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21 APRIL 2016 

Rollback redux

Union Labour Minister Bandaru Dattatreya has backed off from enforcing new rules to restrict employees from emptying their provident fund accounts before they turn 58 years old. This is the second time in just over a month that the government has backtracked on a major policy shift concerning retirement savings in PF accounts. Another U-turn may be called for once the implications of new rules issued by the Finance Ministry to forfeit ‘unclaimed' deposits in small savings schemes sink in. Earlier, Finance Minister Arun Jaitley withdrew two paragraphs of his Budget with a provision to tax three-fifths of employee PF accumulations at the time of retirement. That rollback came within a week, in the face of a widespread political backlash. The rules restricting EPF withdrawals were notified nearly 10 weeks before they were rolled back. Though there were some murmurs of discontent and many rushed to withdraw PF balances from previous jobs, it was only when violent protests rocked Bengaluru that the Centre changed tack. It first tried to buy peace with a three-month deferral and relaxations to allow employees access to their entire EPF balance for the marriage of children, the purchase of a house, enrolment in an educational course, and switch to a government job. Less than 24 hours later, the rules were simply scrapped. Most of the protesters in Bengaluru are employed in the textile sector, where India is fast ceding ground to Vietnam and Bangladesh; jobs are vulnerable and workers cannot take it for granted that they will be employed under the same conditions till the age of 58.

The violence may be seen as an act of desperation, and the Centre's rationale - ensuring people don't fritter away their PF savings during their working life - is good in theory. But it does not take into account the fact that people often withdraw EPF balances when they change jobs, simply because transfers are not handled smoothly at the PF office. Moreover, the labour market has undergone a paradigm shift; it is now characterised by greater job mobility, contractualisation and weaker security of tenure. A similar ‘we know what's best for the people' strand of thinking was evident in the Budget proposal to tax EPF savings. The Finance Ministry claimed it was meant to nudge people into buying an annuity with their retirement corpuses rather than blow them away. The quick rollbacks in the face of protests create an impression that the government hadn't done its homework in these cases. Had it persisted, more people may have preferred informal jobs (without mandatory payroll deductions like EPF), thus defeating the larger objective of creating quality formal sector jobs, that account for just 10 per cent of the workforce. Micromanaging retirement choices for the privileged few is a waste of time. Redoubling efforts at providing genuine social security for the other 90 per cent of the workforce is a far better idea.

Frontrunners seize the day

The Empire State has smiled upon its own. In Tuesday's primary elections, New York yielded rich bounties to Democrat and former Secretary of State Hillary Clinton and also to Republican property billionaire Donald Trump. Both were already frontrunners in the race to win their party's nominations for the November 2016 presidential election, going by the number of delegates each had garnered. In sweeping New York, both candidates have consolidated their leads over their nearest rivals and set themselves up for victory in the July conventions in Philadelphia and Cleveland, respectively. Ms. Clinton, who has led by a sizeable margin over her only Democratic rival, self-described socialist and Vermont Senator Bernie Sanders, sprinted to the finish line in the state that she represented in the U.S. Senate for eight years from January 2001. Of the 247 delegates available for the taking, she scooped up 135 and won 57.9 per cent of the vote. Mr. Sanders managed to win 104 delegates after getting 42.1 per cent of the vote, but he now faces an increasingly uphill road to the nomination with 19 states still to hold their primaries or caucuses, and 1,692 delegates remaining. To seal his nomination Mr. Sanders would have to win 71 per cent of these outstanding delegates, a prospect that is not necessarily impossible given his seven straight victories prior to New York. However, to achieve that he would need a major national-level popularity surge that could offset Ms. Clinton's overwhelming lead with super delegates, or "unpledged" party heavyweights who can cast a vote in favour of any candidate of their choosing at the convention.

The broader lesson is simple: ensure that you are the darling of the party mainstream and you will go much farther in the delegate count than if you are a maverick with an ideological plinth that challenges the rugged individualism and unbridled excesses of Wall Street capitalism that so many in America instinctively veer towards. The battle for the Grand Old Party's nomination is the perfect mirror image of the Democratic experience. The maverick in this case is frontrunner Mr. Trump, the plain-speaking casino owner who has made disparaging remarks that have offended a variety of minorities including Muslims, Mexicans, women, and the differently-abled. After his resounding victory in New York, Mr. Trump holds at least 845 delegates against his nearest rival Senator Ted Cruz's 559. However, the GOP's deep disenchantment with Mr. Trump's campaign, not to mention the prediction by nationwide polls that he would fare less well against Ms. Clinton than Mr. Cruz would, implies that a "contested convention" could be on the cards. This will happen if Mr. Trump fails to snatch 1,237 delegates, the minimum necessary to secure the nomination. In effect, a potentially chaotic nomination process could engender a political crisis that would pit the GOP leadership not only against Mr. Trump, but also against the millions who voted for him this year.


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