The Political Fix: Why Indian states are junking labour laws in the middle of the Covid-19 crisis

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The Big Story: Ctrl-Alt-Delete

As of May 10:
Covid-19 cases in India: 62,939 (up from 40,263 last week)
Recovered: 19,357 (up from 10,885)
Deaths: 2,109 (up from 1,306)

It is a cliche by now to agree that India reforms in a crisis.

The trope is most strongly linked to the 1991 Balance of Payments crisis, which led to the process that is now commonly known as the “liberalisation” of the Indian economy.

So this week as India’s states announced a number of changes to labour laws, TV channels and newspapers spoke of major “reforms” in the middle of the coronavirus crisis and of chief ministers “stoking the engine” and “blazing a trail for the rest of India to follow”.

Because of the 1991 example, the term “reforms” tends to conjure up memories of dismantling of the restrictive Licence Permit Raj (which, as Rahul Jacob’s superb piece explains, is actually making something of a comeback) and changes to laws that allow private enterprise to thrive. The English-language media usually portrays such changes as being indisputably beneficial for Indians.

But can you actually use the word “reforms” to describe Uttar Pradesh’s actions under Chief Minister Adityanath? To attract investment, Adityanath is giving businesses and factories in his state a three-year regulatory holiday. The Purge: Labour, if you will.

“The Uttar Pradesh government has approved an Ordinance exempting businesses from the purview of almost all the labour laws for the next three years, to give a fillip to investment in the state, affected by Covid-19...
The government had cleared the “Uttar Pradesh Temporary Exemption from Certain Labour Laws Ordinance, 2020” to exempt all establishments, factories, and businesses from the purview of all but four labour laws, for three years.”

Laws connected to industrial disputes – including over layoffs and compensation – and the working conditions of workers, health and safety mandates, maintenance of facilities like drinking water, canteens, rest rooms and crèches and inter-state worker regulation are all defunct for the next three years. The list is long.

As expected, this has elated the people who believe that labour laws are the main barrier holding back Indian industry. (Never mind the fact that many of those who hold this belief cannot actually point to laws that have proven to be restrictive, as our report from 2014 shows.)

Meanwhile, those who pay attention to the actual conditions of labour are horrified. This “turns the clock back 100 years”, one said. Even the Bharatiya Mazdoor Sangh, the labour wing of the Rashtriya Swayamsevak Sangh, the parent organisation of the ruling Bharatiya Janata Party, has criticised the decisions. They are a “bigger pandemic”, said the Sangh.

And here is a comment from the Observer Research Foundation’s Gautam Chikermane and entrepreneur Rishi Agrawal, neither of whom are exactly bleeding-heart labour activists:

“We wonder what this policy will deliver to Uttar Pradesh. Even if we believe that these suspensions are fine and pass the Union and judicial muster, we fail to understand what Adityanath will get or how Uttar Pradesh will benefit by designing a policy for just three years or how such a policy will attract long-term capital. Investors need policy stability, consistency and predictability. A three-year window of regulatory concessions add up to nothing for any new and serious investor.”

Chikermane and Agrawal compared Uttar Pradesh’s move to changes put in place by the Madhya Pradesh government, insisting that the latter’s policies make much more sense.

In the face of Adityanath’s wrecking ball, Madhya Pradesh Chief Minister Shivraj Singh Chouhan is carrying out a more targeted demolition of labour laws. The state’s new rules are aimed at significantly reducing the regulatory processes a business has to undertake, particularly if it is new.

Critics have long argued that many of these laws actually work against the interests of labour, and instead only enable rent-seeking behaviour. These people believe that revoking some of those laws will allow allow private industry to flourish, thereby giving workers more choice and benefits.

But, in addition to removing some of the regulatory requirements, Madhya Pradesh will let companies hire contract workers for a longer duration, allow them not to recognise trade unions for collective bargaining in a number of sectors such as textiles, cement and auto, and not provide any mechanism for raising industrial disputes for new firms.

Uttar Pradesh and Madhya Pradesh aren’t the only ones. Other states have done away with the eight-hour work day, and are trying various alterations of labour laws.

Shankar Gopalakrishnan, who studies labour issues, has a useful thread about the standard narratives surrounding labour law changes in India and how the laws hurt workers in the unorganised sector, even if they don’t apply to them.

The Economic Times’ TK Arun argues that the decisions reflect what sort of aspirations Indian states seem to have: “If the ambition is to assemble sweatshops that produce stuff to be sold in the local weekly market, you have the kind of labour laws the leaders of Uttar Pradesh and Madhya Pradesh champion.”

And Saurabh Bhattacharjee reiterates in Scroll.in, “A study of four states – Rajasthan, Uttar Pradesh, Andhra Pradesh and Madhya Pradesh – by the VV Giri National Labour Institute found that ‘amendments in labour laws neither succeeded in attracting big investments, boost to industrialisation or job creation’. Regression analysis studies of Indian experience have shown that ‘growth in labour market flexibility does not have any statistically significant influence on employment growth’.”

This context is important because a number of states are making these changes with an idea of attracting business that would have otherwise gone to China, which we wrote about two weeks ago.

At least some of this seems like wishful thinking, considering the economic mismanagement India has seen over the last six years, coupled with the immense state arbitrariness faced by businesses during lockdown. This doesn’t exactly reflect an ease of doing business.

There is an unsaid aspect of the “India reforms in a crisis” trope. It usually means that it is also a time where opposition to these changes – the kind of pushback that makes it hard for those laws to be changed in normal times – has been nullified. That may be seen as a good thing if its effect is to end rent-seeking behaviour or undermine vested interests.

But when it takes on workers at a time when people simply don’t have the opportunity to take to the streets to express their opposition, this could seem like callous exploitation to many people. And it tells us even more about how pandemic politics, the subject of last week’s newsletter, may play out.

Missing middle

The Centre under Prime Minister Narendra Modi during this crisis has been full of contradictions, if not outright arbitrariness. On one day, it angrily tells Kerala that it is not allowed to open bookshops. Two days later, it makes opening bookshops legal.

The Central government has tried to dictate much of how India has responded to Covid-19, a damaging centralised approach that we wrote about a few weeks ago. Yet it has been absurdly absent when it comes to other issues.

The migrant worker crisis is instructive.

Last week, Karnataka all but acknowledged that it sees migrant workers as machines or beasts of burden, not citizens. Right after a meeting with real-estate developers, Chief Minister BS Yediyurappa decided to cancel trains for this vulnerable group to go home. As I wrote, the comparisons to bonded labour and begaar were not far-fetched.

BJP Member of Parliament Tejasvi Surya (whose past bigotry has been so embarrassing that the Indian government asked Twitter to take down one of his posts) sold the idea as a “bold move” that would help migrant labourers “restart their dreams”.

Thankfully, public pressure resulted in the policy being reversed.

Other states have also sparred over everything from the cost of screening to the responsibility for offering care to the migrants as they attempt to get home in the middle of this crisis. And as a result, with even more setting out on foot or on perilous road journeys, we get news of a cargo train running over 16 workers and an overturned truck killing six.

Meanwhile, the Centre – which is squarely responsible for inter-state travel and whose logical role would include speaking up for citizens if individual states are squabbling – has left it to various chief ministers to deal with this politically complicated situation. This fits in with the Modi-gets-the-credit, states-get-the-blame approach that we have seen.

Missing middle 2

It has been 45 days since the Finance Ministry last announced a package to address the economic fallout of India’s harsh lockdown measures, and that was mostly a reworking of existing schemes to give food and cash to the poor. There have been reports for weeks about an actual stimulus package for industry and small businesses. Undoubtedly, one is in the works. Yet the delay has already cost India.

Meanwhile, KV Subramanian, Chief Economic Adviser to the Prime Minister thinks India’s GDP growth will be 2% this year, when most other countries are expecting zero or negative growth. (For context, his prediction for last year’s growth was two percentage points below what even the finance ministry eventually expected). His talk of “no free lunches” have made many wonder if India will go for a fiscally conservative response to the crisis.

Shah’s health

Amit Shah is unhappy.

The Union Home Minister has been relatively silent over the last few months, going back to the Centre’s messaging around the Delhi riots. This was quite a change compared to 2019, when Shah almost seemed more prominent than Modi.

The Covid-19 crisis too has seen Shah at most operating in the background, with the occasional photo op or Home Ministry press release. This led to a few theories doing the rounds, with people speculating that he is unwell.

Now some of those people have been detained. And Shah put out a statement asking people to mind their own business, adding that he believes speculation about people’s health only makes them stronger.

Lockdown ending?

The next deadline for the Centre to decide on how India takes on the Coronavirus Crisis is May 17, when the third phase of the lockdown is set to end. Modi will be speaking to the chief ministers on Monday, which should offer some sense of what the way forward looks like.

Most indications suggest that, after more than seven weeks of lockdown (with the last two seeing considerable relaxation on the extremely harsh measures of the first five), India will open up. Indian Railways has already said it will restart some services.

However, this will take place despite coronavirus cases continuing to grow and questions about whether enough was done to prepare in the interim.

We considered, on this newsletter a few weeks ago, the complication of India moving into an “early” lockdown, when it had just 500 cases. That seems even more stark now. As I write in this long look at the lockdown and what comes after, the simple answer for why India is opening up now might not be because of any specific gains against the virus or health preparedness, but simply that it cannot afford to be shut for much longer.

“It is important that we learn to live with the virus,” said Health Ministry Joint Secretary Lav Agarwal, last week, admitting as much.

Flotsam and jetsam

Former Prime Minister Manmohan Singh, 87, has been admitted to the hospital after he complained of uneasiness. Former Chhattisgarh Chief Minister Ajit Jogi, 74, slipped into a coma.

Indian and Chinese troops got into fisticuffs on the Sikkim border, though the situation appears to have been resolved. India’s Met department is now going to offer weather forecasts for areas of Pakistan-occupied Kashmir, resulting in even more India-Pakistan chatter than usual, especially for Gilgit Baltistan.

Maharashtra Chief Minister Uddhav Thackeray’s political pickle – the fact that he isn’t yet actually an MLA – appears to have been solved. A gas leak at a plant that was reopening after the lockdown in Andhra Pradesh killed 11 people. Moody’s says India’s GDP growth will be zero this year and that the country’s sovereign rating could be downgraded further.

Ground Report

Shoaib Daniyal has a report on how West Bengal is only paying lip service to the idea of getting back its migrants, since the state fears a further spread of Covid-19 if large numbers return.

The piece has this excellent anecdote, when a Gujarat official asks Daniyal to do some inter-state coordination:

“To make matters worse, Bengal has not responded to requests from other states, when it comes to taking back Bengali workers. On May 4, Karnataka complained that Bengal was refusing to give consent for trains. Maharashtra made the same allegation on May 6.
Harshad Patel, the Gujarat government’s nodal officer for West Bengal migrants accused the Trinamool government of stonewalling requests to accept migrant trains. ‘We are not able to connect with them,’ complained Patel, when contacted by Scroll.in. ‘There is no response and no consent from West Bengal. We cannot send trains till they agree.’
‘Ask them to at least respond,’ he continued. ‘If they give consent, we can plan trains and request the railways.’

As always, this is where I remind you to contribute to our Ground Reporting fund, or subscribe to Scroll+ if you want to help us ensure that we can continue to bring you quality journalism in these testing times.”

Linking Out

India is using criminal provisions for what is essentially economic strategy. “Economic policy works well when there is the slow, intellectual, consultative process of understanding problems, undertaking cost benefit analysis, finding the least coercive intervention, and making small moves,” writes Ajay Shah in the Business Standard. “The Disaster Management Act, 2005, does not have these checks and balances.”

A massive repatriation effort is underway, as India attempts to get citizens home from abroad. Though the Vande Bharat mission is being used to generate publicity for the Modi government’s efforts, it is full of challenges, writes Constantino Xavier in the Hindustan Times. Nikhil Eapen on Article 14 writes about how the ticket prices are too steep for many Indians who work in the Arabian Gulf.

We need to pay close attention to how people save their money. In Mint, Niranjan Rajadhyaksha savings data will tell us what effect the crisis has on expectations for the future.

Is Nepal falling even more out of India’s orbit? Gautam Sen explains why he believes this is so on New World Order, even as the two countries get into another map-based squabble.

Nearly 40% of Aaadhar-based payments failed in April. Malavika Raghavan and Samir Shah write in Mint about how this makes life worse for the vulnerable.

“When all the smoke and dust clears, state government finances will be in shambles.” So says Pronab Sen on Ideas for India, predicting that states will have to go to the Centre with the begging bowl.

Should India allow employment of MGNREGS workers in private agricultural activity? Roshan Kishore in the Hindustan Times argues that it would be a non-inflationary way to support rural India.

Read this report on the “precariat” in the time of the pandemic. Forty economists offer up analysis of the trade and foreign policy effects of Covid-19 on India.