By Tarunkumar G. Singhal, Raman Jokhakar Chartered Accountants
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There has been some minor celebration over the fact that the president has given assent to changes in three central laws relating to industrial labour, proposed by the Rajasthan government and, therefore, applicable to that state. It would seem that we are prepared to celebrate even the smallest change in labour legislation in one corner of the country, when what the country needs is wholesale change across all states. The most significant of the changes in Rajasthan is one that does away with the need for government permission to retrench staff or shut down a unit, so long as the unit employs fewer than 300 workers (against 100 earlier). This is to be welcomed, but do remember that a more ambitious change along the same lines was proposed on a national scale by Yashwant Sinha, in a Budget speech, more than a decade ago. So this is reform by inches over decades. In any case, the real changes needed in labour laws are not those that facilitate units shutting down, rather those that help units to function more easily – though it is also true that you are more likely to hire workers if you know that you can retrench them should they become surplus.
What one would like to hear more of are the changes to labour laws on an all-India scale that the Cabinet was widely reported to have cleared more than three months ago. These were more wide-ranging, though perhaps not comprehensive, and with all-India application. As reported at the time, the changes related to limits on hours of overtime (important for seasonal businesses that have peaking cycles at specific times of the year), women working night shifts (many industries have traditionally had more women employees), reducing the scope for harassing factory owners because of minor infractions, and simplifying form-filling for the owners of small factories. Some of these changes were clearly designed to reduce the scope for blackmail by labour inspectors – harking back once again to Yashwant Sinha’s unfulfilled promise to get rid of the “inspector raj”.
The accompanying message to the country has to be that the government wants to create real jobs that create real value, and pay much better wages than the rural employment guarantee programme does. China, which has been factory to the world, is now less than competitive in quite a few labour-intensive industries because of its much higher level of per capita income and a stronger currency. So far the slack has been taken up by countries like Bangladesh, Vietnam and the Philippines. There is no reason why some of those industries should not find a welcoming home in India. If the government can bring about a more congenial environment for employers, the jobs should materialise – and that would be more important than all the other Modi initiatives so far.
(Source: Article in Weekend Ruminations by T. N. Ninan in Business Standard dated 15.11.2014)
