Labour .... Law ....Reforms in India .. for the 21st Century

Labour .... Law ....Reforms in India .. for the 21st Century

Recently the state governments of Uttar Pradesh, Madhya Pradesh and Gujarat have announced that they will be intermittently suspending most of the labour laws which were enacted in 1946 to stimulate the growth of manufacturing. This proposal is still waiting with the union government's approval as these laws are in the concurrent list, between the state and centre. Let us examine the journey of the labour laws and the growth over the years from a common man perspective,

The Journey :

So what do these laws mean for the employer, employee and India's manufacturing capabilities? Were they hurdles? In this post we are going to examine only the essence of labour laws and not land laws which will be a separate subject.

For an employer, it was cited by many that for a capital intensive business such as the manufacturing, these laws enacted that, for a firm with a size of more than 10 employees, even during the tougher fiscal situations, the employers has to get the nod of the government to fire an employee, there are many other items as well, but this is one of the primary hurdles cited.

For an employee, these laws act as a cushion of protection by providing job security, minimum wage assurance and fixed work hours of 8 hours a day. In those times in 1946 when labour work was more intensive and demanding physically.

For India's manufacturing capabilities, these laws were considered as of one the primary factors of dragging the growth of the manufacturing sector over a period of time, as when these laws were originally enacted, India and the world was then in a closed economic system in 1950s, with limited trade between countries. But as the growth progressed rapidly in the western world after the second world war for around 2 decades, a need for bigger markets was sought. Thus came the liberalisation of the trade barriers from the 1980's around the world.

So at this point, India had to compete with the manufacturing capabilities of other countries which had modest labour laws. And during the course of time, in a path-breaking move, India liberalised itself to the world in 1991. But these labour laws which had automatically become more stringent considering the dynamics of the world policies. 

Due to which business models which were less capital intensive such as the service sector that boomed in the last 30 years, leaving the manufacturing sector behind automatically expect select portions such as the automobile industry and textile industry.

Where we stand now?

20 years into the 21st century, we live in a world where manufacturing is more technology-driven and has become more smarter than ever. Completely abolishing these laws alone will not drive growth in manufacturing, though some tweaks in it are absolutely necessary. For example, while allowing a free hand to the employer over his important stakeholder the employee, if an employer decides that he needs to let go his employee due to a business emergency, the laws must still ensure that the employee is compensated for at least the subsequent 3 months providing him the social security to survive and to find the next job. 

Also, considering to increase working hours from 8 to 12 a day, maybe a thing of the 20th century, not the present and the future. As today, employers need skilled labour who are technically enabled to increase the productivity of business growth. 

So there can be provisions in these laws that employees should fulfil some amount of time every week say 7 hours, in upgrading themselves to the ever-changing technology-driven world and the government can incentivize the employers to do this.

 A humble request to the governments is that the brute force way of having provisions to increase daily work hours from 8 to 12 might not be an effective tool in increasing productivity and attracting investment in the 21st century.

So the government in its capacity can extend the programmes to skill the youth labour in emerging trends of the integrated manufacturing such as IoT, robotics etc which would be an option to attract the employers to set their manufacturing facilities in India. 

To conclude, completely abolishing labour laws without leaving social security for the employee would be abrupt in the current situation and also doesn't necessarily benefit the employers. Deregulating is essential in a market economy, but there should be a margin for social security. For any country to be self-sufficient manufacturing is one of the keys, currently India's manufacturing capabilities are confined to auto and textiles by and large. Building a skilled youth is extremely important in this technology-driven world, maybe it is time that India needs a district-level IIT's considering the demographic dividend of our country. 

~ Views are Personal