The Rejig of Labour Laws by States in India

Boosting Investment or Violating Basic Rights of Labourers?

This blog is inscribed by Raja Reeshav Roy.


Last month, multiple states[1] in India have brought changes by diluting or suspending a number of their labour laws. The major states which have brought changes to its labour laws recently include Uttar Pradesh,[2] Gujarat, Madhya Pradesh,[3] while states like Haryana,[4] Himachal Pradesh,[5] Rajasthan, and Punjab have taken similar steps in the last few years. Uttar Pradesh being the largest of them and politically the most important state in India is at the forefront of the debate. The world is still battling the global pandemic COVID-19 and we are not sure when this will get over. The Corona Crisis has also pushed the Global Economy into a critical stage along with that of India’s. For a country like India attracting foreign investments is a very important step to overcome the repercussions of COVID-19 on its economy. In this article, I will be discussing briefly the implications of the changes brought in by these states.

“If a free society cannot help the many who are poor, it cannot save the few who are rich.

― John F. Kennedy

Why there is an immediate need for a strong Social security Regime in India

The social security laws in India have been at the forefront of the discussion for a fairly long time now. However, with the sudden outbreak of COVID-19, the discussion has gained a sudden momentum. The Laws related to employees/workers/labourers which were for a fairly long period has not been one of the areas of law which were often discussed, However, the outbreak of COVID-19 and the whole humanitarian crisis changed the course and the whole migration issue has raised discussions around the plight of workers in our country, especially the daily wage workers or the ones who are in the unorganised sector. India has numerous policies for social security when it comes to education, healthcare, skilling, food security, and pensions, however, most of these schemes are restricted to the organised sector. This leaves the majority of workers in the informal sector without the required social security net.

India is currently in the middle of the COVID-19 pandemic which is spreading very rapidly. We have got out from a nationwide lockdown (economic as well) which lasted almost two and a half months. The images of Lakhs workers walking, cycling, dying of highways of India are still fresh along with the scars of the millions of daily wage and migrant workers who are struggling every moment for their lives and livelihood for the past three months now. Therefore, it is important that along with preserving the jobs and creating more, the social security fabric of the industry as a safety net needs to be strengthened.

The changes vis-à-vis the Labour Law regime in India 

The states have argued that flexible labour laws will help in ease of business and therefore will attract investors, however, it has seen a lot of opposition from various sectors after the announcements.[6] In this article, I won’t be going into specifics of these changes, however, I will be looking at “whether such dilution of labour law will boost potential investments in India.” 

Labour law in India is too wide and vague to understand. With estimates saying that there are over 200 state laws and around 50 laws,[7] it is very difficult for any industrial setup to get comfortable with such a wide and complicated set of laws. The industrial establishments often get indulge in the intricacies of these laws and ultimately their businesses suffer which has somewhat prevented India from being a very attractive destination for these Industries. The reforms of these laws are long overdue and finally, some progress can be seen to be made.

However, before moving forward it is important to understand the division of labour laws under the Indian Federal structure. The issue of labour and surrounding laws around it falls under the Concurrent list in India and hence both the state government as well as the central government are at the liberty to make laws over this issue. However, for laws passed by the centre, the state needs presidential assent to amend it.

Nearly 90% of Indian work in the informal sector and they are automatically outside the purview of these labour laws.[8] The informal sectors which make the backbone our Industry is already unregulated and hence these amendments won’t make any difference. However, it will have some serious impact on the formal sector.

The main argument that has been given by the states is that this move will help in restarting the economy in an efficient manner. This will attract investments primarily in the form of industries which will give a boost to the Indian economy and will also give employment to a large number of people.[9] While the counter view to this is that dilution of these labour laws will lead to Exploitation of workers as the employers now will have more power in their hands. This way we will see a loss of bargaining power for the employees thus making them more vulnerable.

This will mark the beginning of the reform phase of labour laws in India. Six years ago, Rajasthan was the first state to dilute the labour laws in order to bring in investment and to lure industries. But in these six years, nothing substantial has happened. The central government has made its intention clear and for quite some time has been trying to bring in 4 Labour codes[10]instead of currently existing 44 central labour law legislation.

Analysis & Concluding remarks

In the backdrop of economic depression as a result of corona, industrial development will hold a key, and such steps on behalf of the government to attract investments is praiseworthy. However, we should not run away from the responsibility of providing a safe working space for the workers. The coronavirus has made the workers vulnerable and the current working environment at all the establishment must be rejigged, keeping the best interests and safety of the workers in mind. 

However, for attracting investors simple dilution of complex labour laws will not help but there will be several other things that will have to be taken into account with the availability of skilled labours and favourable tax structure being the most important one. Ease of doing business is something which cannot be solely achieved by curtailing the Labour law legislation but there are many other factors which are needed to be taken care of which the governments should realise as soon as possible.

It is important to note that because of this pandemic, there has been a massive displacement of migrant workers and many of them won’t be keen to return to their previous workplace away from their homes in the near future. In such a scenario to save ourselves from large scale unemployment, we should make our industries flexible so that the large industries and associated businesses are attracted to the area which has fewer industries but higher population density.

For any bold policy move, there is a hue and cry expected and we are witnessing the same for this one. However Indian formal sector accounts for less than ten percent and with the help of this policy move if it can be increased then it will be better for our labours in the long run since these labour laws will not be suspended forever. We need to understand that labour laws will only be relevant when enough number of workers will be there, if a huge majority of us won’t have a job then these laws will anyhow be irrelevant, hence it is better for us to look out for creating jobs now and once we achieve this we can gradually build a strong labour laws for our workers. 

The better part about these changes is that the labour law with respect to the most vulnerable lots that is women and children are there to stay which is a nice move but it is important for us to ensure that other workers in absence of any regulations are not being exploited as well. It is important to make sure that there should be a system of checks that will be placed on behalf of the government along with ensuring that the frameworks concerning issues such as working hours, minimum wages, and job security are there at place.

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