India Has Been Working Out

Context: Labour is in concurrent list under seventh schedule of Constitution. Proactive attempts by various states to reform labour laws resulted in asymmetrical labour market across the country. 

Issues associated with India’s labour market

• Complex web of laws and compliances: Nearly 50-55 laws, over 30,000 compliances and over 3,000 intimations or filings, which together comprise over half of the regulatory burden facing enterprises.
  • Laws lacks flexibility: Nearly impossible to lay off permanent workers even when business conditions are seriously adverse.
• Incentivising informalisation – Substitution of regular workers with contract labour: Overall, regular workers are being substituted by other employment categories such as contract labour, family employees or support staff perhaps due to lack of reforms.
• Substitution of regular work with capital: Capital growth was higher than the growth of worker employment in all states.
  • Increasing capital intensity is also due to both structural and technological changes.
• Disincentivizing industrial growth: As the study across states indicates that the number of units grew 93% in high manufacturing flexible states compared to 52% for high manufacturing inflexible states.
• Weak employment generation: As there is a 77% growth in workers in high manufacturing flexible states compared to 2% for high manufacturing inflexible states.
• Asymmetrical wage rates: Wage rates in inflexible high manufacturing states were the higher than flexible states.

Conclusion: India’s labour reforms agenda shall account for the variation across states and other factors contributing to strengthening labour maws such as good infrastructure (roads and railways), reduction in industrial disputes and related disruptions (disputes and man-days lost), low crime and better education and skill-building resulted in significant employment generation.