Labour reform in India: How can recent laws enable dignified economic growth?

Economic Times, October22, 2020

By Pradeep S. Mehta 

“We (the workers) understand that industrial development is important, not just for the economy or the country but also for our own individual growth. We just need a system where we are treated as contributors to that growth and not merely the beneficiaries of it”, says a textile worker in Surat on being asked about his perception of employer-employee relations in the light of recently passed labour codes.

With the passage of the Industrial Relations Code 2020, the Code on Social Security 2020 and the Occupational Safety Bill, Health and Working Conditions Code 2020, the process of simplifying the complicated labour law regime in India has taken a leap forward.

These legislations, in addition to the Code on Wages which was passed in the previous session of the Parliament, are poised to reinvent the relationship between monetary capital and human capital in order to develop an economy which nurtures the well-being of both enterprises and workers. These developments also come at a time when there is a pressing need upon the economy to enhance domestic capacities of manufacturing and competitiveness in national and international markets.

However, achieving these intended objectives would require a governance system which adheres to the spirit of these legislations in practice and empowers the stakeholders to become shareholders of the economy thus enhancing the dignity of human capital.

In order to do so, the laws should be implemented with the premise of optimal regulation, whereby the rules created should foster and not hinder the growth of the economy. For instance, if simplification of the plethora of existing labour laws is the objective, the rules and regulations that follow should also be framed by keeping in mind the necessity, legality and proportionality of them. Our tendency to maximise regulations and practices should be reigned in.

Furthermore, to fulfil the aim of facilitating job creation while protecting workers, it is crucial that clarity of definitions of different types of workers is ensured. This will aid in effective identification of beneficiaries and hence, efficient implementation of the provisions of the Code, particularly on issues related to occupational safety and social security. Both these factors are crucial for human dignity.

These codes are a milestone development in striving towards universal coverage of enterprises and workers. The limitations and exceptions for certain types of enterprises, on one hand provide them the regulation-free environment to grow but on the other hand, compromises on the basic tenets of dignified work including universal social security and workplace safety. This issue can be dealt with empowerment of authorities at decentralised levels through executive routes, where states can proactively work in alignment with the vision set out by these laws. For example, adoption of web-based inspections and digitalised registers and returns can be one of the solutions to ensure universal coverage.

Finally, the controversial issues of increasing threshold for hiring and firing and rigidifying the conditions for formation of trade unions should be seen with the prism of the overarching objectives of the entire slew of the proposed reforms. Thus, it is the spirit of these reforms and the responsible governance and implementation of these laws that will be driving force behind this transformation to a ‘sustainable economy for all’. To do all this, we will also need to build state capabilities which can work in tandem with the vision laid out by the new labour codes. Otherwise, the reforms will not work.

The writer is Secretary General, CUTS International (, a global public policy think-and-action-tank on trade, regulations and governance, Em: Twitter: @psm_cuts

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