There are no real political parties or politicians in India after emergency period, all political parties and politicians(chumchas) are funded by big business houses, they do what they are asked to do.

Need proof?
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Last time I saw political parties collecting election fund “house to house” from ordinary citizens is during 1971 general elections. Think about it, if you are an ordinary citizen, has any political party in India contacted you to join them or asked for election contribution in last 30 years? why not? think…..

There is a much simpler explanation as to why politicians are not willing to touch the labour reform issue. Many of them have trade unions of their own and they are obviously reluctant to do anything to offend their support base. This is true of the BJP, the Left, Congress the DMK, AIADMK, Shiv Sena etc. As further evidence, note that many of them are willing to make exceptions in the sectors where there is no trade union. Witness the curious fact that the left front in Bengal has banned strikes in the IT sector where of course, there is no trade union.

I have to clarify one thing: I do not think that your assertion that labour reforms will cause large unemployment in the short run is correct. I only said that the reasoning is somewhat subtle. But I don’t think it is right and here’s why. The organized sector employs only 7-8% of the total labour force. Sure, some workers will get unemployed but there is no reason to believe that there will be large scale unemployment. Much of the overemployment is in the public sector and I don’t see those firms laying off anyone. The private sector have already optimized their behaviour (in terms of the number of workers they hire) and I don’t see them laying off large number of workers either. Do you have any reason to believe the contrary? I have asked you this before and you ducked it claiming the onus is on me. I am confident you will continue to duck the issue.

Finally, I am struck by your arrogance. You claim you are not an economist and don’t know much about the microeconomic situation, but for sure, you know that Indian economists are not doing something right. Yes, of course…as I said, I await the name of one Indian economist who meets your caricature.

And of course, you will not acknowledge that you made an incorrect inference about me.

And don’t try to whitewash the political viability issue as if it is something top economists in India consider the first thing in the morning. Sure, the buereaucrats and the politicians have to consider it; it’s their job; but what I want is for mainstream economists to consider it.

For it is from them that the truly good solutions can arise.

Indeed, I’m not saying the question is non-obvious; I’m saying that it is the answer which is non-obvious; and that it’s being clouded by Friedmanian ideologues, it’s not being pursued. Not least because it is extremely difficult.

For one, I could not find good politico-economic analyses on Indian labor policy.

I might be wrong, perhaps teh top Indian economists do have the sort of vibrant tab on the political pulse that teh top American economists have; if so I would be one of the happiest persons to know that.

I am an economist, of course.

Apologies in case my comments offended you but I was expecting better economic reasoning from you. It’s good that you are passionate about the subject; good luck with your studies.

seven_times_six, subtle economic reasoning is a skill that does not come naturally to everyone but of course, it can be learned. This is not peculiar to economics - not all have natural skills at maths or physics or any other branch of study. In all honesty, most (not all) of our politicians have not displayed that they are skilled in the type of economic reasoning that you put forward as an explanation of why our politicians have stuck to our current labour policy. This does not imply they are stupid. I would not make the mistake of underestimating any of our politicians; many of them are very smart. I think many of their economic policies are wrong-headed but as I have said, that is a different matter.

You inferred something that I did not imply but I do not expect you to acknowledge that, given that your opinion of economists is not high. Presumably, the economists are not smart enough to see what you have seen - that economic policies need to be politically viable as well. You have been repeating this point throughout this thread. Yes, of course, people like Montek Singh Ahluwalia and others in charge of implementing policies are blissfully unaware of this fact, not to mention lesser mortals like myself.

For the record, the fact that a suboptimal policy is being followed because of political considerations does not change the fact that it *is* suboptimal. As an economist, I have to say that the policy is suboptimal: what else can I say? That does not mean that I am unaware of the practical problems in changing the current policy. And that is all I have to say on this topic.

As such it is not a politican vs investor but a politican vs economist argument.

you state very clearly that politicians are incapable of nuanced economic reasoning and tell me I’m putting words into your mouth about your low reckoning of politicians?
And what’s with the dramatic “you can have the last word” and all that?

You must understand that I’m not debating or antagonizing you: I actually want smart free market economists like you to formulate smart solutions that can actually take off the ground.

Nitin:
I actually think the argument of politician vs economist is relevant in the sense that I think drawing vanilla policy suggestions from just such studies is unadvisable. No investor worth his salt thinks it is better to do business in Nepal and Bhutan rather than India.

The study is merely a ranking of labor restrictions, but from which passionate economists from the Milton-Friedmanian school make their naive policy inferences; without taking into account the current microeconomic situation in countries like India: but which have to be taken into account to make any solution politically feasible.

I detailed some possible solutions in the previous comment (e.g. try to identify other regulation relaxations which would cause expansions and increase job growth and THEN relax labor restrictions. This would ensure the unemployment increase would be kept to a minimum and perhaps it would not increase at all)

I’m not an economist and I really do not have much info. about the microeconomic situation either, but it has to be possible for our smart economists to hasten our transition to a market economy by doing it intelligently by taking into account microeconomic political feasibility.

I apologize for the seeming pedanticity, but this is something I’m starting to feel strongly about.