Nation / Thu, 06 Jun 2024 The Indian Express

Coalition opens space for dialogue, makes tough reforms feasible: CEA

“This actually makes some of the difficult reforms more feasible incrementally because it opens up space for dialogue,” Nageswaran told The Indian Express. AdvertisementThis happened in the case of land reforms, initiated early in the tenure of the first NDA government. In its second term, labour reforms got stalled due to an inadequate number of states pushing through the requisite supporting measures at their end. While the push towards capital expenditure and infrastructure is expected to continue, other reforms may see slow progress, ratings agencies said. But officials said land and labour reforms can be pushed, especially through discussions with states.

Will a reduced mandate for the third consecutive NDA government, set to take oath in two days, curb its reform instincts? Fitch Ratings Thursday said broad policy continuity is expected but with “coalition politics and a weakened mandate” there could be greater reform challenges. Chief Economic Advisor V Anantha Nageswaran, however, thinks otherwise.

“This actually makes some of the difficult reforms more feasible incrementally because it opens up space for dialogue,” Nageswaran told The Indian Express.

During the previous two stints, the NDA government faltered on big-ticket reforms not having evolved the requisite consensus — and pushed the ball back to the states.

This happened in the case of land reforms, initiated early in the tenure of the first NDA government. In its second term, labour reforms got stalled due to an inadequate number of states pushing through the requisite supporting measures at their end. Farm reforms, too, could have fared differently if some states were taken on board early on.

While the push towards capital expenditure and infrastructure is expected to continue, other reforms may see slow progress, ratings agencies said. Moody’s, in a note Wednesday, said it expects policy continuity especially with regard to budgetary emphasis on infrastructure spending and boosting domestic manufacturing in order to support growth.

Fitch Ratings said the government is expected to continue prioritising infrastructure capex, improvements to the business environment, and gradual fiscal consolidation, but coalition politics could make ambitious parts of the reform agenda more challenging.

But officials said land and labour reforms can be pushed, especially through discussions with states. “The answers to the current employment and growth situation lie in tightening nuts and bolts, of which many lie in the domain of states. Since these reforms are in the concurrent list, these would require talking to them, persuading them, having a dialogue with them and thinking of them as an equal participant,” an official said.

Changes in land-use policy could be initiated by states to make land acquisition easier for industries and infrastructure in the overall push towards scaling up manufacturing and improving growth outcomes, the official added.

Of the factor market reforms of land, labour and capital, the Centre has been stuck with implementation of labour reforms despite having passed the requisite legislation in Parliament as early as August 2019 (Code on Wages) and September 2020 (Code on Social Security; Occupational Safety, Health And Working Conditions Code; and Industrial Relations Code).

With labour being a concurrent subject, both the Centre and states have to frame laws and rules. While Parliament cleared the four labour codes in 2019 and 2020, and the Centre pre-published the draft rules for all four codes, some state governments are yet to complete the process.

Internal discussions within the government in 2022 had even contemplated a staggered implementation of the labour codes with an initial rollout of two codes, the Code on Wages and the Code on Social Security. But these could not sail through.

In the case of land, the NDA government promulgated an ordinance on December 31, 2014, less than a year since coming to power with an absolute majority in May, to amend the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, enacted by the United Progressive Alliance (UPA).

It introduced key changes to expand the purpose for which land can be acquired without consent from landowners and undertaking social impact assessment.

Despite demands from other political parties including Congress that the Bill be referred to the Standing Committee of Parliament after being introduced in Lok Sabha on February 24, 2015, the government refused to budge.

Given BJP’s majority numbers in Lok Sabha, it was passed there but was held back in Rajya Sabha. Then, the ordinance was re-promulgated in April since it could not be passed in the first leg of the Budget session.

The ordinance was re-promulgated on May 30, 2015, but protests gathered momentum and eventually Prime Minister Narendra Modi announced in August that the ordinance would not be re-issued and was allowed to lapse.

Additionally, farm reforms were brought in as a package during Covid relief measures in May 2020 and then within a fortnight, the government issued ordinances on June 3, 2020, bringing into effect the three farm laws.

By the time the bills were introduced in the Lok Sabha on September 14, protests had intensified in Punjab with rail roko and gheraos, and within two months of the President of India’s assent to the laws on September 27, 2020, the farmers had moved to the Delhi border.

The two Houses cleared all three Bills in a week, without much debate and discussion. There were many concerns of farmers – like no recourse to courts on disputes with the private procurer and the perception that APMC mandis would be rendered unviable.

In November 2021, after a year of protests, Modi announced the repeal of the three farm laws.