The August Pragati

Have you picked up the August 2009 issue of Pragati yet?† It is good. The focus this time is on legal and regulatory reform and it has been guest-edited by Shruti Rajagopalan.† My favourites are this piece by Ajay Shah about the changes in legal regime required for† further Financial Reform, Aadisht’s article on the widespread prevalence of retail corruption in India, and Jaivir Singh’s article on Labour Laws and Special Economic Zones.

A little more about that last piece. The common wisdom is that we need to reform our labour laws to make life easier for our companies. The theory is that if employers know that they can lay off workers without getting mired in red tape, they will be more willing to hire workers.† Now, many people argue that labour inflexibility is not actually much of a burden on employers and that they get around restrictions by hiring contract labour or by “persuading” labour inspectors to be more flexible.

Labour laws do hamper employers when the workers have lots of market power anyway and there are strong unions, as was the case in the Bombay of the 60s and 70s, but when companies set up textile mills in remote areas of Tamil Nadu and Gujarat where employment is scarce and the low wages they offer are still better than the alternatives, they are pretty much useless. In other words, labour laws are ineffective precisely where they could be of use to Labour.

Jaivir Singh points out that instead of changing the law to provide a little more flexibility to employers, opposition to the relaxation † has forced government to adopt a subterfuge wherein they are ignored almost entirely within SEZs. Incidentally, Aadisht’s article is also about why India’s preferred mode of corruption is one where industries buy lax enforcement of the law, rather than lobbying to have laws changed.