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India’s Labour Reforms

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August 19, 2022

What is the issue?

The model driving employment and labour policies needs to change for better-quality livelihoods.

What are the country’s faultlines?

  • Curbing liberty- Political liberties and freedoms of speech are being curbed in India.
  • Social inequality- Social equality amongst castes has not been achieved and lower caste citizens continue to live in great indignity.
  • Income inequality- While the numbers of Indian billionaires increased during the COVID-19 pandemic, millions of Indians lost their incomes.
  • Poor employment conditions- A vast majority of citizens have poor quality of employment, insufficient and uncertain incomes, and poor working conditions.

What about the labour reforms introduced by the government?

  • The government tried to improve the ease of doing business, with the expectation that investments in businesses will improve citizens’ ease of earning good livelihoods.
  • In this theory, large and formal enterprises create good jobs, and labour laws must be flexible to attract investments.
  • The principal thrust was to improve administration by simplifying procedures and digitisation.
  • However, the labour laws were not more employer friendly.
  • So, the Government designed a framework for reforms and, since labour is a concurrent subject, it encouraged States to implement changes.
  • Labour laws cover many subjects — payment of wages, safety conditions, social security, terms of employment, and dispute resolution.
  • The proposed national reforms the Government is gearing up to make shortly are the conversion of all the labour laws into four codes.

What are the impacts of the reforms?

  • The V.V. Giri National Labour Institute’s interim report provides insights into the impacts of the reforms so far.
  • Labour laws- Labour laws are only one factor affecting business investment decisions.
  • Investors do not go out to hire people just because it has become easy to fire them.
  • An enterprise must have a growing market for its products, and many things must be put together to produce for the market — capital, machinery, materials, land, etc. not just labour.
  • Employment- Reforms of labour laws have had little effect on increasing employment in large enterprises.
  • The report says that the effects of labour reforms cannot be revealed immediately and they will take time.
  • Post 2014 reforms- Though overall employment is affected by many factors, the bolder reforms post 2014 were designed to promote larger factories.
  • Employment in formal enterprises is becoming more informal where large investors are employing people on short-term contracts, while demanding more flexibility in laws.
  • Labour rights- Increasing the threshold of the Industrial Disputes Act dilutes the rights of association and representation of workers in small enterprises.
  • The report includes a long chapter on the views of employer associations about the benefits of the reforms, and nothing about the views of employees and unions.

Between 1980 and 1990, every 1% of GDP growth generated roughly 2 lakh new jobs; between 1990 to 2000, it decreased to 1 lakh jobs; and from 2000 to 2010, it fell to half a lakh only.

What does this signify?

  • More GDP does not automatically produce more incomes at the bottom.
  • Fundamental reforms are required in the theory of economic growth.
  • The model driving employment and labour policies must change to enable the generation of better-quality livelihoods for Indian citizens.



  1. https://www.thehindu.com/todays-paper/tp-opinion/hard-truths-about-indias-labour-reforms/article65785709.ece


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