Covid as opportunity: UP pushes massive agricultural and labor reforms

There is a way to turn the Wuhan Coronavirus into an opportunity. The crisis has finally given the Indian state the license to cut through the license quota permit raj that has been India’s greatest bane. And it is thrilling to see Uttar Pradesh Chief Minister Yogi Adityanath rise to the challenge.

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Big Bang reform. Just three labor laws remain on the books, dealing with basics such as protection of women and children, rights to timely payment of wages and workers compensation. But beyond that, nothing. Uttar Pradesh is open for business.

Welfare schemes, direct benefit transfers, etc, all have their place in keeping India afloat in crisis times. But those are more like life boats. There will never be an alternative to wealth creation. To get India back on track after the lockdown, the only way is to get business back on its feet.

The big bang labor reforms come just days after Yogi Adityanath announced sweeping changes to laws dealing with agricultural markets.

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To understand what is happening, one has to have a working knowledge of the agricultural procurement system in our country. Generally speaking, a farmer must bring their produce to a board known as an Agricultural Produce Market Committee (APMC) in order to be sold. In theory, the purpose of such a board is to protect farmers from “exploitation” by private purchasers. In practice, like every other socialist setup, these boards are hotspots of corruption by local politicians. Not surprising, because they have immense power over the lives of farmers.

The new laws in Uttar Pradesh now exempt 46 agricultural items from these boards. First of all, they allow direct procurement from farmers. Then, they let the private sector to operate mandis of their own. Additionally existing warehouses and cold storages can now operate as market places in themselves. And farmers will no longer be at the mercy of the local APMC, because they have a single license to sell at any marketplace in the state.

In other words, this shakes up the village economy and strikes at the heart of corruption ridden monopolies.

It must be noted that Madhya Pradesh passed a similar law just days ago.

A crisis is also an opportunity to change the world order. At the end of World War 2, the European empires collapsed and a vast swathe of independent nations emerged, from Asia to Africa. Among them, our own. The United States seized the moment and assumed full leadership position in the world. Over the next several decades, the US established itself as the global leader in industry, innovation and culture.

Let’s be real. As the world entered a period of overall peace (however tense), following World War 2, India missed out. We could have used our newfound independence to become like Singapore. But we did not. Not just Singapore: one by one the ‘Asian tiger economies’ left us in the dust. We were too caught up in socialist superstitions to notice.

The boom that China experienced after 1979 could well have happened in India. Sigh.

There are three further observations to make here. First, over the next few days, you will see comrades begin an unprecedented level of chest-beating over these agricultural and labor law reforms. We have to be wary of their propaganda and guard against it. In a democracy, a government may be forced to respond to perception as much as it has to respond to reality. The comrades are very well trained at catching eyeballs with images and videos.

I say ‘trained’ for a reason. Obviously, there are vested interests of foreign governments in holding India back. They have a well paid and well trained shadow army of “activists” operating within India. Which foreign government? Let’s just say a certain country that shares a land border with India.

Second, in order to develop towards a $5 trillion economy, India needs more “industrialized states.” Roughly speaking, India’s post 1991 economic boom has been concentrated in some states in the West and the South. To become a superpower, we are going to need more and bigger engines. And they don’t come any bigger than Uttar Pradesh with its 23 crore population. With a revamped legal framework for labor, land and agriculture, Uttar Pradesh has a huge opportunity to become an engine for wealth creation.

Third, in Uttar Pradesh, we see the clear advantage of having a powerful government with a big mandate. This cushions the government from short sighted political interests. And gives it room to make big decisions, bring about structural change. On the other end, you have the shaky multi-party government in Maharashtra, where the drivers seat is all but empty.

At the moment, nobody seems to like the year 2020. A hundred years from now, people will remember 2020 as the year of the virus. But can we turn it around? The world remembers 1979 as the year China woke up. Can we make 2020 the year that India seized its destiny?

 

 

 

8 thoughts on “Covid as opportunity: UP pushes massive agricultural and labor reforms

  1. This is a tremendous move by Yogi Adityanath. It will open up the route for Uttar Pradesh to become a trillion dollar economy by itself. If Uttar Pradesh can become a large version of Singapore, it will have a ripple effect in the neighbouring states of MP(already happening), Bihar, Rajasthan, Uttarakhand, maybe even Nepal. Maybe not in the freebie state of Delhi but that is okay.

    I recently read that manufacturing labour cost in India is $5/day as opposed to $28/day in China. With this kind of labour arbitrage, there shouldn’t be a single factory left in China. It was only because Indian states were stuck with corrupt dynasties that nothing moved here. And now Yogi has set the ball rolling, other states will have to follow or get left behind.

    The comrades have already started whining. Yechury put out a tweet trying to drive a wedge between wealth creation and value creation. The comrade dumbheads will never realize that wealth and value creation are highly correlated. Every Marwari child in the womb and the Hindu child in the cradle knows this but some facts will never make it to the thick skulls of the comrades.

    Uttar Pradesh is the cradle of Indian civilization and Hinduism. A prosperous and rich Uttar Pradesh will power the Indian economy as well as Indian culture. Looking forward to the days when labor from South India will migrate to UP. With Yogi at the helm, that day is not very far off.

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  2. I have three observations from the recent moves in UP and MP. All three are relevant to the BJP generally and to the BJP states in particular. Here they are:

    1. Communication, communication, communication

    This is one area that the illiberal liberal cohort and the SCUM media will seek to run an end-run around the announced reforms. They will leverage everything – legitimate social media, illegitimate and fake news social media, the biased prognostications of MSM, and the support of the so-called “intellectual” activitsts. Expect our friends Rajan, Banerjee, Sen, et al to be roped in and pronounce grave and nasty effects of these reforms. That’s where both the state and the centre have to set in motion a blitzkrieg of communications and village-level town hall meetings to emphasize the huge expected investments and jobs, money in the pockets, higher returns to farmers, and lower prices overall. They will have to do this from Day 1, meaning now, and go at the “other” side hammer and tong. Take the initiative away from them.

    2. Enlarge the field of reforms

    Right now, UP has announced 46 exempt items in agri trade away from the APMC mandis. They should, before the dust has settled as also to unsettle the opposition, hugely expand the scope of reforms. First announce, in a week or so, that this would cover all agricultural produce, not just the 46 announced at first. Simultaneously, announce huge incentives and tax breaks for corporations to set up warehouses, cold chain, and modern supply chain backend going into each and every village in the next five years – and get the private sector to start investing now. Finally, go the whole hog and abolish the APMC. As for the labor reforms, follow up by removing the three year span and make it permanent. As an incentive, announce that every adult laborer not without a job would be supported with a minimum safety net income (not too large that individuals are attracted to not seeking a job and not too small that they cannot afford to buy the essentials of life), life insurance cover, minimal preventive health cover, and a minimum pension at some retirement age. These direct benefits to the citizens would ensure the government has their full support.

    3. Rein in the bureaucracy

    The biggest challenge to reforms in India, I am convinced, is the hide-bound bureaucracy that sees itself first. The state government should put all babus on notice: toe the line and implement – and implement quickly – else they would be compulsorily retired for reasons of disobedience (and create the laws for that). The bureaucracy represents a larger problem, for which the centre should be brought in. If a state bureaucrat of the IAS cadre is working at cross-purposes, the centre should give them marching orders. For example, I cannot understand how the Centre can stand mute to Mamata’s chief secretary or chief of police acting against central orders. They are only deputed to the respective states and, sure, they need to report to their political bosses in the states. But when their actions run contrary to the central government’s actions, the centre, not the state, should take precedence. Such babus should be dismissed. On a longer term, the ratio of cadre civil service and experts drawn from the private sector should begin to swing away from the cadre. In time, what we mean by civil service – generalists – should only occupy lower and mid-level positions.

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  3. CM Yogi means business in UP. He has set his sights on attracting businesses looking to shift from China. One of the disincentives for investment in manufacturing units in India are the arcane and myriad Labour Laws that were passed when India was in thrall of Nehruvian socialism. Indian commies and leftists are financed by foreign interests (yes the chief among them being the country that shares land border with India to the east). They act as cats paw for these foreign interests in keeping India down. A good example is the so called NGO led agitation against the Sterlite plant in TN. India had become self sufficient and even exported copper to other countries. Sterlite had started exporting to countries in ME, Africa etc. but the foreign funded NGO led the agitation led to the closure of Sterlite plant in TN. Now India is a net importer of copper. We are even importing from China. Is it a coincidence?

    India is a soft state as it cannot will itself to bring down the hammer and crush foreign funded anti-India NGO agitators from ruining India’s economic potential. The Indian judicial system also takes enormously long time to dispose cases but is quick to accept PILs without any vetting of the vested interests trying to destroy Indian economic potential. I think it is time the parliament passes laws that expressly prohibits PIL as a medium of filing litigation on matters that affect Indian economic, financial and national security interests. There is no other way. The judicial system has invented the PIL which has not been defined in any court procedures or laws of the land. What is the Law Minister doing? What is the LM waiting for? Is he not even aware that PILs are being used by vested interests to destroy India’s economic potential and hurt national security?

    The leftist commie cabal is well entrenched in many segments and is using insider information to wreak havoc on India’s economic potential in a systematic and targeted manner.

    Slightly off topic: What is the opinion of other readers about the lowering of interest rates in India? I believe a large section of India’s poor and middle class are risk averse and rightly so as there is no social security to back them up in case they lose their savings. Therefore, they depend on interest on bank deposits as a primary source of income generation from their savings. More particularly, the retired class is mostly dependent on interest from bank deposits. So any drastic decrease in interest rates (now its around 6% -7% already which is much lower than what it was a year or two back) is likely to affect the income level of many in the poor and middle class families. The western model of low interest rates is unsustainable in India at least for the next two decades. Therefore, we need to have a different model. People generally in India do not like to borrow to spend. They save and spend a portion of their savings for their needs. India does not have a consumerist culture of spending today tomorrow’s earnings. So India needs to evolve a savings led growth model that is uniquely suited to us. Indian people are good at savings and are more than happy to park it in banks. They also want a reasonable interest rate to meet their income needs. There is no class of investment in India that is easily accessible and suitable for risk averse/very low risk threshold people (who are the majority) other than bank deposits. This is a very big topic so I will leave it at that.

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    1. On the interest rates, as long as the real interest rate (bank interest rate – inflation) is in the 2-4 % range, it should be fine. During UPA2, the real interest rates were negative. And soaring inflation wrecked the retirees. I know few people who retired in 2004/2005 with about 30-40 lakh rupees who are struggling now because of the high inflation in UPA2.

      In other words if inflation starts soaring and real returns become negative, people flee to assets like gold to retain the purchasing power of their money

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      1. How about interest rate subsidy to banks for higher interest rates upto a certain threshold limit for deposits for putting money in the hands of poor and middle class? Is it viable?

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        1. Interest rate subsidy is a good idea but will be gamed by people who will start putting money into their relatives or friends account to get extra interest. Politicians will game it even more. But if the government badly needs deposits to kickstart the economy, then this might be a viable route. Provided they can stop public sector banks again lending to the Mallya types.

          A lot of the lower middle class buys gold whenever possible which is not a bad thing. People need to protect their wealth, cannot rely on any government even if it is a good government.

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  4. Any reform that breaks the back of the Commie backed Unions and corrupt middlemen are welcome anytime. Once the BJP ruled states’ farmers start doing good, other BJP non-ruled states’ farmers will demand such reform. Such reform is against the blood of Congress/TMC etc. So advantage BJP.

    Slightly off-topic: We read that America is approaching 20 percent unemployment, other countries must be in the same situation and India may have 25-30 percent unemployment. That means some 70-80 percent are still employed, yet we keep reading that GDP would be zero or even negative. Does that mean only 20-30 percent of the people are contributing to GDP?

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    1. GDP growth could go negative, not the GDP itself. This is because jobs are going to be lost and those who loose jobs are going to consume less. Even those who have jobs will save for the rainy day and consume less. As consumption goes down, there is a ripple effect, more jobs are lost and so on till the cycle is broken.

      Even if all the people worked at the same level of productivity as last year and jobs stayed same, GDP growth will be zero. Positive GDP growth means increase in productivity and value creation translating into increase in wealth.

      Governments typically lower interest rates or even take it negative to boost consumption. Essentially making it easy for people to keep borrowing and consuming. Before the 2008 crisis, people with no jobs were given millions of dollars to buy homes in the USA. it did not end well.

      Countries like China and US have taken on lots of debt to keep their growth going. But what happens then is that a lot of taxes just goes into payment of the debt and healthcare, education and other areas suffer. One in ten dollars that USA takes in as tax goes to repaying debt. The debt UK took during World War 2 was fully paid only in 2006, two generations of English people worked to clear the debt.

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