Economic Times, March 06, 2021
By Pradeep S. Mehta and,
The last budget was quite a change from its earlier versions. It was bold, transparent and growth oriented. Even the pronouncements by the Prime Minister who stated that their government will be market friendly, not just business friendly, was a breath of fresh air. However, the PM recognised that the private sector will have a big role and secondly, that many non-strategic public sector units will be privatised thus expanding the size of the private sector. In both these growth areas, we interpret the thrust of the government will be towards stakeholder capitalism and not shareholder capitalism. One common stakeholder in both areas who will be affected is labour, among others.
The recent debate on the role of the private sector in India’s economic development has called for a multi-dimensional deliberation. It has particularly stipulated an inquiry into the relation between the private sector and Indian people. The debate is triggered by the Prime Minister’s remarks where he has categorised private sector as wealth creator, and thus, one of the major constituents of India’s economic growth.
Recognising the role of labour, or human capital, the Prime Minister has also spoken about education, skilling etc. with the hope that the private sector will do the same so as to accelerate India’s economic development trajectory. Given the economic transformation of Indian economy post-1991 reforms, there is no second thought on the contribution of private sector towards India’s economic development, save and except few glitches. Nonetheless, both the government and private sector should realise that people’s acceptance of its role is crucial for this multi stakeholder led approach for development. People will embrace the private sector when the distribution of its acquired wealth is just and fair.
People’s affirmation and support is the key towards the success of any type of development approach. It is an organic process which is governed by a number of factors, particularly dependent on people’s self-interest and reliance on political, social and economic ideologies.
In order to gauge people’s existing perceptions towards the private sector, firstly the fault lines between the private sector and Indian masses need to be examined.
This examination is of the utmost importance, given the long standing trust deficit between the private sector and the people. The ever-increasing widening wealth gap in India and around the globe, increased contractualisation of regular jobs, stagnant wages, lack of job security, and lack of accountability of the private enterprises are few of the prominent reasons of people’s scepticism towards the private sector. To put things in context, India Inequality Report 2018 by Oxfam India highlights that the top 10% of the Indian population holds 77% of the total national wealth. 73% of the wealth generated in 2017 went to the richest 1%, while 67 million Indians who comprise the poorest half of the population saw only a 1% increase in their wealth.
People are contributors to and beneficiaries of growth of the economy, of which the private sector is a critical partner. The private sector needs to acknowledge that the Indian people are placed at a relatively lesser dominant position than its own standing, and thus initiate the first step to address the fault lines. It is also to be acknowledged that there is a direct linkage between wealth redistribution and improved human development index. Thus, it is also imperative on the policy makers to assess and analyse the performance of the private sector not only through its wealth creation activity but also through its redistribution efforts.
Any inquiry regarding the role of private sector in wealth re-distribution in India needs to answer two questions to start with: its purpose and responsibility in redistribution of wealth.
The traditional understanding of the purpose of private sector is widely known to be wealth creation through which it generates profits and thus expands the economic pie of a given economic system. In recent times, there has been rethinking on this front with the advent of concepts like stakeholder capitalism, sustainable development, corporate social responsibility, economic democracy etc. The objective of this re-thinking is to re-orient the purpose of privatisation to include social accountability. While there been some success towards this end, it still remains a long journey.
Secondly, is the private sector responsible for the redistribution of wealth which it generates?
Though, it is widely believed that re-distribution is the role of government, the private sector has a limited but particular role to play in it by generating decent work for the public.
As per International Labour Organisation (ILO), decent work involves opportunities for work that is productive and delivers a fair income, security in the workplace and social protection for families, better prospects for personal development and social integration, freedom for people to express their concerns, organise and participate in the decisions that affect their lives and equality of opportunity and equal treatment for all women and men.
To put it differently, decent jobs place workers at the centre of production or delivery and consider them as assets with increasing value as opposed to one of factor costs.
The generation of decent jobs will lead to a healthier, secure and socially protected workforce which helps in generating demand in the economy. It directly involves the private sector not only as a facilitator of development agenda but also as its implementing agent. Thus, facilitating redistribution of its acquired wealth in a just and fair manner. The act towards generation of decent jobs is also a step to move away from the notion that any job is better than no job.
Private sector’s requirement of an enabling ecosystem is being addressed by the government’s initiative of ease of doing business reforms. Coupled with it, generation of decent jobs has the potential to create a ripple effect thereby aligning profits of private sector with the improved living standard of workers as an enabler towards economic democracy and justice.
The authors work for CUTS International, a global public policy research and advocacy group.
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