What use is a 10% employment quota for economically disadvantaged when there are no jobs?

Early on in primary school, mathematics teachers explain to their pupils that zero remains zero if it is multiplied by any number whatsoever. Children also learn that a negative number multiplied by a positive number yields a negative number as the product.

The Bharatiya Janata Party seems to be hoping that a large proportion of Indian voters will have forgotten these basic rules. If you do not assume that level of illiteracy, the proposal of 10% reservation for the economically disadvantaged does not make sense.

In the past year, over 11 million jobs have been lost in India as the ill-effects of demonetisation and a badly designed Goods and Services Tax continued to hobble economic growth. This makes the proposal utterly meaningless in practice. If you cannot create jobs and lose them instead, reservations are just a joke.

Election jumla?

The job loss data is only one sign that the reservation proposal is just another election jumla, much like the famous promise of 2 crore jobs that the BJP made on the campaign trail in 2014. The party also made the hilarious commitment that it would magically transfer Rs 15 lakh into everybody’s bank account.

The details of the proposals of The Constitution (124th Amendment) Bill, 2019 passed in haste by both Houses of Parliament are inherently absurd on multiple grounds. It would be unconstitutional going by the judgment of a nine-member Supreme Court bench. It is unlikely that the constitutional amendments will pass judicial scrutiny.

Union Minister Vijay Sampla told The Hindu that those who earn less than Rs 8 lakh per year and own less than 5 acres of land qualify for the quota. That is way over the Rs 3 lakh limit above which income tax is payable. At Rs 2,192 per day, it is orders of magnitude more than the Rs 32 per day (rural) or Rs 47 per day (urban), which is accepted as the poverty line cut-off for government subsidies and benefits.

Clearly, Modi badly needed something to talk about as he hits the electoral campaign. But the desperation to push such an important constitutional amendment in this unseemly rush would not have been necessary if the BJP had shown the ability to exploit three years of benign oil prices and strong global growth to generate growth and jobs. Unfortunately for the electorate, there are other signs that the wheels have come off the economy.

Disinvestment sham

On January 7, the Central Statistics Office reluctantly downgraded advance gross domestic product growth estimates for 2018-’19 to 7.2% from the earlier estimate of 7.4%. That new figure will probably need another, more severe downgrade. Investments in October-December hit a multi-year low – not a good sign for growth, jobless or otherwise.

The Central Board of Direct Taxation chairman says direct tax collections will be lower than the Budget estimates. Goods and Services Tax collections are running at close to 40% below estimates for the year so far. The full-year fiscal deficit estimates were exceeded by 15% in November 2018, four months before the end of the financial year.

Along with the job losses, these are signs that the 2018-’19 Budget estimates were optimistic. In its desperation to raise resources, the government has eroded the autonomy of the Reserve Bank of India and turned the disinvestment programme into a sham.

A large proportion of disinvestment revenues raised will come from the government selling its shares in one public sector unit to another public sector unit, which will take loans if necessary to purchase those shares. The money goes straight into government coffers – the government retains control of both public sector units, the company repays the loans and minority shareholders are treated with contempt.

This concept placed a huge burden on the Oil and Natural Gas Corporation Limited in the last financial year (2017-’18), when the public sector unit was forced to buy the government’s stake in Hindustan Petroleum Corporation Limited for Rs 36,795 crore, taking a loan of Rs 24,000 crore for the purpose of funding this transaction. This year, ONGC will also buy back shares for about Rs 4,000 crore.

This year, the Power Finance Corporation-REC (formerly Rural Electrification Corporation) deal will also take place, where the Power Finance Corporation will buy REC for Rs 14,000 crore, taking out a loan, with both companies suffering ratings downgrades in the process. Those loans go directly to the government account, while the company takes on the burden of repayment. No privately-owned firm could have gotten away with this.

The new quota reservation is certainly not rational in economic terms. Nor is it very realistic to expect that this legislation will actually come through the system, what with the need for constitutional amendments. But it may just work in electoral terms – after all, people believed in that Rs 15 lakh transfer to each account and the promise of 2 crore jobs.