Government to renew labour law overhaul drive to boost jobs

Indian Prime Minister
Narendra Modi’s government is to make a renewed drive to
overhaul labour laws, hoping to create millions of new jobs by
making it easier to hire and fire, the labour ministry’s top
bureaucrat said on Thursday.

Modi made a shake-up of India’s labour market a part of his
reform agenda after coming into office in 2014, but opposition
from unions and a bruising battle to pass other crucial pieces
of economic legislation have stalled those efforts.

Shankar Aggarwal, the ministry secretary, told Reuters that
the government felt the time was right to prioritise labour
reform again after parliament in August passed India’s biggest
overhaul of indirect taxes, the Goods and Services Tax (GST), a
victory for Modi’s bid to boost the economy.

“We have to tweak the law. Employers want flexibility in
hiring,” Aggarwal said in an interview.

Two key bills, covering industrial relations and wages,
would be sent to the cabinet this month, he said. Subject to
cabinet approval, the bills would be presented in parliament’s
next session, beginning in November.

A rule requiring firms to seek rarely granted government
permission for laying off large numbers of workers, which
employers say has discouraged permanent hiring and kept
factories small, are among restrictions to be loosened.

“It is a question of priority. We thought that it will be a
good idea to put GST first so that we don’t fritter away our
energy,” Aggarwal said.

The government says freeing up labour markets will boost
employment, lure foreign investment and encourage firms to

Trade unions argue that the reforms will put jobs at risk
and make it tougher for employees to form unions or strike. More
than a million workers went on strike on Sept. 2 to protest
against the policies.

Under the reforms, 44 labour laws, some of them dating back
to the end of British rule and as anachronistic as providing
spittoons in the work place, will be grouped into four new
labour codes.

Bills on social security and working conditions remain under
discussion with states and trade unions.

India’s two-decade streak of fast economic expansion is
often derided as “jobless growth” since the service sector-led
model has been capital rather than labour intensive.

More than 200 million Indians will reach working age over
the next two decades, and creating sufficient jobs for perhaps
the largest youth bulge the world has ever seen is among the
toughest challenges for the country.

In 2009, 84 percent of India’s manufacturers employed fewer
than 50 workers, compared to 25 percent in China, according to a
study by consultancy firm McKinsey.

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