WHY MAKE IN INDIA IS STUMBLING OVER INDIA’S ARCHAIC LABOUR LAWS

What’s the one assurance investors want before setting up manufacturing base in India? The ease of making workforce adjustments in line with changing market conditions. In this area, Indian labour laws are among the most restrictive. The Industrial Disputes Act of 1947 has two provisions in the way of workforce adjustments. Chapter VB of the Act requires prior approval of the appropriate government before resorting to any layoff, retrenchment or closure in establishments employing 100 or more workmen. The draft Labour Code on Industrial Relations currently in circulation seeks to raise the threshold to establishments employing 300 or more workers, but it is still work in progress.
Contract labour is yet another major area of concern. Investors would surely want to know if engaging workers on temporary contracts would run afoul of the law. The Contract Labour (Regulation and Abolition) Act, 1970, as the name suggests, is enforced to regulate the practice and abolish it in certain cases. In other words, the practice is not prohibited. Engaging contract workers for temporary, intermittent or seasonal work is allowed but using them for work of perennial nature violates the letter and spirit of the law. Why would investors want to engage workers on temporary contracts in the first place? To meet surges in demand for goods and services requiring urgent workforce adjustments. Immediate deployment of regular workers is not always feasible and pruning them alongside falling demand often meets legal obstacles. Moreover, regular workers are increasingly becoming less productive and more expensive.

The Government of India is making a concerted effort to create 10 million jobs every year to fulfil the aspirations of the new age employee who is joining the workforce. But this goal can be achieved only with overhauling of the employment laws. The new set of employment laws must give an entrepreneur the flexibility of hiring an employee while giving employment security to the worker. One of the key areas of concern on employment in recent years is flexibility wished for by the employers and security as well as similar benefits/protection of the workers wished for by workers and / or employees. While it is recognized that contractualization of labour is emerging as an integral component of contemporary employment relations, there is a need for policy to situate contractualization of labour from perspective of business requirement and needs as well as security, protection and dignity of, decent work for workers. India is trying to get manufacturers to ‘Make in India’, an ambitious programme which endeavours to place India to become the world’s manufacturing capital through business friendly government policies and labour reforms. There is a need for change in the mindset of the government. Labour laws should be simple and flexible to promote compliance and create jobs in a fast manner. As the reforms package unfolds, pragmatic solutions will have to be discovered to assure investors that their business interests would not suffer by mindless application of the law, while taking care to ensure that workers’ interests are not compromised. Labour reforms are critical to the “Make in India” campaign. Investors have been waiting with anticipation. Brand India cannot afford to disappoint.

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