Big Bold Reforms From Rajasthan Chief Minister Vasundhara Raje

Jaipur: The reformist government that many Indians and free-market flag-bearers had hoped would emerge after this year's election isn't in New Delhi - at least not yet. It's a dusty day's drive to the southwest.

Rajasthan, derided as a poverty-stricken laggard, has taken the lead on structural reforms that, their backers argue, could also help Asia's No.3 economy as a whole to attract business and employ a fast-growing workforce.

Chief Minister Vasundhara Raje has shaken up labour, land and welfare policies with such verve that Prime Minister Narendra Modi has even poached her chief of staff for the Union Finance Ministry.

In her most controversial achievement since taking office a year ago, Raje, 61, enacted reforms to a law hated by industry that made it almost impossible to lay off workers.

Raje, descended from royalty that once ruled the "Land of Kings", told Reuters her goal is to "create a habitat for employment" - not to destroy jobs.

"We have no intention of hurting anyone," she said in the state capital of Jaipur. "We have to open up every single employment opportunity."

Rajasthan and the rest of India face other obstacles besides a freer labour market: woeful infrastructure, red tape and corruption. India slipped to 142nd in the World Bank's latest 'ease of doing business' rankings.

Daikin, a Japanese maker of air conditioners that is the largest outside investor in Rajasthan, welcomes Raje's resolve on reforms. But it has yet to decide whether to build a second plant in the state.

"If India has to become a global force in manufacturing, all these issues need to be looked into," said Kanwal Jeet Jawa, Managing Director at Daikin India.

By activating a rarely-used clause that allows state law to supersede central law as long as it wins presidential approval, Raje has broken the impasse in two crucial areas where New Delhi shares responsibility with India's states - labour and land law.

In July, she pushed amendments to the Industrial Disputes Act of 1947 through the state legislature, allowing firms in Rajasthan to lay off up to 300 workers without government permission, up from 100 before. President Pranab Mukherjee has just given his assent.
Raje has wielded her four-fifths majority to tackle another chronic obstacle to investment in India - land acquisition. A bill to expedite land purchases for public purposes was passed in September and awaits the president's signature.

Labour and social activists reply that Raje's reforms will only exacerbate job insecurity in India, where just eight percent of manufacturing workers are in formal employment. Many of the rest are short-term contractors.

"Now the companies will look to do away with permanent and regular workers, and employ more and more contract labour," said Rajya Bihari Sharma, the Rajasthan head of the Bharatiya Mazdoor Sangh trade union that is affiliated to the ruling BJP.