Tuesday, June 20, 2017

Rural Distress & Cures For It

Since agriculture is where half the Indian population is trying to make a living, it's worth looking further at what ails India's more miserable half, to figure out how to cure them.

Roots of rural distress:


Note that the govt is now putting forth a Wage Code bill:


Unfortunately, this bill creates a universal minimum wage across the entire country. Why not simply give local districts the power to set minimum wage? Surely it's obvious that minimum wage has a relationship with cost of living, and cost of living is not the same in all parts of the country. Why not give local districts the flexibility to compete in attracting jobs through the ability to set local minimum wage?


Pagan said...

One big factor: In case of MP and UP, inflation levels have fallen into negative territory.

san said...

I'm not saying that minimum wage should be calculated from a formula based on inflation rate. I'm saying that each local district should have the power to set its own minimum wage. Naturally, this will result in some districts having a relatively higher minimum wage, while some districts will have a relatively lower minimum wage. Districts which have a lower minimum wage will naturally attract more job creation, while districts with higher minimum wage are more likely to have less job creation. There will be competition among the districts, which will improve efficiencies.

Pagan said...

I was talking about what made the farmers rise up. This whole minimum wage thing is a drastic left turn for this govt more likely to make matters worse.

san said...

Modi is possibly trying to position himself for getting votes in 2019 elections. BJP has seen what MNREGA did for Congress. Anyway, below a certain wage level, you're not even part of the official economy and you're just part of the informal economy where rules don't apply. But yes, it really bothers me that the Modi cabinet aren't showing the intelligence to decentralize economic policies down to the district or at least state level, to allow competitive federalism, etc to work their magic. They don't seem to understand that by placing Minimum Wage in the hands of national jurisdiction, it will just give future Congress/Left govts the power to raise that minimum wage for populist vote-buying.

Common Man mainly cares for himself and wants to have his cake and eat it too - but doesn't particularly care for which part of the govt gets which power, as long as he can get his fill. That's why decentralization is a penalty-free way to reform, without suffering any loss of votes.