High-wage jobs can rev up Punjab

THE oft-quoted Punjabi aphorism, Khaada peeta lahe da, Baki Ahmed Shahe da (eat and drink whatever you can because the invader will take the rest), may feel like it explains some of the high discount rate, low savings rate and consumption preferences of the state. But such cultural explanations are at best the soft bigotry of low expectations, and at worst, racism. We argue that policymakers can reverse involuntary migration and transform Punjab into a rich habitat for high-wage jobs through a principles-based programme of decriminalisation, deregulation and digitisation of employer compliance.

India’s problem isn’t jobs and unemployment, but wages and employed poverty. This arises from the shortage of high-productivity, formal, non-farm employers — our 63 million enterprises only translate to 29,500 companies with a paid-up capital of more than Rs 10 crore. Why? One possible explanation is regulatory cholesterol; employers face 69,233 compliance requirements, 6,618 filings and 26,134 jail provisions. The problematic philosophies embedded in this excessive compliance include “permitted until prohibited,” “show me the person and I’ll show you the rule,” and the notion that drunk driving is an argument against cars.

This complexity breeds corruption, uncertainty and informality, and many of our employers are dwarfs (small that will stay small) and not babies (small that will grow). As quality guru Edwards Deming reminded us, a bad system always beats a good man.

Punjab, like India, does not have a shortage of land, labour or capital, but faces challenges in how these three factors of production combine into productive enterprises (economists call this Total Factor Productivity, while people in general call it entrepreneurship or technology).

Punjab, with a GSDP of Rs 8.9 lakh crore, is home to over 12.8 lakh MSMEs (Micro, Small, and Medium Enterprises), 4.06 lakh businesses that pay GST and 26,952 registered companies. However, formalisation in the state is low, with only 1.1 per cent of entities making monthly provident fund contributions. Other issues on the employment and wage landscape include manufacturing employment, good urbanisation, exports, services and women’s labour force participation.

Employers in Punjab face a complex array of 827 Acts (150 state ones), 29,758 compliance requirements (4,221 from state laws), 2,410 filings (128 from state laws) and 7,153 jail provisions (1,914 from state laws). We propose three reforms that would help make Punjab a productive ground for high-wage job creation:

Decriminalisation: Punjab must leapfrog the limited success of Jan Vishwas 1.0 (which removed only 110 employer-related jail provisions) by adopting the principles-based philosophy articulated by the Ministry of Commerce that advocates thinking about (a) if the provision involves a procedural action, inaction or compliance; (b) if the provision is a general contravention where singular punishment is prescribed for multiple unspecified offences; (c) whether the offence would result in physical harm or externalities so large that compensation is not feasible (e.g. threats to national integrity or public order); (d) whether it involves mala fide intent to defraud any stakeholder such as employees, shareholders or the government; (e) number of ongoing or pending cases under that provision; (f) whether the prescribed punishment is appropriate and proportionate; (g) if the offence is already punishable under another legislation; and (h) whether the offence is better regulated through civil penalties, particularly for first-time violations.

Decriminalisation is not about being soft on crime but bright about regulation. Given that hardly any employers are in jail, despite numerous ways to be jailed, it’s clear that the law is not working due to corruption or selective enforcement. Using these principles, two Bills — one for state laws and another for concurrent laws — could eliminate 90 per cent of the current criminal provisions.

Digitisation: Entrepreneurs struggle with non-paperless, non-presenceless and non-cashless compliance workflows. A Punjab Open Compliance grid modelled on India’s digital public goods framework, architecture and infrastructure, including API Setu, Entity DigiLocker and PAN 2.0 (Common Business Identifier), would consolidate time-based, event-based, ongoing and licence-based compliance requirements into a single, seamless digital platform. State departments will publish licences, permissions, NOCs, consent orders and regulatory updates directly into a secure, tamper-proof platform, enabling firms to streamline regulatory filings, periodic returns and register maintenance. This would replace today’s opaque, manual workflows, where employers rely on costly intermediaries with transparent, trackable and corruption-resistant processes.

Deregulation: Entrepreneurs define compliance as any obligation outlined in an Act or rule (Union, State, local or regulatory level) that requires actions such as obtaining or renewing licences, making payments and maintaining records; any failure to meet these obligations can result in penalties.

Punjab must establish a State Regulatory Reform Committee to rationalise compliance requirements. The committee would reimagine the state’s regulatory framework, eliminate departmental redundancies and promote seamless compliance.

A possible principles-based approach would examine every compliance obligation for whether the regulation is already under review for repeal, consolidation or reform; how frequently it is amended in ways that may disrupt compliance; how much duplication there is with other laws; legal obsolescence; weigh the cost of compliance against the governance value; assess relevance to technological, economic and social realities; and identify gaps between a law’s intent and its execution. Using this framework, each compliance obligation should be marked Red (Remove), Amber (Modify) and Green (Retain).

In his book The Death of Consensus, historian Phil Tinline suggests, “Democracy means that any unthinkable new idea has to go through a long trial before it can be sufficiently established for a government to act on it. The dispelling of an old nightmare, the destruction of an old taboo, takes a lot of back-and-forth wrangling between the established orthodoxy and the new regime. While that is happening, things look bleak, and frightening”.

The economic regime adopted by India after 1947 — codified in the Avadi resolution of 1955 — vilified entrepreneurs. But without employers there are no employees, and fiscal and monetary policy cannot substitute for wages.

The best route for tackling Punjab’s fiscal challenges (47 per cent debt-to-GSDP ratio, expected to rise above 50 per cent by FY28) and blunting outward migration is to complement its fertile agricultural soil with a fertile habitat for high-wage employers. Any takers?

Manish Sabharwal & Jayashri Patil are from Teamlease Services.