FASTER – Policy Idea for Large-scale Job Creation
Executive Summary
India has massive underemployment. Nearly two-thirds of its workforce are semi-skilled, and 70% of its graduates are in elementary occupations. Labour-intensive industries have the highest capacity to transition millions from agriculture, elementary work, and unpaid family labour to more productive jobs. These industries need structural reforms in factor markets. But there are multiple interconnected barriers – institutional, regulatory, and political. Innovative policy models are required to overcome them.
This paper proposes creating exceptions – Federally Administered Special Trade and Economic Regions (FASTERs) – specially notified district-sized coastal areas of 300-500 sq kms with liberalised factor markets.
FASTERs will have – exclusive labour codes that enable size scale-up and manning flexibility for firms; de-regulation to ensure ease of doing business; exclusive land laws, formal land lease markets and pooling to provide easier and cheaper land availability; special courts for quicker dispute resolutions and contract enforcement; specialised financial institutions with targeted credit guarantees and localised risk assessment; full duty exemptions on key inputs, and tax holidays; integrated logistics ecosystem with world-class ports and warehousing, quick clearing, and multi-modal connectivity. Unlike Special Economic Zones (SEZs), Coastal Economic Zones (CEZs), or Industrial Cities, there will not be land acquisition or compliance audits and exclusive export zoning. FASTERs will be much larger and provide enabling conditions, rather than subsidies and incentives.
Two coastal Union Territories – Puducherry (main district) and Daman-Dadra Nagar Haveli (excl. Diu) are ideally poised for conversion into FASTERs. The neighbouring states of Tamil Nadu and Gujarat-Maharashtra, respectively, will also have the option to participate by notifying adjoining areas and enclaves for the purpose. They will be jointly administered by the union and the participating states. The administration shall facilitate public infrastructure, housing for migrant labour, and skill-training infrastructure.
FASTERs will develop into large urban agglomerations, with industries, housing, education, healthcare, and amenities. By attracting ten mega firms, a hundred large firms, and thousands of small and medium enterprises each, they can potentially generate 24 million jobs within three years. Government investment will be limited to urban infrastructure, human resources, ports, and multi-modal connectivity. Each FASTER would need a gross budgetary support of INR.39,000 cr p.a for the first three years.
The two prototypes will build conviction for further FASTERs, and eventually wider adoption of factor-market reforms. It is time to usher in a new era of FASTER (led) industrial growth and employment generation.
Author
Kannan
Kannan is a Research Scholar with the 20 Million Jobs Project at the Takshashila Institution. He is also a guest teacher at IIM-L and MICA. He has over 22 years of varied and extensive experience. Prior to policy and academia, he was an entrepreneur and a senior business manager at companies including GSK Consumer Healthcare and Mondelez International, leading large teams and building some of their much-loved brands.