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By Swati Gupta and Shruti Srivastava
India’s move to distill its byzantine labour laws and get rid of obsolete rules will boost jobs and investment, according to the top bureaucrat handling the exercise, who pledged to complete the overhaul by early next year.
Labour regulations, some of which date back almost a century, have long been identified as a key stranglehold on Indian enterprise. Last week, Prime Minister Narendra Modi’s government crunched 29 laws into four codes, making it easier for employers to hire and fire workers and at the same time imposing minimum wages and social security benefits for employees.
The changes will reduce the compliance burden for firms, said Vandana Gurnani, secretary in the Ministry of Labour and Employment.
“It’s unified, it’s simplified, it’s transparent, and it’s also technology driven,” Gurnani said in an interview from her office in New Delhi on Thursday, calling the revamp “the biggest reform since independence” in the labour arena.
Modi has been under pressure to boost competitiveness as volatile geopolitics shift supply chains. The outdated labour laws had incentivized local businesses to stay small, denying the world’s most populous country the flexibility of scaling up and becoming a manufacturing force on par with China. Modi is betting that similar tweaks across India’s regulatory landscape will unleash animal spirits in manufacturing that — together with the more nimble services sector — will boost what is already one of the fastest paces of growth and cement his legacy among India’s most consequential economic reformers.
The new laws are expected to create 7.7 million additional jobs and bring down unemployment by as much as 1.3 per cent over the medium term, according to a Nov 25 report by SBI Research.
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The codes had been approved by parliament in 2020, but were held back on concerns of political opposition and labour unions. Geopolitical ructions since then, including US President Donald Trump’s tariffs, have added urgency to reform and a string of state-election wins, including the latest sweep in Bihar, have strengthened Modi’s hand.
The new codes make the same minimum wage mandatory for men, women and transgenders, and ask employers to ensure universal social security payouts. They also allow longer factory shifts and night work for women, and say firms that employ more than 300 workers don’t need prior approval to layoff workers, easing the rule from 100 workers earlier.
The new rules also account for gig workers, such as Uber drivers and food delivery workers, including them under a state-mandated social security umbrella for the first time. Benefits will cover disability, pension, health and accidental insurance, and they will receive payments through an online platform.
Some trade unions, mostly aligned with parties opposed to Modi, organized protests against the legislation. The Bharatiya Mazdoor Sangh, aligned with Modi’s party, called on states to implement them after consultations on some of the codes.
Since labour falls under the so-called concurrent list of India’s constitution, the country’s states can use the federal statute as a guide to craft their own rules and implement them within their borders.
Extensive consultations with labour unions were held for years during the formulation of the codes and the government will continue to examine their comments, Gurnani said. She added that the federal government will now re-publish the rules, the states will take similar measures, and the whole exercise will be complete within three months.
“The benefits are not just in terms of investment, the benefits are also for workers,” Gurnani said.
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