The Economics Behind the CAA Bill

Authors: Tanvi Johri, Agrima Jain

Research Head: Tanvi Johri

Editor: Praharsh Mehrotra

Illustration by Ng Jia Ying

Abstract

This article discusses the recent establishment of the Citizenship Amendment Act (CAA) in India, the unrest that followed andits impact on Assam’s labour market. While it is a controversial bill on ethical grounds, this article focuses on what the bill means for India’s economy in the short and long-run.

There has been widespread unrest in India since the implementation of the CAA. It is an act whichseeks to grant citizenship to persecuted illegal immigrants who are Hindus, Sikhs, Parsis, Buddhists, Jains and Christians coming from Pakistan, Afghanistan and Bangladesh to India before December 2014 (The Ministry of Law and Justice, 2019). India has always prided itself on secularism which is an outcome of its historical origins. With the bill leaving out Muslims, many netizens view it as a discriminatory move (Business Standard, 2019). Despite the protests, the government stands firm with the decision. Their main motive is to provide shelter to the people who have been persecuted in those countries except Muslims. These immigrants are usually non-Muslims who faced unfair treatment in Muslim-Majority countries and have come to India to seek a better life---considering that India is the one of the few countries that accommodates these religions, especially Hindus, Buddhists, Sikhs and Jains. The government believes that Muslims from those countries should have no reason to come to India. Firstly, they are usually not the ones that are persecuted. Secondly, there are 50 other Muslim countries around the world for them to seek better economic opportunities from (Financial Times, 2019). Thus, the government believes that religion is the only yardstick that can limit the number of illegal immigrants into India.

While this bill is debatable on ethical grounds, it is likely to take a toll on India’s economy. The bill does not only grant citizenshipto existing immigrants in India but also incoming immigrants as long as they can prove that they have been persecuted (The Ministry of Law and Justice, 2019). Immigrants can take advantage of the bill and enter India with the reason of ‘persecution’ but in reality, they are just seeking better economic opportunities.

India is currently not in a position to accommodate such an influx of immigrants. As per NSSO’s periodic Labour Force survey, unemployment rate in India reached 45-years high of 6.1% in 2017-2018. This is further testified by Centre for Monitoring Indian Economy (CMIE) with 7.2% unemployment rate as of January 2020. This shows that the unemployment rate has been on an upward trend.

The CAA Bill can therefore further put pressure on India’s labour market. Assam is one such region that would get greatly impacted. Assam is culturally very rich and is home to nearly 238 indigenous tribes (Sunuwar D., 2020). As of 2010, 89.77% of the local Assamese depend on the labour intensive sectors, such as agriculture, as a source of livelihood (Pradhan A., 2019). With the implementation of the bill, the influx of forced immigrants will lead to increased pressure within Assam’s labour market.With most of these immigrants having little to no skills, they are likely to enter Assam’s low -skilled sectors with the new rights granted to work under the new Act. This would increase labor supply, depressing wages in the market further (Dadush U., Niebuhr M., 2016). Since most of these migrants are willing to accept lower wages and are a cheaper source of labor, we can expect a lot of these migrants taking away locals’ jobs (Pradhan A., 2019). This translates to lower standards of living and high unemployment rates which further worsens India’s already poor performing labor market. The Assamese are also worried that the influx of Bangladeshis would lead to a loss of cultural and linguistic identities (Sarma M., 2015). This further aggravates the political and social unrest in Assam.

Such economic outcomes are almost inevitable in any country facing an influx of forced migrants. This is observed in countries like Lebanon that saw large influx migrants from terror -inflicted country, Syria. According to aWorld Bank study, “The influx of Syrian refugees [in Lebanon] is expected to increase labor supply by between 30 and 50 percent –with the largest impacts on women, youth, and unskilled workers [...] The overall unemployment rate and share of informal work in total employment could both increase each by up to 10 percentage points” (Ianchovichina & Ivanic 20)

Moreover, in developing countries, low incomes and fiscal constraints mean that the provision of health care, education and social services barely satisfies the needs of the native population to start with. An influx of immigrants further put a strain on public infrastructure and resources. Assam, having had a long history of Bangladeshis migrating in the region, has been a witness of problems like declining man-to-land ratio and shortage of food (Basumatari S., 2014).

On the other hand, research suggests that pressure in the labor market is only temporary and a short-term consequence (Sarma M., 2015). If the inflow of immigrants is controlled well, itcan actually contribute to higher GDP growth, productivity and employment rates in the long run. Most developing countries, like India, have a large, growing informal economy that can accommodate an influx of immigrants (Sarma M., 2015). For example, 70.3% of immigrants in Dhubri District, Assam end up being self-employed by starting their own businesses rather than taking up wage-paying jobs. Part of the reason why this happens is due to the exploitation and discrimination they face in wage-paying jobs (OECD, 2018). This expands the labor market without putting pressure on the limited role of the formal economy.

Moreover, a lot of immigrants help improve labor productivity. Assam’s agriculture sector benefited a lot from the Bangladeshi immigrants that introduced better techniques of cultivation, multiple cropping methods and introduced a new variety of crops, like jute (Sarma M., 2015). Research suggests that immigrants invariably have a positive impact on productivity since they bring in new work patterns and innovation.

Overall, no matter the share of the employed population among the foreign-born and the native-born, it is evident that immigrants do value-add to the economy.While religion as a yardstick for the bill is debatable, some kind of control must be present to limit the flow of illegal immigrants. If the bill is implemented well, India can potentially expect positive economic outcomes in the long run. But for now, India must be able to develop a framework to integrate these immigrants while ensuring that it does not put a strain on public resources. At the same time, it needs to manage the public's sentiments in order for the smooth implementation of the bill.

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