NYAY recalls our disastrous romance with socialism

There have been of late many articles by eminent economists, the central theme of which lends credibility to the ‘NYAY “scheme. Even in pure science subjects there are as many opinions as there are experts and therefore it should not be surprising that in subjects like economics, politics or Law the deniability or ambiguity can be conclusively arrived from the same set of inputs as per the exigencies of the need.

In a layman’s understanding the unemployment or underemployment is an outcome of mismatch between number of people seeking employment and number of jobs at hand. This mismatch is because of lack of adequate economic activities in service and manufacturing sectors. This is caused by two main factors. One concerns with inadequate capital deployment for employment generation activities and the second factor is concerned with uncertainty element in govt policy or international environment due to which despite having capital at hand there is reluctance to employ it for economic activity.

If we ignore the second factor under the present context then the lack of employment is directly related to lack of capital deployment in employment generation economic activities. This in turn depends upon the govt’s ability to generate income both for internal financing as well as for servicing external financing. After all no country would like to get in to a debt trap.

The employment generation comes from Manufacturing sector and service sector both in private as well as govt domain. In manufacturing sector increased productivity and efficiency levels, which becomes a paramount criteria to maintain competitive edge, in itself excludes the possibility of proportionate increase in employment generation. Therefore in manufacturing sector to provide increased levels of employment maintaining the same or improved manufacturing efficiency the volumes need to go up substantially. In this age of faster product obsolescence it will be imprudent to invest in increasing capacity without limit.

The astronomical NPA which banks are saddled with are a direct result of thoughtless deployment of capital by the business enterprises. In service sectors too the necessity to adopt cutting edge technology to remain competitively relevant offsets the prospects of commensurate increase in employment level.

This leaves us with govt jobs which is somewhat insulated from the statutes of market competitiveness. However the govt jobs too cannot increase continuously without attending economic value addition.

Under the above scenario, the Pakoda stall concept of mini business model example given by the PM, to seriously boost self employment through promotion of small and mini enterprises becomes very relevant and meaningful. His detractors have chosen to ridicule his proposal, without seeing the inevitability of such alternatives in the future especially under the menace of unchecked population growth.

As of today assuming that employment levels have not gone up in the last 5 years, how is it that the increased levels of unemployment has not led to increased discontent and frustrations culminating in suicides or increased criminal activities. If the employment situation was so grim as is being indicted by Modi detractors then we should have witnessed serious street protests across the country. The answer to this valid questions clearly lies in the un denying possibility that there has been a significant increase in the employment in unorganised sector. Unfortunately the traditional way of survey to compute unemployment levels are ill equipped to capture the employment generation in unorganised sector.

In a globalised economy continuous reckless growth in manufacturing and service sector will not be sustainable at the expense of losing economic competitiveness. The regular employment growth will taper off at some stage or the other. To add to our woes even where there is employment opportunity the availability of employable number of graduates is grossly inadequate due to the unregulated mushrooming of private educational institutions by unscrupulous mafia elements turning education into a profiteering business. Facilitating growth of self employment in unorganised sector is the key to address the spiralling problem of unemployment as well as under employment.

Under the circumstances the announcement of “NYAY “appears to be an ill thought out scheme, which seeks to tackle poverty through legislation. Poverty cannot be eliminated by legislating against the rich. Why are we trying to re invent the wheel, the misplaced faith in socialism had brought us to the stage of mortgaging our gold to enable payment of imports and we luckily recovered from the brink of economic disaster. It is akin to treating the symptoms of a disease without attending to the root cause of the disease. To generate 3.6 lakh crores of funds annually for the NYAY scheme the budgetary govt revenue has to increase by 16%. Many writers choose to express this additional financial burden in percentage of GDP which is really a mischievous ploy because the GDP is not the income of the govt it is just a value of economic activity that transpired in the reference period.

There is no other way this additional income can accrue every year without increasing the taxes. Thus all the efforts in the previous decades to reduce the taxes under tax reform policies to incentivise economic growth go for a toss with one sweeping decision. Even in the welfare states of European countries the social benefits are sustained by high tax regime. It is the same set of economists who were fighting tooth and nail to make govt agree to reduction in direct and indirect taxes in order to give a boost to the economy by way of tax reforms. It would be really a retrograded policy approach to get back to high tax regime leading to lower growth of economy resulting in to all those very problems which took us many decades to surmount.

The most pertinent point that needs deliberation apart from the economic feasibility of this NYAY scheme is the political will and administrative structure needed given the shady track record of the regime which is promising this SOP. The administrative feasibility is more complicated than the economic feasibility of this con scheme. People have witnessed how Congress party has ensured growth of the Pariwar above everything. The politicians under congress rule and congress led UPA rule managed to corner a slice in every welfare scheme and govt projects one can think off. Now added to this is the greed of the coalition partners who are bound to demand their pound of flesh. There will never be NYAY to the NYAY scheme.

The entire scheme is a devious ploy by congress to facilitate its emergence as a leading party in the coalition especially since coalition has not really taken off. In the event of coalition managing to muster the required numbers congress can later on cite the disagreement within the coalition as a reason for not implementing the promise.

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