By Tarunkumar G. Singhal, Raman Jokhakar Chartered Accountants
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Reform of India’s archaic and restrictive labour laws are central to any reform programme. This is a wellunderstood fact now; that the unfortunate stunting of India’s manufacturing sector, particularly in labourintensive industries, can largely be laid at the feet of these statist laws is undeniable. Not only do they provide bureaucrats with a reason to harass entrepreneurs, and place an excessive and unfair burden on small and medium enterprises, but they have signally failed to protect India’s workers. The fact that every employer wishes to avoid the incidence of these laws has led to widespread casualisation of the workforce. As a consequence, over 90 per cent of Indians work in the unorganised sector. Any comprehensive approach to restarting the economy from the new government will need to include a complete overhaul of labour law.
It is unfortunate, therefore, that the new government has shown little interest in pushing the envelope as far as this essential reform is concerned. Instead, the Bharatiya Janata Party (BJP), which leads the National Democratic Alliance government, has stressed that the Rajasthan government – which it also runs – is conducting labour law reform. The Rajasthan government will alter the application of related central laws: for example, raising the threshold of the number of employees who can be laid off without government permission from 100 to 300, and applying the Contract Labour (Regulation and Abolition) Act only to companies with more than 50 workers, compared with 20 now. Similar labour law changes are being contemplated in Madhya Pradesh, also ruled by the BJP, and even Haryana, which is ruled by the Congress. These are certainly welcome developments, indicating that labour law changes as necessary reforms to revive the manufacturing sector have begun to gain wider acceptance in many states.
(Source: Business Standard, dated 23-07-2014)
