Agriculture and Labour Reforms in India




Key Takeaways


Currently we are seeing radical market reforms in Madhya Pradesh. Farmers could sell only to the nearby mandi/APMC which are are run by local strongmen and middlemen. 


APMC will lose the tight control of agriculture and farmers. E-NAM will now take care of supply and demand activities. Any storage company can now act as a Mandi. 


UP has also done similar reforms. But it has also taken other steps like categorising 46 fruits and vegetables can go and sell anywhere. 


India has seen the APMC way and it has not worked for the farmers. The old system didn’t bring prosperity. If you give farmers more channels to distribute it will benefit them.


In Madhya Pradesh, Factories act 1948 will now apply only to 50 people and more. Smaller factories will get more flexibility and much lesser regulations. New and old manufacturing companies will be benefited due to this reform. 


UP reforms have exempted all but 4 labour laws for manufacturing industries.


Gujarat has left only 3 basic acts to be applicable for 1200 days. At present large US European countries want to move out of China and Gujarat as an investor friendly state is always ahead.


 Some of the laws in UP need to be introspective in 3 aspects and will probably change:

  • Protecting women and child workers

  • Retiral money

  • Safety and welfare 


Labour laws used to apply only to 10% of the labour population and hence 90% per cent don’t have any protection anyway.  


2018-19 economic survey says Rajasthan has helped grow the MSME manufacturing sector and led to more jobs. 


The construction of old laws in the origins itself makes it so that there is a rift between the businessmen and the workers. The conflicting relationship between workers and businessmen should not exist for a successful business. 


The only people who benefit from strict laws are business consultants and inspectors. The laws make it hard for even smart people to figure out what is happening in the industry and they go to inspectors and consultants for help. 


Intro 


Guests:

Ashish Chandokar 

Rajeev Mantri 

Vivek Khaitan 

Host: Roshan Cariappa


Agri Reforms of Madhya Pradesh and Uttar Pradesh


Currently we are seeing radical market reforms in Madhya Pradesh. Farmers could sell only to the nearby mandi/APMC which are are run by local strongmen and middlemen. 


These middlemen have had huge control over agri-marketing and selling activities. MP now has removed APMC control and now farmers can now sell anywhere in the state and outside the state as well. 


E-NAM will now take care of supply and demand activities. Any storage company can now act as a Mandi. 


As organised retail becomes common, many more buyers going to get produce directly from farmers. Small farmers can now create FPOs which can collectively market to the buyers and elsewhere. 


These are radical reforms and the biggest since independence. 


UP has also done similar reforms. But it has also taken other steps like categorising 46 fruits and vegetables can go and sell anywhere. 


APMC and benefits to the farmer from reforms


We should look at the farmer as a businessperson. From independence the farmer was told to sell in a certain way and given very limited channels. And everything else was made illegal. 


These reforms give farmers the freedom, flexibility and fluidity. These reforms will make the sector more dynamic. 


Over many decades governments only delivered sops and doles, instead of structural reforms.


We have seen the APMC way and it has not worked for the farmers. The old system didn’t bring prosperity. If you give farmers more channels to distribute it will benefit them.


APMC and a lot of old structures came into effect because there were no markets. So many aspects of Indian farmers lives were controlled. 


Now we see the winds of change, the output side is now free due to these reforms. New businesses will germinate and approach farmers directly by cutting middlemen. Entrepreneurs should be excited.


Labour reforms in various states


In Madhya Pradesh, Factories act 1948 will now apply only to 50 people and more. Smaller factories will get more flexibility and much lesser regulations. New and old manufacturing companies will be benefited due to this reform. 


New companies will not be regulated by any laws (barring section 25) for 3 years. The state expects the centre to enact new and better laws in the near future. 


The registration process is now much business friendly, the process will be completed in 1 day instead of 30 days with escalation path available for companies.


Inspections in factories can be now self-certified and companies can pay for the audit. This will result in less power commissioners and inspectors. 


These changes will help India attract companies from China. MP has 3 industrial zones having good connectivity so it will boost activities there. 


UP reforms have exempted all but 4 labour laws for manufacturing industries.


India has always seen an agitation led mind state among workers and it has not helped them.


UP has seen a lot of changes along similar lines of Madhya Pradesh. Laws relating to bondage laws, payment of timely wages, all other laws have been put in abeyance for 3 years for new and existing companies.


Noida and Greater Noida is one of the most exciting parts of India. China companies can come to those areas though implementation of these reforms remains to be seen.


Gujarat has left only 3 basic acts to be applicable for 1200 days. At present large US European countries want to move out of China and Gujarat as an investor friendly state is always ahead.


Labour laws used to be major hurdles for attracting investments. The landscape is made up of very small enterprises. In the long term, even for India to build its own manufacturing base, relaxation of laws was needed. 


The old laws were preventing employment rather than protecting employees. 


India has seen a rising population and fewer jobs to provide for them. The heartening thing is Indian manufacturing a chance to grow. 


UP laws need clarification because they were written in a hurry. Some of the law need to be introspective in 3 aspects:

  • Protecting women and child workers

  • Retiral money

  • Safety and welfare 


Labour laws and growth in India


Labour laws used to apply only to 10% of the labour population and hence 90% per cent don’t have any protection anyway.  


There is evidence of more lax laws leading to growth. If laws are made to be less restrictive, more formalising of work can happen.


2018-19 economic survey says Rajasthan has helped grow the MSME manufacturing sector and led to more jobs. 


Conventionally people see China as a monolith. China is a very decentralised country and many provinces compete heavily with each other. The same way India has now 3-4 states which are competing, it could also be sufficient condition for growth.


Old laws used to divide the whole workforce into organised and unorganised sections. The construction of these laws in the origins itself makes it so that there is a rift between the businessmen and the workers. 


The conflicting relationship between workers and businessmen should not exist for a successful business. 


Heuristically, someone who has not studied the subject of wages, feels minimum wage is useful but this is wrong. We can see that from what is happening in Karnataka.


Karnataka has the most detailed minimum wage laws in India and it defines 100+ industries. The no of minimum wages count up to 1000+ all in the range of 8000 Rs - 11000 Rs range. 


The only people who benefit from strict laws are business consultants and inspectors. The laws make it hard for even smart people to figure out what is happening in the industry and they go to inspectors and consultants for help. 


Respect for wealth creators


Even so-called right-wing governments don’t seem economically right in india. A little bit of respect has been shown to wealth creators by Modi. Economic survey has also paid some heed to the needs of wealth creators.


The sad reality is that for decades in India there was a demonisation of business or whoever creates wealth. 


Old biases will be hard to shake off in India. Bridging the distrust is going to be a long process because leading businessmen in India were caught in corrupt acts. 


In India political connections were needed for small things to be done, now that might go away. 


The trust deficit is the biggest factor concerning businesses in India. As an approach, the politicians should place the distrust on inspector raj rather than businesses and we might see good growth in the near future. 



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