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Part 6 of What needs to be done to get INDIA back into 8% growth .... Criticality of labour reforms


Labour reforms are not just about rules of hiring and firing. 
Probably because agricultural and early industrial societies required only base labour and capital was the constraint only base labour was considered as a factor. To get into the right mindset, we need to now think broadly about human capital management policies ! 

From an entrepreneur’s perspectives, What is required is :
A) healthy
B) appropriately trained and educated workforce.
C) with no restriction on tenure or pricing of contracts (within a set of minimum health, safety and minimum wage rules) 
D) easy exit rules in case of ups and downs in business which is a special case of (c) above. 

Therefore the HR agenda is very clear.
1) invest in universal affordable primary health and dissemination of health insurance - ideally again using market based mechanisms such as vouchers for insurance and vouchers for primary health access. 
Globally, government provided healthcare has proven to be suboptimal. The swachh Bharat initiative will also ensure that lack of hygiene which is a big cause of poor primary health is mitigated. 
The other benefit of universally accessible clean public toilets would be a significant improvement in tourism and its accompanying economic benefits and employment.

2) India has the largest number of government run schools in the world with over 1 million schools but the outcomes are pathetic. The old socialistic mindset has ensured that education remains not for profit and therefore all players skirt at the edge of legality by setting up a web of service companies to take the profits out. However, genuine entrepreneurs don’t want to skirt around the law and therefore the sector has largely been captured by rent seekers who can bend the law. This law needs to go and education should be opened up to the private sector for profit. 
To get the outcome of universal and decent quality primary education as well as vocational training, globally well proven market based mechanisms such as vouchers should be used. 

3) labour reforms to allow full flexibility of hiring and firing. But this then necessitates the need for a social safety net for the losers. 

While in India, it’s a concurrent subject which requires states to be on board as well, the right conditions and incentives have to be provided for the states to help themselves. 

To be continued....Next article: how to unleash capital in the service of Indian growth link to next article

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