FEBRUARY 01, 2010

Can FM do an Obama to Union Budget?

By Naresh Minocha, Our Consulting Editor

''PEOPLE are out of work. They're hurting. They need our help.  And I want a jobs bill on my desk without delay,” that was President Obma striking cord with Joes of the United States in his first State of the Union Address that he delivered on 27th January.

‘Joes’ here means ‘Amreeki Aam Adami’, a derivation that I have spun from Ohio resident ‘Joe the Plumber’ who symbolized the common man in 2008 Presidential Elections. Joe’s shot to fame started with his questioning presidential candidate Obama on his proposed small business tax policy.

Obama has not let down Joes ever since he took over as the President of the US. In the State of Union speech, Obama unveiled numerous tax proposals to generate employment.

He said: “I'm proposing that we take $30 billion of the money Wall Street banks have repaid and use it to help community banks give small businesses the credit they need to stay afloat. I'm also proposing a new small business tax credit - one that will go to over one million small businesses who hire new workers or raise wages.”
 
This reminds us of the draft National Employment Policy (NEP) that UPA Government unveiled in its first tenure in August 2008. It had called for reworking of all tax incentives to transform them into instruments for facilitating jobs creation.
 
There seems to be conspiracy of silence on the Government’s failure to finalize NEP. It has thus deprived opportunities to the countless unemployed and many times more under-employed to realize their dream to live with dignity.

Neither NEP figured in the agenda notes for the State Labour Ministers’ Conference that the Union Labour Ministry organized on 22 January. Nor did it find mention in the Ministry’s backgrounder for Editors’ Conference on Social Sector Issues that the Government organized a fortnight back.

The Ministry’s backgrounder merely stated: “Steps have been initiated to undertake an annual survey of employment and unemployment.”

This apparently refers to an initiative unveiled by the President Pratibha Devsingh Patil in her address to Parliament delivered on 4June 2009. She had stated the UPA Government in its second tenure would present five reports to the People on education, health, employment, environment and infrastructure to “generate a national debate.”

Following this, Labour Ministry had floated a tender enquiry for preparation of the report to the people on employment.

It is pathetic that the Ministry has to outsource services of consultancy firms to prepare a report to the nation and an issue that is core area!

Visit the Website of Labour Ministry (labour.nic.in) and its attached office Directorate General of Employment and Training (dgdget.gov.in). You would get numbed by the archaic data on display. The ‘Quick Estimate of Employment’ pertains to period December 2004-March 2005. The latest quarterly employment review pertains to March 2005. And annual employment review is for 2002!

The fact that reliable and updated statistics on unemployment and under-employment are hard to come by confirms the Government’s half-hearted approach towards generating jobs.

UPA Government is thus ducking at the demand to universalize its flagship anti-poverty programme National Rural Employment Guarantee Act (NREGA) that guarantees every rural household up to 100 days of wage employment in a year within a period of 15 days of demand for such employment.
                                                              
Finance Minister Pranab Mukherjee should pump in a lot more money into this scheme to ensure that NREGA guarantees employment 365 days in a year in rural areas to stave off hunger. He also ought to put in place a similar framework to provide jobs or unemployment allowance to urban poor.

UPA cannot drag for long its feet over implementing Congress Party’s poll promise that it would enact a Right to Food law that guarantees access to sufficient food for all people, particularly the most vulnerable sections of society.”

 In its Lok Sabha manifesto, the party stated “The Indian National Congress pledges that every family living below the poverty line either in rural or urban areas will be entitled, by law, to 25 kgs of rice or wheat per month at Rs 3 per kg. Subsidised community kitchens will be set up in all cities for homeless people and migrants with the support of the Central government.”

Where are the community kitchens? Can the forthcoming budget provide for an Indira Gandhi community vocational farms and Kitchens to which destitutes and beggars can located?

Let Pranab da take forward the Prime Minister Manmohan Singh’s agenda for reforms with human face by focusing on unemployment, under-employment and hunger eradication in the forthcoming budget. And he can do this without waiting for finalization of NEP.

It is Finance Minister’s prerogative to restructure taxes through the budget. He can at least make a modest beginning by taking a leaf out of the NEP. It stated: “Several types of tax holidays, tax exemptions and differential duty rates are in operation primarily with the objective of encouraging investment. Such incentives should be calibrated to the employment outcome. Employment may be made one of the criteria or additional
incentives may be devised for employment outcome.”

It is high time the Government takes a hard look at tax preferences or concessions given to different segments of industries and other tax payers. Many industries continue to enjoy tax concessions even when they have reached take-off stage or are logging robust growth year after year.

The Government should give tax breaks to labour-intensive sectors. It should also put in place an integrated policy and regulatory framework to facilitate their fast-paced growth.

It is a national shame that the country is resorting to increased coal imports just because the Government wants to pamper existing organized workers unions that are opposed to opening up of the commercial sale-focused coal mining to private sector.

Unionism, coupled with pressures from short-sighted NGOs, has created an adverse business climate for domestic mining. It is small wonder then that the companies are rushing to acquire mines or mining rights overseas for various minerals including iron ore whose reserves are vast in the country.

Same is the story with the edible oil, paper and other plantations. There is a scramble among Indian corporates to acquire vast chunks of agrarian land in developing countries with State Governments largely dithering on contract farming.

Time is ripe for the Centre to prod the States to put in contract farming regulations that protect the interest of farmers while facilitating healthy linkages with the industry.

Contract farming is the key to infusion of new technologies and agronomic practices. It is the stepping stone to value-addition right up to the food retail outlets.

The forthcoming budget can provide for a specific initiative in this regard especially in the area of wasteland cultivation.

Why can’t the barren wastelands be made arable for raising rainfed crops and non-edible plantations, thereby generating jobs for the millions?  Let the Finance Minister shift some tax preferences to areas that have strong potential to generate jobs for unskilled or semi-skilled people.

The country’s 107 million hectares of degraded land can cultivated to produce biomass that can yield bio-fuels, gas, electricity, herbals, paper and improved habitats for the masses.

Apart from shifting some of the tax preferences from well-off sectors to employment-centric sectors, Finance Minister should take a hard look at thousands of crore of money that is doled out as subsidies, grants and soft loans to influential segments year after year. A part of this money ought be diverted to promote labour-intensive activities such as transforming jails into factories, thereby bringing dignity and sense of living to criminals.

As put by draft NEP, “Lack of access to employment, that is decent and remunerative, lowers self-esteem and leads to denial of basic needs of the individual and the family, and can lead to social instability.”