While it is clear that India can never completely do away with labour laws because of the sizable voting population of labourers and by the virtue of being a part of the International Labour Organization, the central and state governments have shown interest in reforming some laws to attract more investors.
States such as Uttar Pradesh, Maharashtra, Rajasthan, Gujarat, Goa, MP, Uttarakhand, Assam, Punjab, Haryana and Himachal Pradesh have increased the working hours from 8 to 12 hours and some have even scrapped key labour laws for the next three years.
Their justification of doing so is that rigid laws on downsizing labour and cumbersome compliances currently force companies either to remain small, employ fewer workers or use capital-intensive methods of production. Backing this claim, a recent study showed that restrictive labour regulation in India is associated with a 35% increase in firms’ labour costs
In the past month, the government had approved the Industrial Relations Code bill, which empowers the government to change the ceiling on employee count for a company to retrench workers without government approval. While the current upper threshold limit of 100 workers has not been changed, the bill allows the government to amend this number without seeking Parliament’s approval. Even though successive governments have agreed that labour reforms are necessary to provide employment to the nearly 1 million job-seekers entering the market each month, the fears of a trade union backlash and partisan politics have been a deterrent to major reforms.
Although relaxing certain labour laws might attract more investment, ensuring that workers are not exploited is equally important. Keeping a welfare fund for the unemployed or policies such as a Universal Basic Income can be looked at to ensure that unemployed labourers do not face challenges.
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