Food Security – The biggest mistake India might have made till date

250px-Gandhisonia05052007Vivek Kaul 
Historians often ask counterfactual questions to figure out how history could have evolved differently. Ramachandra Guha asks and answers one such question in an essay titled A Short History of Congress Chamchagiri, which is a part of the book Patriots and Partisans.
In this essay Guha briefly discusses what would have happened if Lal Bahadur Shastri, the second prime minister of India, had lived a little longer. Shastri died on January 11, 1966, after serving as the prime minister for a little over 19 months.
The political future of India would have evolved very differently had Shashtri lived longer, feels Guha. As he writes “Had Shastri lived, Indira Gandhi may or may not have migrated to London. But even had she stayed in India, it is highly unlikely that she would have become prime minister. And it is certain that her son would have never have occupied or aspired to that office…Sanjay Gandhi and Rajiv Gandhi would almost certainly still be alive, and in private life. The former would be a (failed) entrepreneur, the latter a recently retired airline pilot with a passion for photography. Finally, had Shastri lived longer, Sonia Gandhi would still be a devoted and loving housewife, and Rahul Gandhi perhaps a middle-level manager in a private sector company.”
But that as we know was not to be. Last night, the Lok Sabha, worked overtime to pass Sonia Gandhi’s passion project, the Food Security Bill. India as a nation has made big mistakes on the economic and the financial front in the nearly 66 years that it has been independent, but the passage of the Food Security Bill, might turn out to be our biggest mistake till date.
The Food Security Bill guarantees 5 kg of rice, wheat and coarse cereals per month per individual at a fixed price of Rs 3, 2, 1, respectively, to nearly 67% of the population.
The government estimates suggest that food security will cost Rs 1,24,723 crore per year. But that is just one estimate.
 Andy Mukherjee, a columnist with Reuters, puts the cost at around $25 billion. The Commission for Agricultural Costs and Prices(CACP) of the Ministry of Agriculture in a research paper titled National Food Security Bill – Challenges and Optionsputs the cost of the food security scheme over a three year period at Rs 6,82,163 crore. During the first year the cost to the government has been estimated at Rs 2,41,263 crore.
Economist Surjit Bhalla in a column in The Indian Express put the cost of the bill at Rs 3,14,000 crore or around 3% of the gross domestic product (GDP). Ashok Kotwal, Milind Murugkar and Bharat Ramaswamichallenge Bhalla’s calculation in a column in The Financial Express and write “the food subsidy bill should…come to around 1.35% of GDP, which is still way less than the numbers he(i.e. Bhalla) put out.”
The trouble here is that by expressing the cost of food security in terms of percentage of GDP, we do not understand the seriousness of the situation that we are getting into. In order to properly understand the situation we need to express the cost of food security as a percentage of the total receipts(less borrowings) of the government. The receipts of the government for the year 2013-2014 are projected at Rs 11,22,799 crore.
The government’s estimated cost of food security comes at 11.10%(Rs 1,24,723 expressed as a % of Rs 11,22,799 crore) of the total receipts. The CACP’s estimated cost of food security comes at 21.5%(Rs 2,41,623 crore expressed as a % of Rs 11,22,799 crore) of the total receipts. Bhalla’s cost of food security comes at around 28% of the total receipts (Rs 3,14,000 crore expressed as a % of Rs 11,22,799 crore).
Once we express the cost of food security as a percentage of the total estimated receipts of the government, during the current financial year, we see how huge the cost of food security really is. This is something that doesn’t come out when the cost of food security is expressed as a percentage of GDP. In this case the estimated cost is in the range of 1-3% of GDP. But the government does not have the entire GDP to spend. It can only spend what it earns.
The interesting thing is that the cost of food security expressed as a percentage of total receipts of the government is likely to be even higher. This is primarily because the government’s collection of taxes has been slower than expected this year. The Controller General of Accounts 
has put out numbers to show precisely this. For the first three months of the financial year (i.e. the period between April 1, 2013 and June 30, 2013) only 11.1% of the total expected revenue receipts (the total tax and non tax revenue) for the year have been collected. When it comes to capital receipts(which does not include government borrowings) only 3.3% of the total expected amount for the year have been collected.
What this means is that the government during the first three months of the financial year has not been able to collect as much money as it had expected to. This means that the cost of food security will form a higher proportion of the total government receipts than the numbers currently tell us. And that is just one problem.
It is also worth remembering that the government estimate of the cost of food security at Rs 1,24,723 crore is very optimistic. The CACP points out that this estimate does not take into account “additional expenditure (that) is needed for the envisaged administrative set up, scaling up of operations, enhancement of production, investments for storage, movement, processing and market infrastructure etc.”
Food security will also mean a higher expenditure for the government in the days to come. A higher expenditure will mean a higher fiscal deficit. Fiscal deficit is defined as the difference between what a government earns and what it spends.
The question is how will this higher expenditure be financed? Given that the economy is in a breakdown mode, higher taxes are not the answer. The government will have to finance food security through higher borrowing.
Higher government borrowing by the government as this writer has often explained in the past crowds out private borrowing. The private sector (be it banks or companies) in order to compete with the government for savings will have to offer higher interest rates. This means that the era of high interest rates will continue, which will not be good for economic growth.
Also, it is important to remember that the food security scheme is an open ended scheme. 
As Nitin Pai, Director of The Takshashila Institution, writes in a column “The scheme is open-ended: there’s no expiry date, no sunset clause. It covers around two-thirds of the population—even those who are not really needy. This means that the outlays will have to increase as the population grows.”
This might also lead to the government printing money to finance the scheme. It was and remains easy for the government to obtain money by printing it rather than taxing its citizens. F P Powers aptly put it when he said that money printing would always be “the first device thought of by a finance minister when a large quantity of money has to be raised at once”. History is full of such examples.
Money printing will lead to higher inflation. Prices will rise due to other reasons as well. Every year, the government declares a minimum support price (MSP) on rice and wheat. At this price, it buys grains from farmers. This grain is then distributed to those entitled to it under the various programmes of the government.
The grain to be distributed under the food security programme will also be procured in a similar way. But this may have other unintended consequences which the government is not taking into account. As the CACP points out “Assured procurement gives an incentive for farmers to produce cereals rather than diversify the production-basket…Vegetable production too may be affected – pushing food inflation further.”
And this will hit the very people food security is expected to benefit. A
 discussion paper titled Taming Food Inflation in India released by CACP in April 2013 points out the same. “Food inflation in India has been a major challenge to policy makers, more so during recent years when it has averaged 10% during 2008-09 to December 2012. Given that an average household in India still spends almost half of its expenditure on food, and poor around 60 percent (NSSO, 2011), and that poor cannot easily hedge against inflation, high food inflation inflicts a strong ‘hidden tax’ on the poor…In the last five years, post 2008, food inflation contributed to over 41% to the overall inflation in the country.”
Higher food prices will mean higher inflation and this in turn will mean lower savings, as people will end up spending a higher proportion of their income to meet their expenses. This will lead to people spending a lower amount of money on consuming good and services and thus economic growth will slowdown further. It might not be surprising to see economic growth go below the 5% level.
Lower savings will also have an impact on the current account deficit. As 
Atish Ghosh and Uma Ramakrishnan point out in an article on the IMF website “The current account can also be expressed as the difference between national (both public and private) savings and investment. A current account deficit may therefore reflect a low level of national savings relative to investment.” If India does not save enough, it means it will have to borrow capital from abroad. And when these foreign borrowings need to be repaid, dollars will need to be bought. This will put pressure on the rupee and lead to its depreciation against the dollar.
There is another factor that can put pressure on the rupee. In a particular year when the government is not able to procure enough rice or wheat to fulfil its obligations under right to food security, it will have to import these grains. But that is easier said than done, specially in case of rice. “Rice is a very thinly traded commodity, with only about 7 per cent of world production being traded and five countries cornering three-fourths of the rice exports. The thinness and concentration of world rice markets imply that changes in production or consumption in major rice-trading countries have an amplified effect on world prices,” a CACP research paper points out. And buying rice or wheat internationally will mean paying in dollars. This will lead to increased demand for dollars and pressure on the rupee.
The weakest point of the right to food security is that it will use the extremely “leaky” public distribution system to distribute food grains. As Jagdish Bhagwati and Arvind Panagariya write in 
India’s Tryst With Destiny – Debunking Myths That Undermine Progress and Addressing New Challenges “A recent study by Jha and Ramaswami estimates that in 2004-05, 70 per cent of the poor received no grain through the pubic distribution system while 70 per cent of those who did receive it were non-poor. They also estimate that as much as 55 per cent of the grain supplied through the public distribution system leaked out along the distribution chain, with only 45 per cent actually sold to beneficiaries through fair-price shops. The share of food subsidy received by the poor turned out to be astonishingly low 10.5 per cent.”
Estimates made by CACP suggest that the public distribution system has a leakage of 40.4%. “In 2009-10, 25.3 million tonnes was received by the people under PDS while the offtake by states was 42.4 million tonnes- indicating a leakage of 40.4 percent,” a CACP research paper points out.
Bhagwati and Panagariya also point out that with the subsidy on rice being the highest, the demand for rice will be the highest and the government distribution system will fail to procure enough rice. As they write “recognising that the absolute subsidy per kilogram is the largest in rice, the eligible households would stand to maximize the implicit transfer to them by buying rice and no other grain from the public distribution system. By reselling rice in the private market, they would be able to convert this maximized in-kind subsidy into cash…Of course, with all eligible households buying rice for their entire permitted quotas, the government distribution system will simply fail to procure enough rice.”
jhollawallas’ big plan for financing the food security scheme comes from the revenue foregone number put out by the Finance Ministry. This is essentially tax that could have been collected but was foregone due to various exemptions and incentives. The Finance Ministry put this number at Rs 480,000 crore for 2010-2011 and Rs 530,000 crore for 2011-2012. Now only if these taxes could be collected food security could be easily financed the jhollawallas feel.
But this number is a huge overestimation given that a lot of revenue foregone is difficult to capture. As Amartya Sen, the big inspiration for the 
jhollawallasput it in a column in The Hindu in January 2012 “This is, of course, a big overestimation of revenue that can be actually obtained (or saved), since many of the revenues allegedly forgone would be difficult to capture — and so I am not accepting that rosy evaluation.”
Also, it is worth remembering something that 
finance minister P Chidambaram pointed out in his budget speech. “There are 42,800 persons – let me repeat, only 42,800 persons – who admitted to a taxable income exceeding Rs 1 crore per year,” Chidambaram said.
So Indians do not like to pay tax. And just because a tax is implemented does not mean that they will pay up. This is an after effect of marginal income tax rates touching a high of 97% during the rule of Indira Gandhi. A huge amount of the economy has since moved to black, where transactions happen but are never recorded.To conclude, the basic point is that food security will turn out to be a fairly expensive proposition for India. But then Sonia Gandhi believes in it and so do other parties which have voted for it.
With this Congress has firmly gone back to the 
garibi hatao politics of Indira Gandhi. And that is not surprising given the huge influence Indira Gandhi has had on Sonia.
As Tavleen Singh puts it in 
Durbar “When she (i.e. Sonia) refused to become Congress president on the night Rajiv died, it was probably because she knew that if she took the job, she would be quickly exposed. In her year of semi-retirement she learned to speak Hindi well enough to read out a speech written in Roman script, and studied carefully the politics of her mother-in-law. There were rumours that she watched videos of the late prime minister Indira Gandhi so she could learn to imitate her mannerisms.”
Other than imitating the mannerisms of Indira Gandhi, Sonia has also ended up imitating her politics and her economics. Now only if Lal Bahadur Shastri had lived a few years more…
The article originally appeared on on August 27, 2013
(Vivek Kaul is a writer. He tweets @kaul_vivek) 

Political suicide: Why UPA took so long to bite the bullet on reforms

Vivek Kaul
The Congress led United Progressive Alliance (UPA) government has been talking about economic reforms over the last two months. This after more or less ignoring them since May 2004, when they first came to power.
The rupee’s rapid depreciation against the dollar which started towards the end of May 2013, and which could lead to a serious economic crisis, has forced the government to get a tad serious on the reform front.
The recent Indian experience is no different from how things have happened all over the world. It takes an economic crisis or the possibility of one happening, to get economic reforms going, more often than not.
Nevertheless, the question is why wait till things turn really bad and then start implementing economic reforms? As Alberta Alesina and Allan Drazen ask in a research paper titled 
Why are Stabilizations Delayed? Countries often follow policies for extended periods of time which are recognized to be infeasible in the long run. For instance, large deficits implying an explosive path of government debt and accelerating inflation are allowed to continue even though it is apparent that such deficits will have to be eliminated sooner or later. A puzzling question is why these countries do not stabilize immediately, once it becomes apparent that current policies are unsustainable and a that change in policy will have to be adopted eventually.”
The government expenditure in India has exploded over the last few years and more than doubled(gone up by 133%) to Rs 16,65,297 crore between 2007-2008 and 2013-2014. An increase in expenditure has also led to an increase in the fiscal deficit or the difference between what the government earns and what it spends. The fiscal deficit between 2007-2008 and 2013-2014 has gone up by 327.4% to Rs 5,42,499 crore.
It was only recently that the government started taking steps to control the fiscal deficit by trying to control the subsidy it offers on cooking gas, petrol and diesel.
A similar thing has happened on the current account deficit front. 
The current account deficit(CAD) for the period of 12 months ending March 31, 2013, was at 4.8% of the GDP or $87.8 billion. The CAD is the difference between total value of imports and the sum of the total value of its exports and net foreign remittances.
The level of the CAD at 4.8% of GDP was much higher than the comfortable level of around 3% of GDP. It did not reach such a high level overnight. In fact warnings were made as early 2010 on the mess India would end up in because of the high CAD. And that’s precisely what has happened over the last few months. A high CAD has led to a shortage of dollars, which in turn has led to the depreciation of the rupee against the dollar.
But it was only very recently that the government started to make serious efforts on this front to ensure that the dollars kept coming in. One such move was to increase the allowed level of foreign direct investment(FDI) into a host of business sectors.
What India has seen over the last few months is minor economic reform at best and that too has happened because of the ‘possibility’ of an economic crisis. “The fact that broad-ranging, fundamental economic reform is difficult is attested to by the simple observation that it is quite rare,” writes Val Koromzay in a paper titled 
Some Reflections on the Political Economy of Reform.
There are many reasons for economic reforms being as rare as they are. Lets look at some reasons which are valid in the Indian context.
A major reason is the fact that politicians do not see beyond their terms. As Dennis Arroyo writes in a research paper titled 
The Political Economy of Successful Reform: Asian Stratagems “A politician elected to a 3-year term may know that proposed reforms may bear fruit in 8 years. So why scuttle re-election by inflicting temporary economic pain? They would rather optimize over the short term. The benefits of reform do not ripen fast enough to fit the political cycle.”
Lets take the case of allowing FDI in multi-brand foreign retailing (in simple English allow Wal-Marts of the world to operate in India), a decision which was hanging for more than a decade. When FDI was finally allowed into multi-brand retailing in September 2012, it came with too many terms and conditions attached to it. Some of these conditions were done away with recently.
The benefits that India is likely to get in the form of better supply chains, elimination of middle-men, lesser wastage of food, greater consumer choice etc, will not happen overnight. Meanwhile, the government would have to face the heat from opposition parties, traders, and even the press. This largely explains why the Congress led UPA government took a long time to bite the bullet on this front. If the government had made this decision after being re-elected in 2009, the benefits of this reform would have started to become visible by now. As Arroyo puts it “The conventional wisdom is that politicians should use the early honeymoon period to embark on the difficult reforms. The latter will yield fruit by the end of their terms, just in time for the campaign period for reelection. Surprisingly, reform governments do not often take advantage of this window.”
The question is why is the Congress led UPA government so gung-ho now about allowing multi-brand foreign retailing now, given that its benefits are not going to become visible any time soon? One obvious explanation is that India needs dollars that the foreign companies are likely to bring in, if and when they decide to invest in India.
Then again, this is not going to happen overnight. Koromzay has a better explanation for this sudden commitment of the Congress led UPA government to encourage FDI in multi-brand retailing. As he puts it “There is, I think, a definite role for suicide in politics. When a government reaches the point in a reform process where the prospects for re-election become dim, one has much less to lose by continuing with the reform. Politics is a repeated game, and the political parties (if not, usually, their leaders) will be back to fight another election.”
Then there is also the political cost of reform. Take the case of various subsidies that the Congress led UPA government has been doling out over the years. While it is important to cut down these subsidies, it is easier said than done. As William Tompson and Robert Price write in an OECD study titled 
The Political Economy of Reform “Fiscal reforms in particular often impose risky political costs (Sobel 1998). They entail raising taxes, cutting program budgets, privatizing state enterprises, downsizing the civil service, removing subsidies on sensitive goods, and reallocating funds from one region to another. There will be winners and losers, but it is difficult to pinpoint who are the net gainers a priori. The people feel this short-term pain and ignore the long-term gain.”
It is also important that politicians pitching for reforms effectively communicate their benefits. As Tompson and Price point out “ The importance of meaningful mandates makes 
effective communication all the more important. Major reforms have usually been accompanied by consistent coordinated efforts to persuade voters and stakeholders of the need for reform and, in particular, to communicate the costs of non-reform.”
Now when was the last time you saw an Indian politician try and explain the benefits of economic reform to the citizens of this country? As economist Vivek Dehejia told me in an interview that I did for the Daily News and Analysis in August 2012, “What makes reforms more difficult now is what I call the original sin of 1991. What happened from 1991 and thereon was reform by stealth. There was never an attempt made to sort of articulate to the Indian voter why are we doing this? What is the sort of the intellectual or the real rationale for this? Why is it that we must open up?”
It is also important that politicians present a united front on the reform front. As Tompson and Price write “The 
cohesion of the government is also critical. If the government undertaking a reform initiative is not united around the policy, it will send out mixed messages, and opponents will exploit its divisions; defeat is usually the result.” Given that India has had coalition governments since 1996 total ‘cohesion’ has gone missing from its governments, making it all the more difficult to push through economic reform.
What makes reforms further difficult is the fact that there is a section of the population that benefits if the situation continues to be as it is. Take the case of labour law reforms in India. India has too many labour laws which have held back the growth of labour-intensive manufacturing business. Jagdish Bhagwati and Arvind Panagariya in their book 
India’s Tryst with Destiny estimate that there are as many as 52 independent Central government Acts in the area of labour. Over and above this there are some 150 state level labour laws in India.
And this has held back the growth of firms because the extra costs of satisfying labour laws are so huge that the firms choose to stay small. But the moment there is any talk of labour laws being reformed there are protests from labour unions and political parties (to which the labour unions are affiliated).
Bhagwati and Panagariya estimate that India has nearly 47 crore workers. And of this less than a crore (98 lakh to be precise) were employed in private sector establishments with more than 10 workers in 2007-08. And it is in the interest of these workers and the political parties their unions are affiliated to, that the status quo continues. As Koromzay puts it “reducing rents in the interest of greater efficiency is a task that can be counted on to evoke the opposition of those whose rents are at risk.”
Given these reasons economic reforms are rare and are only pushed through when a country is facing an economic crisis or is likely to face one. India is in a similar situation right now.

Disclosure: The idea for this article came from Vivek Dehejia’s column Why are Reforms Difficult?published in the Business Standard.
This article originally appeared on on August 8,2013
(Vivek Kaul is a writer. He tweets @kaul_vivek) 

Why Indian businesses don't create enough jobs

jobsVivek Kaul
Neelkanth Mishra, the India Equity Strategist for Credit Suisse, has written a very interesting column in today’s edition (August 6,2013) of The Indian Express. In this column Mishra writes “It shocks most people to hear that India had 42 million enterprises in 2005, but that’s what the Economic Census found. This is when, even as late as 2012, India had less than a million companies.”
What this means is that the average business in India is very small in size. “In 2005, each enterprise on average employed a shockingly low 2.4 people. Almost 40 per cent of the enterprises were in trade (retail, wholesale, or repair of motor vehicles), with average employment of 1.7 people! Truly mom & pop, father & son, and one-man enterprises (the statisticians have a better name for them: “Own Account Enterprises”). Even in manufacturing, which is 20 per cent of all enterprises, the average employment is merely three,” writes Mishra.
Given this small size of Indian businesses, the salaried class still forms a small proportion of the population. As
the Report on Employment and Unemployment Survey 2011-2012 “In the rural areas, 11.1 per cent households are estimated to be having regular/wage salary earning as major source of income. In the urban areas, 42.3 per cent households are estimated to be having regular wage/salary earnings as major source of income.”
The report also found that “50.8 per cent or majority of the households are found to be having self employment as the major source of income.” Not surprising, given that small firms cannot create jobs and thus people have to fend for themselves.
These numbers need to be read along with the numbers and arguments provided by economists Jagdish Bhagwati and Arvind Panagariya in their book
India’s Tryst with Destiny – Debunking Myths that Undermine Progress and Addressing New Challenges. As they write “The number of workers in all private-sector establishments with ten or more workers rose from 7.7 million in 1990-91 to just 9.8 million in 2007-2008. Employment in private-sector manufacturing establishments of ten workers or more, however, rose from 4.5 million to only 5 million over the same period. This small change has taken place against the backdrop of a much larger number of more than 10 million workers joining the workforce every year.”
What all these numbers clearly tell us is that Indian businesses have not been able to create enough jobs. And this explains to a large extent why 50.8 per cent of households are self employed.
A major reason for the lack of creation of jobs is the fact that an average Indian business was and continues to be very small. As Bhagwati and Panagariya write “employment in India is heavily concentrated in the small enterprises. While the large enterprises have some presence, the medium size enterprises are entirely missing.”
Research and data prove this point even more conclusively. “An astonishing 84 per cent of the workers in all manufacturing in India were employed in firms with forty-nine or less workers in 2005. Large firms, defined as those employing 200 or more workers, accounted for only 10.5 percent of manufacturing workforce. In contrast, small- and large-scale firms employed 25 and 52 per cent of the workers respectively in China in the same year,” write Bhagwati and Panagariya.
What is true about manufacturing as a whole is also true about apparels in particular,which is highly a labour intensive sector. 92.4% of the workers in this sector work with small firms which have forty-nine or less workers. Now compare this to China where large and medium firms make up around 87.7% of the employment in the apparel sector.
This leads to poor performance on the export front as well. “The near absence of medium and large firms in apparel, especially when compared with China, is clearly linked to the poor performance of this sector. The inability to massively capture the export markets in this major sector with comparative advantage is linked to the poor performance of labour-intensive manufacturing and, therefore manufacturing in general. The ultimate reason why growth has not been as inclusive in India as in South Korea,Taiwan and China remains the absence of large-scale firms in labour-intensive sectors in India,” write Bhagwati and Panagariya.
This lack of inclusive growth comes from the tendency of Indian businesses to remain small. Since businesses continue to remain small they do not generate as many jobs as they could. Ultimately, maximum jobs in any economy are created when small firms graduate to becoming medium firms and then finally large firms.
This really hasn’t happened in the labour-intensive manufacturing sector in India. The labour intensive sectors of manufacturing accounted for around 12.94% of the gross value added in the organised manufacturing in 1990-1991. This number rose to 15.9% in 2000-01 and then fell back to 12.91% in 2003-04. “And, in all likelihood,this share has further declined since 2003-04. In fact, some of the fastest growing industries between 2003-04 and 2010-11have been automobiles, two- and three-wheelers, petroleum refining, engineering goods, telecommunications, pharmaceuticals, finance and software. All these sectors are either capital intensive or skilled-labour intensive,” write the authors.
A major reason behind businesses in labour intensive sectors continuing to remain small are the labour laws. Labour comes under the Concurrent list of the Indian constitution, meaning both the state government as well as the central government can formulate laws in this area. “The ministry of labour lists as many as fifty-two independent Central government Acts in the area of labour. According to Amit Mitra(the finance minister of West Bengal and a former business lobbyist), there exist another 150 state-level laws in India. This count places the total number of labour laws in India at approximately 200. Compounding the confusion created by this multitude of laws is the fact that they are not entirely consistent with one another, leading a wit to remark that you cannot implement Indian labour laws 100 per cent without violating 20 per cent of them,” write Bhagwati and Panagariya.
And the presence of these ‘burdensome’ labour laws explains to a large extent why entrepreneurs in labour intensive sectors like apparel, where labour costs account for 80 per cent of the total costs, choose to remain small. As Bhagwati and Panagariya write “As the firm size rises from six regular workers towards 100, at no point between these two thresholds is the saving in manufacturing costs sufficiently large to pay for the extra cost of satisfying the laws”.
The authors recount an interesting story told to them by economist Ajay Shah. Shah, it seems asked a leading Indian industrialist about why he did not enter the apparel sector, given that he was already making yarn and cloth. “The industrialist replied that with the low profit margins in apparel, this would be worth while only if he operated on the scale of 100,000 workers. But this would not be practical in view of India’s restrictive labour laws”.
There is a problem and there is a solution. But every time there is some talk about labour reforms being reformed, political parties (almost every one of which has a labour union) start protesting. But what they don’t realise is that by protesting they essentially ensure that firms in labour intensive sectors continue to remain small. And that means creation of fewer ‘new’ jobs.
The article originally appeared on on August 7, 2013 

(Vivek Kaul is a writer. He tweets @kaul_vivek)