George Curzon’s budget speech in 1901 aimed to “increase non-agricultural wealth" and he responded to critics of this mission as “talkers of platitude". That unlikeable imperialist was only partly wrong because he chose wealth instead of employment but increasing non-agricultural employment does not need platitudes but a radical policy shift. Radical, like the shift made when classical physics (discrete systems) was replaced by quantum physics (everything is interrelated). Max Planck, the discoverer of quantum physics, would be proud of the systemic and systematic approach of this budget.

Before we examine the systemic approach, it is important to highlight that the budget announced one of the most impactful labour reforms in 50 years—a radical and innovative revamp of India’s employee benefits regime. One of the birth defects of our labour market has been an unchanging 90% informal employment; this means 100% of net job creation in the last 20 years has happened in informal jobs. The primary driver of this informality has been a mandatory payroll confiscation regime which requires employers to deduct 45% of salary for low-wage employees (upto ₹ 15,000 per month) for programmes like Employees’ State Insurance and Employees’ Provident Fund Organisation that “don’t have clients but have hostages" and create a wedge between salary in hand against that on paper that is higher than individual savings.

EPFO not only operates the world’s most expensive government securities mutual fund but offers a goofy service that means 45 million accounts are dormant because it links accounts to employers rather than employees. ESI not only offers India’s health insurance programme with the worst claims ratio (45%) but sits on cash reserves of more than ₹ 30,000 crore. This budget proposes to make employee provident fund voluntary and creates competition for employer provident fund and ESI by allowing employees the choice of paying their contribution to the National Pension Scheme and any IRDA-regulated health insurance programme. The consequences of this change will be a massive rise in formal employment combined with laying the foundations of a modern pension system. The deep and liquid US pension market traces its origin to the passing of ERISA (Employee Retirement Income Security Act of 1974). Finance minister Arun Jaitley may have just passed the Indian equivalent of ERISA.

The budget made interesting down payments on all the five locations of work (physical, sectoral, education, enterprise and legislative). The physical geography of work will be helped by the massive increases in infrastructure spending and devolution to states (62% of total tax receipts) because 29 chief ministers can finally compete on creating fertile habitats for job creation. The sectoral geography of work is helped by the nuanced thinking around manufacturing and putting more details around Make in India. The enterprise geography of work—52 million enterprises only translate to 7500 companies with a paid up capital of more than ₹ 10 crore—will shift towards more formal and larger enterprises because of GST, simplification of processes, and all the ease of doing business agenda. The education geography of work will benefit from the ministry of skills becoming the single node though further details of higher education deregulation and amendments to the right to education law would have helped. The legislative geography of work is labour laws; I am glad it did not take on the hire-and- fire clause and left that to states but made the radical changes to the benefits regime highlighted earlier.

When Planck was asked why quantum physics was not being widely adopted a decade after its superiority became clear he said, “Unfortunately, science progresses one funeral at a time." After a decade of budgets that prayed to the god of subsidies, it is wonderful to have a budget that prays at the altar of jobs. It is a testament to India’s wonderful democracy that this change did not need any funerals.

Manish Sabharwal is chairman of hiring services firm Teamlease Services.

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