New Delhi:

Prime Minister Narendra Modi today resumed his monthly radio programme, ‘Mann ki Baat’, days after taking charge as the Prime Minister for a third consecutive term.

PM Modi’s last ‘Mann Ki Baat’ was aired on February 25, before the poll schedule was announced. The BJP-led NDA won 292 seats and prevailed over the opposition alliance, INDIA, which bagged 232 seats.

In today’s ‘Mann ki Baat’, PM Modi said the 2024 general election was the biggest election in the world. “Such a big election has never taken place in any country in the world. More than 65 crore people voted in the election,” he said.

He also thanked voters for re-electing the National Democratic Alliance (NDA) in the elections. “People reposed their unbreakable trust in the Constitution and democratic process in the Lok Sabha elections,” he said.

The Lok Sabha elections were held from April 19 to June 1 in seven phases. The counting took place on June 4.

PM Modi talked about the Centre’s new campaign – ‘Ek Ped Maa Ke Naam’ – to honour mothers by planting a tree. “I have also planted a tree in the name of my mother and I have appealed to all the countrymen to plant a tree to honour their mothers,” he said.

The Prime Minister also spoke about Indian athletes who will be competing in the Paris Olympics next month. He noted that Indian athletes have participated in more than 900 international competitions.

The country expects its players to put up an excellent performance in the Paris Olympics, he said while urging the people to use ‘cheer4Bharat’ hashtag to motivate them.

Former NITI Aayog Vice Chairman Rajiv Kumar. File
| Photo Credit: BIJOY GHOSH

Prime Minister Narendra Modi led-NDA government in its third term must tackle the problem of unemployment in India, especially in the unorganised sector and in small and medium enterprises, former NITI Aayog Vice Chairman Rajiv Kumar said on June 10.

Mr. Kumar also emphasised that the government now must finalise the four labour codes as it has been delayed beyond expectations.

“We must recognise that post-Covid economic recovery has been a K-shaped recovery. I think the most important reform that the Modi government must take is to tackle the unemployment problem, especially in the unorganised and the small and medium enterprises,” he told PTI in an interview.

According to a recent International Labour Organisation (ILO) report, the share of unemployed youths in India’s total unemployed population was nearly 83% in 2022. “The large corporations have done very well and those who are highly skilled have done well. But at the lower end, people are without jobs and firms are struggling to expand their capacity,” the eminent economist said.

According to Mr. Kumar, an important way to generate employment is to reduce the regulatory and compliance burden that SMEs face. “So they have to be tackled along with the State governments,” he said.

He said that the four labour codes need to be finalised and made into statutes.

‘Expand apprenticeship programmes’

Mr. Kumar stressed the need to give more attention to the skilling of youth, especially to apprenticeship development, saying schooling and the education system in India are lagging behind in this regard.

“Our apprenticeship programme needs a far bigger push than we have now and access to quality education should be ensured because ultimately, these are the factors which will determine the employability and employment generation potential for our economy,” he noted.

Coalition dharma and economic reforms

Responding to a question regarding the future of the government’s disinvestment programme, Mr. Kumar noted disinvestment has taken a backseat over the past five years. He pointed out that targets of non-tax revenue and non-tax capital revenue have not been huge in the successive budgets in the last five years, except one year when Air India was privatised. I am not sure at all that the coalition dharma will be the cause for pushing this (disinvestment) in the background,” he said.

The former NITI Aayog Vice Chairman emphasised that privatisation and generating revenues from it to reduce India’s public debt-to-GDP burden is a necessary and important reform measure that should be taken. “Also, to improve the efficiency of the public sector enterprises, especially the public sector banks, where I had advocated very strongly the privatisation of most public sector banks, except the State Bank of India,” he said.

On a question concerning the correlation between coalition governments and economic reforms, Mr. Kumar said the coalition governments have been far better in generating reforms.

He said being a coalition government, one should not believe that there will not be any reforms and they will be only populism. “I think all the three parties (BJP, TDP and JDU) who are coming together are pro-reform parties. And therefore, the pace reforms can and perhaps will continue, as in the last 10 years,” he said.

Prime Minister Narendra Modi plans a raft of business-friendly measures if he wins a third term this week, including pushing through regulations making it easier to hire and fire workers, according to two government officials familiar with the matter.

As part of an election pledge to transform India into a global manufacturing hub, Mr. Modi wants to offer subsidies for domestic production modelled on recent packages for semiconductor firms and electric vehicle makers, said the officials, who spoke on condition of anonymity because they were not authorised to talk to media.

He also plans to reduce import taxes on key inputs for locally-made goods, which have increased India’s manufacturing costs, the officials said.

The Prime Minister’s Office and the Labour and Finance Ministries did not respond to Reuters’ questions.

Exit polls project that the Bharatiya Janata Party (BJP) will win a big majority when election results are announced on June 4.

Increasing India’s share of global manufacturing

Mr. Modi’s re-election campaign was partly built on the promise of continued economic development. He’s pitching India as an alternative for global firms diversifying their supply chains from China.

India is the world’s fastest-growing major economy, but that includes a booming tech sector and a struggling older economy that doesn’t provide enough jobs for everyone else, said Josh Felman, the former head of the International Monetary Fund’s office in India. “What can be done now to provide employment — good jobs for these people — is manufacturing,” Mr. Felman said.

India successfully lured suppliers for major U.S. corporations like Apple Inc and Alphabet Inc’s Google. However, less than 3% of global manufacturing takes place in the country, compared to 24% for China, World Bank data shows.

The government plans to increase India’s share of global manufacturing to 5% by 2030 and 10% by 2047, according to an internal document seen by Reuters. It did not provide specifics.

Reuters spoke to 15 people — including bureaucrats, representatives of major investors, economists and trade unionists — who identified three significant obstacles holding India back from manufacturing hub status: restrictive labour laws, challenges acquiring land, and a rigidly inefficient tariff regime.

Fundamental issues

When Modi was chief minister of his home state of Gujarat between 2001 and 2014, he dreamt up an investment zone in the Dholera region. Legislation creating the Dholera Special Investment Region (DSIR) was passed in 2009 and local authorities began acquiring land for it in 2013.

The plan, Mr. Modi said during a 2011 visit to a Chinese port, was to develop DSIR along the “Shanghai model”.

Starting in the 1980s, China set up special economic zones along its southeastern coast that are widely credited for it becoming the world’s factory floor.

Land reform was a precursor for China’s manufacturing rise. Starting in the 1970s, Beijing separated ownership from usage rights, making it easier for investors to acquire industrial land, said Henry Gao, a Chinese trade expert at Singapore Management University (SMU). Beijing’s industrial zoning policies also made it easier for industries to set up in areas with ready access to materials and facilities, he said.

As Prime Minister, Mr. Modi has continued to stress the importance of industrial zones for India. In March, he described facilities under construction in DSIR as central to the creation of an Indian semi-conductor manufacturing hub. In January, Tata Group announced plans to build India’s first semi-conductor fabrication plant there. During a visit in March, Reuters also saw construction activity for an upcoming cargo airport and promotional billboards set up by real-estate developers. There were paved roads and a waterfront but little sign of bustling business.

DSIR hopes to attract more manufacturing companies by providing leases of up to 99 years on government-owned land, said Rahul Gupta, head of the Gujarat Industrial Development Corporation. Local officials have said that it took more than a decade to acquire land and award infrastructure contracts, but Mr. Gupta predicted there would be much more activity in about two to three years.

Outside such zones, industrial groups still have to undergo a “very difficult process” to acquire the large plots of land they need because title deeds are often unclear and holdings are fractured, said Richard Rossow of the Washington-based Center for Strategic and International Studies think-tank.

In May, Foxconn — whose local investment was trumpeted as a major success by Mr. Modi — was met with protests by farmers in Karnataka state unhappy with the compensation they received from local authorities for giving up their land to the manufacturer, Indian media reported. The Taiwanese company didn’t return a request for comment.

Labour reforms

In much of India, firms with more than 100 employees need authorisation from state governments to hire and fire. This prevents companies from adjusting their operations to meet demand, said Atul Gupta, partner at Bengalore law firm Trilegal.

The parliament has passed legislation to raise the threshold before official approval to 300, but State authorities that must consent to the changes have stalled the move.

Mr. Modi hopes that a strong win on June 4th will give him the momentum and political capital to push through their opposition, the two government officials said.

“No government wants to come across as giving permission to a company to let go of their employees (but)…this is just used to drag out the closure or the terminations endlessly,” said Mr. Gupta, who advocates labour reforms.

General Motors, for instance, decided to shut plants in Gujarat and neighbouring Maharastra in 2017, citing low sales. But unions opposed the closures and GM only received judicial approval to exit India in January. The U.S. carmaker declined to comment. To avoid such difficulties, companies end up using contract workers for extended periods, said labour lawyer Amrish Patel.

HSBC economists said that sweeping changes to labour regulations as well as land reforms are needed to sustain high growth. In a note to investors last month, HSBC economist Pranjul Bhandari wrote that such reforms could allow India to grow at 7.5-8% over the next decade, creating a wealth of jobs.

But lawyer and union leader Sanjay Singhvi said nearly 60% of the workers who benefit from current labour laws would lose protections if the BJP’s codes are implemented.

Praveen Chakravarty, a senior economics policy official with the main opposition Congress, told Reuters that labour law decisions should be left to States. His party’s manifesto calls for a review of the labour codes passed by parliament.

High tariffs

Manufacturing costs in India are also elevated because of tariffs on imports, including components for high-end manufacturing.

To encourage smartphone production, Delhi cut import duties on components to 10%. But competitor Vietnam already levies a rate of between 0% and 5% on equivalent inputs, according to the India Cellular and Electronics Association.

The average import tariff imposed by India on World Trade Organisation (WTO) members was 18.1%, compared to 7.5% for China, according to WTO data for 2022, the most recent year for which figures are available. Customs processes are also significantly quicker and less burdensome in China, said Mr. Gao.

Imports can clear customs in China in about 20 hours, said the SMU professor. It takes between 44 and 85 hours in India, according to a 2023 government study.

Beijing has focused its efforts on being a key node in the supply chain rather than attempting to own the entire chain, leading to greater efficiencies.

For instance, products exported by China often include inputs from other Northeast Asian countries, said Christian de Guzman of Moody’s Ratings. But Delhi “wants to have the entire thing come onshore,” Guzman said.