Sunday, March 30, 2014

What is a Right to Entrepreneurship?

The Congress Party released its manifesto last week, taking further Sonia Gandhi's per project of a 'rights-based approach' to freebies and entitlements. Among the multitude of entitlements promised is a unique one that really made me sit up and think: a Right to Entrepreneurship. For a country which badly needs investment and jobs, this seems like an excellent idea. However, the question still remains as what it really is.

First, consider an example given by a Congressman in a TV 'debate.' Hawkers who sell their wares on street corners are no doubt entrepreneurs and they are routinely harassed by local policemen to keep their pushcarts. The 'Right' gives them protection from such harassment. Now, isn't law and order at such a micro-level as a street corner purely a subject of the States and if so, how can the Central Government decide how police should deal with hawkers? For a party that is accused of treating State Governments like glorified municipalities, the Congress Party sure lives up to its reputation.

Now, coming to specific questions: what does an entrepreneur need? Capital and infrastructure are the first things that come to mind. Capital is something they are certainly not going to get, given that the manifesto expressly defines an additional set of entitlement schemes that are bound to raise government expenditure on non-Plan components, while Plan expenditure has already been slashed. To meet the higher expenditure, the government will resort to borrowing and thus, squeeze our private borrowers. Moreover, the runaway inflation that more entitlements guarantees will force the RBI to raise interest rates further with the net effect that Capital will be squeezed out from the system.

As for infrastructure, the manifesto does not give much emphasis to it except for some routine promises of speeding up project clearances (presumably by abolishing the Jayanthi Tax). In 2009, the UPA promised to build 22 km of highways a day - by 2014, the average number for the entire term of the UPA was 1.5 km/day or 7% of what was promised. By any yardstick, that is a fail grade. As a student of Transportation Engineering knows, for the economy to grow at x% a year, the transportation sector needs to grow by 1.5*x% a year - that is clearly not happening. When you compare that with Narendra Modi's vision of 100 cities connected by high-speed trains by the 75th anniversary of India's Independence from the British Empire, the promises seem laughable.

Land is another important requirement for factories to be established to create jobs. That is clearly going to be next to impossible to obtain because the Land Acquisition Act has made it nearly impossible to do so. On water, electricity and other infrastructure requirements, the manifesto just makes vague promises. But the real area of concern is labor reforms, which is the single biggest bottleneck in an expansion of manufacturing that India so badly needs. On this, all parties are completely quiet, with the exception of Left parties who promise to make things even worse. Without labor reforms, private manufacturing is not going to take off.

Thus, it can be seen that this 'Right to Entrepreneurship' is a complete departure from everything else in the manifesto and it is impossible to implement both at the same time. Given Sonia Gandhi's known priorities, which presumably her son has inherited, there is no doubt which will get implemented and which will remain on paper. This 'right' would be worth a good laugh if it wasn't so sad just thinking about it.

PS: The whole 'right-based approach' is not really a Congress invention but is taken from the Soviet Union's Constitution, which guaranteed all sorts of rights which were impossible to implement. The only reason some people could get them was because of the extensive forced labor camps of the Soviet Union, which created free labor albeit temporarily. We all know where the Soviet Union went in the end. 

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