Need Faster Labour Reforms if the Economy is to Thrive


  • In its six years, the NDA Government has Moved Painstakingly slowly on Labour Reform.
  • The main changes in labour legislation, so far, relate to more Safety Measures for Workers, benefits for women, especially pregnant women and new mothers.
  • Little has been done to make it less onerous for Establishments to Hire and Retrench workers.
  • The Government Pitched Labour Reforms to Compress 44 Labour Laws into 4 Codes- Wages, Social Security, Industrial Relations, and Occupational Health and Safety.

Need for Labour Reforms:

  • Labour Reforms essentially mean taking steps in increasing production, productivity, and employment opportunities in the economy in such a manner that the interests of the workers are not compromised.
  • Labour is in the Concurrent List and more than 40 central laws and more than 100 state laws govern the subject
  • Labour laws remain extremely complicated and there is a need to bring reform by addressing some of the issues like long-term contracts and dispute resolution.
  • The codification of labour laws will remove multiplicity of definitions and authorities leading to ease of compliances without compromising wage security and social security of workers.
  • It would increase job creation by streamlining labour issues and making hiring easy for Industries by developing Adequate means to Absorb Labour in the Economy.

Concerns Regarding the Labour Reforms:

  • The recommendations of the parliamentary standing committee on labour, if approved, will make life even harder for companies.
  • On the matter of Fixed Term Employment (FTE), the committee wants that a minimum and Maximum Tenure for Such Employees be Specified.
  • Moreover, it recommends that there should be a cap on the number of renewals as it fears employers will manipulate the Tenures.
  • The government has been reluctant to raise the threshold for the number of employees up to which an employer can let go of workers without the permission of the authorities from the current level of 100.
  • The Committee has Suggested that the Threshold be Raised to 300 workers in the code so as to avoid duplication and overlap in the legislative procedure.
  • The hesitation suggests the government doesn’t want to upset the labour unions and workers.
  • If the government is serious about raising the contribution of manufacturing to the GDP to 25%, it needs to be far bolder, and impress upon the unions the need to make labour laws flexible.
  • Merely dropping the corporation tax rate won’t be incentive enough for companies, who would increasingly resort to greater automation and mechanisation.
  • Already, India is not able to compete effectively in overseas markets is because the workforce is not as productive as in peer economies, and because Wages are High.


  • Given how global trade will shrink in the aftermath of the pandemic, labour rules must be more flexible, else India will lose whatever little share it has.

Source: Financial Express

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