This week, the powers that be in Karnataka presented a text book case of how not to improve investment climate, rather how to deter investments. The social media is rife with conspiracy theories, but the violent incidents in Kolar at the Wistron plant point out the need for a reality check of systemic fault lines. The harsh fact is you cannot win Formula 1 with the Indian avatar of the British Morris.
For nearly a decade, India’s governments invested political capital to woo manufacturers of iconic products to ‘make in India’ by leveraging skill availability and low manpower cost. The tide of economics, propelled by rising wages in China, produced an opportunity for India to woo investors who were headed to Vietnam, Indonesia, Thailand and Mexico. The consequences of the pandemic accelerated thought on re-configuring the supply chain of manufacturing away from China.
The crafting of the productivity-linked incentive scheme — which leverages tax breaks for the promotion of electronics manufacture, specifically smart phones in India, for global marts — afforded an opportunity for global producers to set shop in India. Wistron began operations in August, and two other Taiwanese contract manufacturers Foxconn and Pegatron signed up for cell phone assembly plants, promising an investment of nearly $900 million in the next few years.
You would think that the government of Karnataka would have done its due diligence on the ‘who-howwhat’ of the operations — particularly, in the light of the fact that the Wistron plant was associated with an iconic product, the Apple iPhone, with global brand resonance, a brand which triggers nearly 4 million results when Googled. That though was not the case. The destruction of property and over 150 arrests has highlighted the level of systemic apathy.
At the heart of the issue is non-payment of wages. The employees allege wages were not paid for months. The company claimed all payments were made to the temp-staff companies which contracted the employees. It now transpires — after enquiries by the Karnataka Labour Department and pressure by Apple — that employees were indeed not paid. The moot point is whether the systems available provided for protection off rights and prevention of such an incident.
The hiring of employees through temp staffing companies is not new, not in the industrial hubs of India and, particularly, Karnataka. The question is whether there exists a mechanism for redressal of norms? Did the government ensure that the temp staffing companies informed/educated workers of the existence of a mechanism? Surely, there are global and local best practices to adopt.
The gap between laws, regulation and redressal mechanism is not unique to Karnataka. The domain of labour dispute resolution across India is a messy landscape of delays and decay. In its report on the Industrial Relations Code 2019 submitted in September, the Parliamentary Standing Committee on Labour reveals “about 23,000 cases are pending in 22 Central Government Industrial Tribunals” and six of these tribunals had no presiding officer at the beginning of 2020.
India’s aspiration for a $5 trillion economy simply cannot be sustained by Licence Raj era governance, legislation, institutions and regulatory framework. The disruption caused by technology and structural shifts in business models — for instance, the gig economy — call for modernisation of laws and regulations. Sustainability of any policy in a modern economy depends on the robustness of the regulation and implementation capacity of the state — particularly the last mile of delivery which is the first mile of governance.
The crux of change is located in the state of governance in the states. The need for upgrading capacity to face new realities is manifest and has never been so urgent. The consequence of resident sloth is visible across global rankings. The latest UN Human Development Report, released on Tuesday, places India at 131 among 189 countries. On the face of it, India has slid by one spot but the broader picture is grim — other countries have done better.
India trails all its peers in the BRICS grouping on overall ranking. India has been in the grouping of medium human development for a decade and trails Nicaragua in life expectancy, Tajikistan in average years of schooling. Every measure of human development depends on how state governments deliver. Yet, state governments have scarcely shown the urge or urgency.
Indeed, even the seductive notion that alignment of political power in the Centre and the States propels change is yet to play out — despite being in power in 15 states, the BJP is yet to present the demonstration effect which Gujarat provided. Take the issue of the recently passed laws to liberate agriculture. Till the agitation arrived in Delhi, there was no sign of any persuasion leave alone evangelism of the potential opportunities in the states where the BJP is in power.
The centralisation of policy design and its political narrative has produced a perverse collateral consequence — it has cocooned state leadership, disincentivised initiative, and allowed states a free pass on accountability for poor governance.
Author of The Gated Republic, Aadhaar:
A Biometric History of India’s 12 Digit
Revolution, and Accidental India