relations, wages, social security and workplace safety. Considering Modi’s party is in power in 17 states, politicians clearly fear resistance.
There has long been a demand from the business community that industrial units with fewer than 300 workers should not ask the government for permission to lay off employees. (The federally mandated cap, which currently affects factories employing more than 100 workers, serves as a negative driver against growth, although some states have relaxed regulations.) However, drafting this concession would not exactly win votes. Likewise, the legal strengthening of retirement egg nests – as required by the new regulations – will ultimately benefit employees. However, they won’t be happy if that means less pay-to-get-in than now.
Why is it so hard for a powerful leader – and after more than seven years at the top to still be so popular – so hard to enforce his will? Modi promises far-reaching, productivity-enhancing changes to the factors of production – land, labor and capital. He also pledged to reform important commodity markets such as food. In each case, being seen as pro-big business was his rescinding his policies.
The first setback is the land. The previous government, facing public anger for allowing land grabs in the name of special economic zones, passed a buyback law in 2013 that big businesses found too restrictive. Within a year of becoming prime minister, Modi was trying to turn the balance so he could easily buy back village plots for infrastructure or affordable housing. But opposition leader Rahul Gandhi mocked him in parliament for supporting crony capitalists in “vests and boots”. Modi has given up on the idea.
An incomparable song
Ditto the controversial agricultural laws. Modi supported them against the incessant peasant protests. But because the overall package gave the impression that the state was going to pull out of grain purchases, leaving farmers at the mercy of large business corporations, it turned out to be a potato that was too hot to have. could be held through next year’s state elections in Uttar Pradesh and Punjab. So, Modi abandoned his ambitious plan, shutting down for at least a few years the reform of the farm economy and subsidized food. Now it looks like new labor rules are also coming into cold storage.
Meanwhile, reforms to improve capital allocation in the economy are a mixed bag. Despite objections from bankers unions, a bill – to be introduced in the upcoming winter session of parliament – would pave the way for the privatization of two state-run lenders. onion. Investors will pay attention to the fate of this law.
They should also keep a close eye on the government’s 6 trillion rupee ($80 billion) asset recycling scheme. This could also become a political minefield. For example, while New Delhi has aggressive plans to privatize the management of its train stations, the amount of money residents may have to spend to improve rail service can become a sensitive issue. sensitive, especially to less affluent voters, who may soon be saddled with a higher consumption tax burden. If business groups deemed close to the Modi government charge that additional user, the opposition parties will receive new ammunition to attack the prime minister.
The closer India gets to the 2024 general elections, the more the government wants to get out of the shadow of big business, and the more his opponents will try to keep it there. In the process, important parts of Modi’s economic agenda may be delayed or eliminated. The reversal of the agricultural laws and the possible stagnation of new labor laws could be the beginning of two years of sluggishness.
(Andy Mukherjee is a Bloomberg Opinion columnist covering industrial and financial services companies. Previously, he was a columnist for Reuters Breakingviews. He has also worked as a columnist. jobs for the Straits Times, ET NOW and Bloomberg News.)
Disclaimer: The opinions expressed in this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability whatsoever.
(Except for the title, this story has not been edited by NDTV staff and is published from an aggregated feed.)
.
