Manish Sabharwal: Get People off Farms

Image: Dinesh Krishnan

HAPPY AT WORK A call centre employee at a village in West Godavari district, Andhra Pradesh. Rural India needs a national network of community colleges offering two-year associate degrees because they are part ITI, part college and part employment exchange

The possible alibis for Indian poverty make a long list: Corruption, weather, infrastructure, subsidies, goofy politicians, greedy private sector, sleepy bureaucrats, myopic entrepreneurs, Mughals, British and much else. But an interesting usual omission is agriculture.

 I submit that the biggest source of our poverty is 58 percent of our population working on farms that produce 15 percent of our GDP. Our agricultural productivity is dismal—75 million Indians produced 110 million tonnes of milk while 100,000 Americans produced 70 million tonnes of milk—and condemns people to poverty. India will not put poverty in the museum it belongs to till we get farm employment down to 15 percent of our labour force.

Over the next 20 years, effectiveness in four labour market transitions—rural to urban, unorganised to organised, subsistence self-employment to decent wage employment and farm to non-farm— could save 163 million Indians from poverty. But instead of accelerating these four transitions, policymaking in the last few years has been focussing on ‘rights’—education, work, food, service, healthcare, and much else. This ‘Diet Coke’ approach to poverty reduction—the sweetness without the calories—was always dangerous because of unknown side effects.

But now our fiscal deficit, food inflation and rupee devaluation remind us that policy entrepreneurship, like all entrepreneurship, is not exempt from the rule that big ideas without execution are ineffective, inefficient and sometimes dangerous.

Outlays don’t lead to outcomes because poetry is useless without plumbing. Getting people off farms means fixing our weak 3E regime: Employment, education and employability.

India’s failing farm to non-farm transition is the child of a fragmented human capital regulatory regime (state vs. Centre, 19 ministries vs. 2 human capital ministries), the dead-end view of vocational training (the lack of vertical mobility between certificates, diplomas and degrees), a broken apprenticeship regime (we only have 2.5 lakh apprentices relative to 6 million and 10 million in Germany and Japan), lack of higher education footprint (60 percent of our districts have lower enrolment than the national average), no model of effective PPPs (public private partnerships) in human capital (using government money for private delivery in education and skills), dysfunctional employment exchanges (1,200 of them gave 3 lakh jobs to the 4 crore people registered last year) and labour laws that encourage the sub-scale enterprises and the substitution of labour by capital.

Reforming the employment regime is the most obvious, but most controversial. Few disagree about the shame in four employment statistics being exactly where they were in 1991: 92 percent informal employment, 12 percent manufacturing employment, 50 percent self-employment and 58 percent agricultural employment. Economists don’t fully understand how jobs are created or why they cluster where they do. But the broad contours of fertile soil for job creation are obvious: A flexible labour market, skilled employees, robust infrastructure and predictable legislation.

A flexible labour market is important: Most economists agree that our labour law regime is poisonous— particularly for manufacturing. Labour-intensive industries probably account for only 13 percent of gross value add in organised manufacturing. Ninety percent of Indian textile employment is in firms with less than 10 employees while 90 percent of Chinese textile employers have more than 50 employees. India’s labour laws—our employment contracts are marriage without divorce—need a radical rethink if we want more formal, more competitive, more productive and larger employers.

The employability and education reform agenda is facing an idea surplus, but execution deficit. Employment Exchanges need to become public private partnership career centres that offer counselling, assessment, training, apprenticeships and job matching. The Apprenticeship Act of 1961 must be amended to view an apprenticeship as a classroom rather than a job and shift the regulatory world from push (employers under the threat of jail) to pull (make them volunteers).

The National Vocational Educational Qualification Framework must be agreed by the states and the ministries of Labour and HRD as the unifying open architecture tool for recognition of prior learning and vertical mobility between school leavers, certificates, diplomas and degrees.

Delivery systems are in the hands of states and every state must create a skill mission or vocational training corporation tasked with building capacity and quality. States should also create asset banks to make existing government real estate available for skill delivery. All schools must teach English because English is like Windows; an operating system that creates geographic mobility and improves employment outcomes by 300 percent.  Finally, we must create skill vouchers that will allow financially disadvantaged students to get trained wherever they want at government expense. Such vouchers would shift the system to funding students. Institutions should be funded by money carved out of the MNREGS (Mahatma Gandhi National Rural Employment Guarantee Scheme) budget. The regulatory cholesterol around national distance education (mail order, e-learning and satellite) must be reviewed to offer flexible options for workers already in the workforce and the geographically disadvantaged.

We must create a national network of community colleges offering two-year associate degrees. These community colleges are what rural India needs because they are part ITI, part college, part employment exchange. Our current education regulators have tried to control quality by controlling quantity and we have ended up with neither. The biggest challenge in replacing institutions like the Medical Council of India, the All India Council for Technical Education and the University Grants Commission is not in renaming them, but architecting the new regulator so it does not become the old regulator.

In 1900, 41 percent of Americans worked on farms. Today there are less than 2 percent. China has moved 400 million people into non-farm jobs since Mao died and his madness died with him. India must make a new appointment for her tryst with destiny because she missed her last appointment; there are 300 million Indians who will never read the newspaper that they deliver, sit in the car they clean or send their child to the school they help build. Democracy is a fake alibi for India’s poverty and our labour markets’ ‘missing middle’. Getting people off farms gets India to 5 percent poverty 20 years faster than the status quo. All we need to do is fix our 3Es.  

India must make a new appointment for her tryst with destiny because she missed her last appointment

what needs to be done
☛ India’s labour laws need a radical rethink and should be made flexible.
☛ Employment exchanges should run on PPP model offering counselling, training and apprenticeship.
☛ Create skill vouchers which allow poorer students to be trained at government expense.