2 truths and a lie

The Nutgraf is a 10-min newsletter sent at 10 AM IST every Saturday. It connects the dots and synthesizes one big event in business, technology and finance that happened over the week in India. In a way you’ll never forget.

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The Nutgraf

How are you?

I don’t know about you, but the further we go into this lockdown, the trade-offs and decisions made by those in power in India start to come into focus. Some of them good. Some well-intentioned but poorly done. 

And some unconscionable. 

Like Karnataka, which attempted to hold back migrants from going back to their home states, ostensibly at the request of builders. And had to reverse its stand following protests. 

This is where we are now. Sigh. 

Stay safe. Be considerate. 

Let’s dive in. 

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Three arguments. Pick any two

There’s a game called ‘2 truths and a lie’. The premise is simple. I’ll give you three statements. Two of them are true. One is not. If you identify the lie, you win.

Let’s play a variation of that today. 

There are three things that happened last week, all of which resulted in a profound shift in the relationship between the Indian state, businesses and the workforce. State. Capital. Labour.  

Here’s what I’ll do. I’ll tell you what happened. I’ll make the best argument for what this means and the nature of this shift. All the facts are true. The interpretation is mine. Three arguments. You pick which two you want to believe, and which one you want to discard. Totally your call. 

Cool?

Here’s the first. 

1. India’s largest states suspend fundamental rights of workers

Uttar Pradesh, India’s largest state, did something surprising. They passed an ordinance exempting businesses in the state from adhering to all except four labour laws for the next three years. 

You may ask, wait, which laws are businesses not required to follow anymore? 

Here’s a partial list

The Minimum Wages Act
The Equal Remuneration Act
The Trade Unions Act
The Industrial Employment (Standing Orders) Act
The Industrial Disputes Act
The Factories Act
The Contract Labour Act
The Inter-State Migrant Workmen Act
The Working Journalists Act
The Employees’ Provident Funds and Miscellaneous Provisions Act
The Employees’ State Insurance Act
The Payment of Bonus Act
The Unorganized Workers’ Social Security Act

Woah. 

Minimum wages. Equal Remuneration. Social Security. This all looks worrying. Well, you aren’t the only one. 

Labour law experts were really upset

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“It is absolutely shocking. This move of the Uttar Pradesh government turns the clock back by more than 100 years. It will lead to slave-like conditions for workers. It’s unacceptable, and in violation of human and fundamental rights. This move should be legally challenged,” 
Ramapriya Gopalakrishnan, Labour Law Advocate

Even trade unions affiliated with the ruling government in Uttar Pradesh were unhappy.

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This will lead to a law of the jungle. Rule of law is a characteristic of every civilized society and any area exempting from the rule of law will lead to a ‘jungle law’.

Uttar Pradesh [is] creating a situation where there will be no rule of law and the two parties (employers and employees) will have to settle the course on streets as the Industrial Disputes Act of 1947 has been withdrawn
Bharatiya Mazdoor Sangh national president C K Saji Narayanan

Uttar Pradesh isn’t the only one. Madhya Pradesh, Rajasthan, Himachal Pradesh, Gujarat, and Punjab have all relaxed their respective labour laws to greater or lesser degrees. 

That’s one of the effects of this lockdown. Businesses are shut. State governments are facing a severe revenue shortfall. Also, many migrant workers hail from states such as Madhya Pradesh and Uttar Pradesh. And are going back there from places like Delhi, Kerala, and Karnataka. 

Governments see this as an opportunity to capitalise. Suspension of these laws allow companies to hire and fire as they see fit, or even make workers do overtime. The ones who are being exploited are labourers. 

That’s the first argument. 

2. India is conducting long overdue reforms

In light of what Uttar Pradesh did, another question worth asking is how many labour laws are there exactly in India? 

The answer is 45 national laws. And over 200 state laws. 

Seriously? 

Yes. 

This brings us to an interesting point. Why are there so many labour laws in the first place? There’s an overriding argument that these laws aren’t really there to protect workers, but act as a tool to harass businesses. 

There’s a phrase for this in India. Inspector Raj

So, on one hand, while the state is still transitioning out of a geriatric view of interacting with businesses, Indian businesses themselves have grown to be entrepreneurial, risk-taking and global. Spates of foreign firms are also rubbing shoulders with them, expecting a professional business environment.

At cross-roads of these two opposing ethos of operation sit the inspectorates—who have jurisdiction over ambitious businesses, but are mandated to ensure imposition of laws that date back to the 1950s and 1960s. These are still modern, when one considers that if you open an establishment in Mumbai, the relevant legislation—Mumbai Municipal Corporation Act—dates back to 1888.

Opaque systems of governance that are paranoid of everyone tend to create institutions and frameworks that are more prone to rent-seeking. India’s tryst with corruption, ranging from petty to megalomaniacal, is symptomatic of such systems.

Ask anyone who runs a small or a medium business, and she’ll tell you how hard it is to conform to the country’s many labour laws, with different definitions of wages, contracts, and workers. Ask her about the stories of paying bribes to avoid getting hauled up, because it’s so easy to make missteps. The stories of how hard it is to run a business in India is well-documented. These laws have a part to play.  

Besides, 90% of India’s workforce was never protected by these laws in the first place. The weight of these regulations pushed businesses into the shadows, into an unorganised sector, or into contract labour. 

Instead, the argument is that these laws being dismantled isn’t a sign that labourers are being exploited. Rather, it is the state realising that the tools of oppression are tools that are holding them back

The Indian government knows this. It knows that labour laws are complex, and has been trying, for six long years, to collapse and reform the 40-odd national laws into a few codes. It’s made some headway but has a long way to go. 

This is its opportunity. 

And there’s historical precedence here. Typically, in India, reforms happen at gunpoint. That’s what happened in 1991, when a balance in payments forced the country to liberalise and throw out archaic laws around flow of foreign exchange into the country, spurring investments and catapulting India into the 21st century. 

In 1991 an economic crisis forced India to reform its money laws. 

In 2020 a human crisis is forcing India to reform its labour laws. 

This is the second argument.

I’ll let Rohin explain the third argument. 

3. India’s Full-Court China Press

Of all the reasons that make basketball such a beautiful game to both watch and play, the one that is perhaps ignored the most is how remarkably balanced it is. Two teams attack, retreat, and then defend in rough intervals of half a minute, back and forth. Over and over again. The symmetry feels almost choreographed.

Except when one of them decides to break the rules and do a “Full Court Press”, basketball’s version of the adage “Offence is the best defence”. What then happens is that one team attacks, and then instead of retreating to their half as the ball possession moves to the other team, continues to attack. By doing this, they put constant pressure on the opposing team, hoping for it to make unforced errors. And to change the tempo of the game to suit themselves.

The full court press is so fascinating that Malcolm Gladwell wrote a fascinating New Yorker feature around it over a decade ago. He called his story, “How David Beats Goliath: When underdogs break the rules.”

The protagonist of the story was Vivek Ranadivé, the Indian origin founder of software company TIBCO and the co-owner of NBA basketball team Sacramento Kings.

Ranadivé was puzzled by the way Americans played basketball. He is from Mumbai. He grew up with cricket and soccer. He would never forget the first time he saw a basketball game. He thought it was mindless. Team A would score and then immediately retreat to its own end of the court. Team B would inbound the ball and dribble it into Team A’s end, where Team A was patiently waiting. Then the process would reverse itself. A basketball court was ninety-four feet long. But most of the time a team defended only about twenty-four feet of that, conceding the other seventy feet. Occasionally, teams would play a full-court press—that is, they would contest their opponent’s attempt to advance the ball up the court. But they would do it for only a few minutes at a time. It was as if there were a kind of conspiracy in the basketball world about the way the game ought to be played, and Ranadivé thought that that conspiracy had the effect of widening the gap between good teams and weak teams. Good teams, after all, had players who were tall and could dribble and shoot well; they could crisply execute their carefully prepared plays in their opponent’s end. Why, then, did weak teams play in a way that made it easy for good teams to do the very things that made them so good?

Over the last few weeks, it’s becoming increasingly clear that India, the country, is attempting a full-court press on China.

India’s full court press is playing out in two halves of what it sees as the game—international and national.

One of the senior most and widely respected ministers in the Indian government, Nitin Gadkari, was uncharacteristically lucid (for a minister) while explaining India’s international strategy.

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Now in the whole world, there is a hatred for China and Chinese economy. Now this is a blessing in disguise and my feeling is, the US, all the western countries and European countries are on the same line. So this is a time for India because China is already in the process of becoming a super economic power.

Now because of this approach of all the countries like the UK, the US, Japan, Germany, France, Italy and Spain, this is an opportunity for India and Indian investors and particularly the MSME make a technical joint venture with the companies who have got the best technology. At the same time, it is an opportunity for India and for foreign investment

Nitin Gadkari, Minister for Road Transport & Highways of India and Shipping Ministry of Micro, Small and Medium Enterprises

Gadkari wasn’t an aberration. Because India’s prime minister would say the same to the chief ministers of various states.

To capitalise on what it sees as a global wave of negative sentiment against China and overdependence on its factories, Bloomberg reported that last month, India reached out to over 1,000 companies globally, offering them incentives to move from China to India.

Displaying unusual alacrity, India has also apparently identified land pools across its states that add up to “two Luxembourgs”.

On its own home turf, too, India is playing an aggressive defence.

All Chinese investments into Indian companies must now go through the government approval route, which is a black hole out of which even light cannot escape.

Perhaps the strongest sign of which way India’s game would play out was presented by Mukesh Ambani, the chairman of its largest private conglomerate, Reliance Industries.

On 25 February, during a roundtable discussion between US President Donald Trump and Indian CEOs, Mukesh Ambani rose to speak. “We’re the only network in the world which doesn’t have a single Chinese component,” the Reliance Industries Ltd (RIL) chairman said. Some saw it as a facile attempt to play to Trump’s famous anti-China rhetoric. Within Reliance Jio Infocomm—RIL’s telecom subsidiary—it was seen as a sales pitch: Jio could play a part in building the next generation of US telecom networks.

[…]

In March, Jio sought governmental approval to test its new 5G equipment, a culmination of years of research and development that began in 2017-2018. That was when the company’s top brass hit upon the idea of becoming a telecom equipment behemoth, potentially even creating a rival to China’s Huawei.

Reliance Jio’s 5G push to be India’s answer to Huawei

Will this full-court press work? Perhaps not. But can it unnerve a stronger rival? I quote from Malcolm Gladwell’s story on Vivek Ranadivé.

Roger Craig says that he was sometimes startled by what he saw. “The other coaches would be screaming at their girls, humiliating them, shouting at them. They would say to the refs—‘That’s a foul! That’s a foul!’ But we weren’t fouling. We were just playing aggressive defense.”

[…]

Ranadivé called the press off. He had to. The Redwood City players retreated to their own end, and passively watched as their opponents advanced down the court. They did not run. They paused and deliberated between each possession. They played basketball the way basketball is supposed to be played, and they lost—but not before making Goliath wonder whether he was a giant, after all.

The Chinese consul-general in India wrote an op-ed yesterday in the Indian Express, a leading daily.

Frankly speaking, we live in a world dominated by Western business. According to the International Monetary Fund, the US dollar accounts for around 40 per cent of the international reserve currency, and the Euro accounts for more than 30 per cent. As far as the media are concerned, Westerners certainly have a “loudspeaker”, while the voices of China and India get lost in this cacophony.

[…]

Now with some Western political figures using COVID-19 to slander China, the Chinese people’s anger is understandably on the rise. China and India should further promote media cooperation to ensure that our views get across to different corners of the world. The renaissance of Asian civilisation represented by China and India and the rise of developing countries, is unstoppable. No provocation can change this historical trend.

To summarise, these are the three statements. 

  1. India is suspending fundamental rights of workers because they are in the weakest position now and do not have a choice.  
  2. India is conducting welcome, widespread, long-pending reforms to make the functioning of businesses easier and attract investments.  
  3. India, in a bid to occupy a space left by China, is introducing more restrictive regulations, and while states are competing for this space, the beneficiaries may be limited to a few, powerful companies.

Three arguments. You pick which two you want to believe, and which one you want to discard. Write to me. Let me know. 

Just remember that what makes ‘2 truths and a lie’ appealing is that your choices reveal less about the other person, and more about your own beliefs.

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That’s about it from me. 

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