Modi and Co harming economy by eulogising informal sector

Has the Narendra Modi government changed the way the Indian economy functions? For the last four years, the government has been harping on landmark decisions it has taken to change the fundamentals of the India's economy. In this line of argument, the government quotes, rise in digital payments, the implementation of the Goods and Services Tax and the introduction of Insolvency and Bankruptcy Code among others.

The above mentioned policies and laws, according to the government are landmark and sets the NDA led government of the present apart from the UPA led government of the past.

How true are the claims of the government? Do laws like GST, insolvency code and the rise in digital payments indicate of a landmark change in the way Indian economy functions?

The answer is a big no.

Since independence, an overwhelming majority of Indians have struggled to improve their lifestyle because of the informal structure of the Indian economy. Despite tall claims by successive governments, the number of people working in the informal sector remains high even today.

According to the latest report by the International Labour Organisation, around 81% of all employed persons in India are working in the informal sector, with only 6.5% in the formal sector and 0.8% in the household sector.

In comparison, China has only 48.4% of its total workforce employed in the informal economy. One may argue that China's economy is five times that of India, and under the Modi regime, steps like GST, IBC and increasing digital payments will eventually lead to formalisation of the Indian economy. But this argument fails in the face of the policy rhetoric of non other than Prime Minister Narendra Modi, who instead of talking of increase in the formal sector jobs, has been promoting menial informal sector jobs by providing MUDRA loans.

Taking a leaf out of the the prime minister, the newly elected chief minister of Tripura Biplab Kumar Deb, reprimanded youth of his state for aspiring to be part of the government sector by saying, “Why do you have to run after netas for government jobs? Graduates should rear cows and milk them. They can earn Rs 10 lakh in 10 years. If they had set up paan shops instead of running after political parties and wasting their time, they would have had a bank balance of Rs 5 lakh by now,” said the Deb, who is from PM Modi's party and is the chief minister of a state with an unemployment rate of 19%. It was the election pitch of Deb's party to create jobs in the state and his party, ended the 25 year rule of the Manik Sarkar-led government of CPI(M).

Modi himself had promised crores of jobs to youth in his election speeches in 2013. Unfortunately, the PM along with his chief ministers across Indian states have failed to generate jobs, forget formalization of the economy.

The promotion of informal sector jobs by PM and other BJP-led chief ministers is in stark contrast to the demolition drive that various state governments are carrying out against street vendors to make cities clean. In the Union Territory of Delhi, thousands of small shops and kiosks have been uprooted or sealed on orders from Supreme Court by the Delhi municipalities for the violation of Delhi's master plan 2021. Similarly, in the state of Uttar Pradesh, the first thing that BJP Chief Minister Yogi Adiyanath-led government resorted to was shutting down of illegal abettoirs in the state.

While the state governments and municipalities are legally correct to uproot illegal shops and kiosks in various colonies, it is fact well known that those who make a living from such structures are part of that informal economy that PM Modi and his chief ministers are promoting. A young man who on the advice of PM Modi begins selling pakodas in Noida (watch his interview to ZEE news) or sets up a paan shop in the state of Tripura would have to do it by encroaching public land.

Because no paan or pakoda seller will be able to make profits if he is to purchase land or pay rent for his small shop. Such small kiosks are viable only so long as the owner pays a small amount of bribe per month to the beat constable of the area.

This is why, the whole idea of smart cities – something that the BJP government went gaga about in its election manifesto, but no longer talks of – is unviable in any part of India so long as a large number of people are employed in the informal sector.

Similarly, clean India or Swach Bharat is possible only when people across the country have jobs in formal sector factories and services units instead of having small illegal units near bus stops and flea markets.

The people of India, including its youth gave a decisive mandate to the BJP-led NDA alliance in 2014 in the hope of getting modern day employment that offers dignity and stability to an individual's finances. Rather, the government is celebrating the age-old structure of Indian economy, which would be in place irrespective of whether Modi comes back to power in 2019 or not.