(GIST OF YOJANA) Labour Reforms in India-June-2017

(GIST OF YOJANA) Labour Reforms in India-June-2017

Labour reforms have often been viewed as changes in the labour laws to make it easy for the entrepreneurs and industrialists to run their businesses without the pain of compliance and fear of punitive action by the state. However, this has limited appeal as labour reforms essentially call for overhaul of labour market rather than making piecemeal changes in the labour laws or expanding the social security measures in a sporadic manner. Interestingly, it is the most opportune time for labour reforms in India for two reasons: first, China is fast losing its advantage as manufacturing hub as labour cost has trebled there in last one decade and second the Government of India is truly committed to 'Make in India' and attracting the investors and large businesses to set up their manufacturing bases in the country. Success of 'Make in India' will depend on how soon and how fast labour reforms are taken further.

Broadly speaking, labour reforms are linked to competitiveness by augmenting labour productivity. Unfortunately, attempts at reforming Indian labour market have been rather slow. Even the globalization and liberalization process that began in India in 1991 impacted labour market in limited manner. No wonder, India missed the opportunity of being manufacturing hub of the world due to rigidities in labour market, archaic labour laws and glaring skill deficit. In last twenty-five years, the government of India has tried to bring in sporadic changes in labour laws aimed at lablour flexibilization. Nevertheless, labour market in India remains poker faced when it comes to attracting foreign direct investments especially in labour-intensive sectors such as leather goods, textiles (apparel, accessories, etc.), gems and jewellry, sports goods, weapons and ammunitions, furniture, rubber products, fabricated metal products etc.

Indian labour market is spoiled by over-arching complexities of archaic labour laws, unmindful bureaucratic control and corrupt inspectorate having unlimited abilities to exploit the susceptible factory owners at the cost of welfare of the workers. Hence, labour market liberalization is urgent need of the day. It is imperative that labour laws are progressive, bureaucratic control is substituted by transparent governance and self-reporting and disclosure as well as voluntary adoption of labour standards take over the flawed system of factory inspections and compliances.

Another school of thought advocates rationalization of archaic labour laws and flexibilization of labour market through empowerment of workers and rigourous skill development in as opposed to 'free labour market' of neoliberals who wish to uphold managerial prerogative at any cost and provide unrestrained powers in the hands of employers so far as hiring, compensating and firing workers are concerned. It is true that Indian labour market is highly regulated and characterized by compliance- orientedmind-set since independence, the government of India as well as provincial governments in the country appear to be in sync with emerging needs of labour reforms so as to keep pace with globalization and integration of labour market, capital market and commodity market. Hence, pressure of compliance and fear of inspectors have diminished during last 25 years. Interestingly, government itself has become one of the largest employers of contract labour as disregarding the Contract Labour Act.

While the government of India has softened Its stance on labour laws, it is not ready as yet to completely hand over the control of terms and conditions of employment to the employers based on voluntary contract between the two parties sans any state regulations. There is clarity of thought on this matter as observed in the study of Planning Commission (2001): 'The reasons why labour markets need to be regulated by law to a much greater extent than goods markets are well known. Workers are not commodities; they are human beings and citizens, and individual workers are also the weaker party in any employer-employee relationship.
Roadblocks in Labour Market Reforms Archaic labour laws are the greatest roadblocks in realization of an industry-friendly 'labour market in India. Labour laws continue to keep the workers' entitlements intact whereas protective shield of the industry which guarded the domestic industry players from competition has disappeared after 1991. Globalization and liberalization unleashed in 1991 allowed international players in Indian market thereby fundamentally changing the business and trade ecosystem. It is essential to have labour laws in sync with emerging trends such as casualization of labour third-party employment, etc. At the same time, it is equally important to ensure that basic rights of the workers are protected arid labour standards are implemented across industries and formal as well as informal sectors.

In terms of vocational skills, India fares worse than some of the developing countries such as Mexico where the percentage of youth having vocational training is 28 per cent. (Planning Commission, 2001). Lack of a holistic labour policy is a major obstacle in the way of developing a liberal labour market which can contribute towards making a competitive manufacturing and service industry eco-systems in the country. There has been a good number of study groups, reports, consultative meetings, etc. However, a holistic national labour policy is elusive. Instead, the government has been involved in piecemeal reforms in labour laws from time to time. In addition, there are references of labour issues in National Manufacturing Policy, National Policy on child Labour, National Policy on Skill Development, National Employment Policy, National Policy on HIV / AIDS and World of Work, National Policy on Safety, Health and Environment at Workplace, etc. Last traces of a 'labour policy' are found in the draft of3rd Five Year Plan document which is quite dated. Such directionless and adhoc efforts have done no good to liberalize the labour market in line with global trends.

Imperatives for India Change in the archaic labour laws has been central theme of labour reforms discourse in India. Planning Commission (200 1) has captured the essence of this debate in the following words: 'A comprehensive review of all these laws is definitely needed. They need to be simplified and brought in line with contemporary economic realities, including especially current international practice. At times, the problem is not so much with the law itself as with the lengthy almost interminable nature of legal proceedings which contribute greatly to the cost of hiring labour and the associated "hassle factor". There are also problems with the enforcement machinery i.e. the various inspectors responsible for enforcing the law. Complaints are frequently voiced by industry that this machinery uses the extensive powers at its disposal to harass employers with a view to extract bribes, a process which imposes especially heavy costs on small entrepreneurs. Equally, an opposite view is expressed by trade unions that the labour enforcement machinery needs to be further strengthened in the interest of better enforcement of labour laws.

A radical legislative intervention in labour market will be impossible without developing a broad-based and holistic national labour policy. Hence, the government of India should first focus on developing a consensus on national policy framework on labour issues rather than continuing with an adhoc approach to amend a few provisions of labour laws to please the industry. Since a lot of studies, consultations, and reforms have been done during last twenty years, it will be easier to draft national labour policy accommodating concerns of all the stakeholders.

While jobless growth is glaring at the country in the wake of highly automated manufacturing ecosystem, it is also important for the government of India to create new opportunities. While 'Make in India' has. already started attracting investments, concomitant jobs in the manufacturing sector have not increased. Hence the government of India need to focus on creation of job opportunities for larger youth population by way of enabling them to enter the service sector with greater degree of competence. This can be accomplished by integrating vocational training with higher education. Labour reforms in true sense will take place when the labour market is full of highly skilled people ready to add to the value to manufacturing and service delivery without fear of being exploited at the hands of the employers. Hence, while recent initiatives of the Government of India to make changes in labour laws are welcome, equal emphasis should be laid on empowering the labour forces by enhancing their competencies.


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Courtesy: Yojana