There has been a dire need for labour reform, which falls under the Concurrent List, but fearing a backlash from labour unions and partisan politics, the successive Governments avoided making amendments to ease up labour markets. Sources in the Labour Ministry have said that reforms in this sector will be top priority for Modi Government's 100 days in office.
Reason for delay:
Almost every labour union in the country is backed by one political party or the other thus preventing the coalition Governments, as its decision might end up inviting unnecessary criticism from its partners, from introducing changes. Incidents in the past have shown how alliance Governments had to subdue before its ally's demand from retracting its decisions. But the fact that incumbent Modi Government enjoys a clear majority in the House ensures that these reforms see a cake walk ride without facing any political hassles. Prime Minister Narendra Modi too had tacitly endorsed reforms of archaic labour laws in the past. This further shows a ray of hope that country might witness changes in such laws.
Seeking to liberate the corporate sector from the shackles of stringent requirements of the laws, the Vasundhara Raje-led Rajasthan Government has recently cleared state level changes in three critical and colonial Central Government labour legislations -- the Industrial Disputes Act of 1947, Contract Labour Act of 1970 and the Factories Act of 1948. This indicates that the NDA regime at New Delhi has made up its mind on the issue of easing up labour reforms and gave the corresponding state Government a go ahead.
Why is there a need for change in these laws?
The prime reason for amendments in these laws is that they have become outdated and redundant. Changes in these laws will be giant steps towards achieving both political as well as economical innovation in labour reforms.
India needs flexible labour laws to ensure freedom from unemployment where as many as 12 million are added to the workforce annually. Labour market reforms will undoubtedly bring down the divide between the formal and informal employment.
PM Modi too had tacitly endorsed reforms of archaic labour laws
Manufacturing in India contributes just 15 per cent to nearly $2 trillion economy. The new dispensation wants to help create 100 million jobs and lift that share to 25 per cent within a decade. In a stark contrast, manufacturing accounted for 45 per cent of China's GDP in 2012. This shows the importance of reforms in this sector to boost ailing Indian economy.
Experts are of the opinion that Rajasthan's move could be replicated in other states as well, and would pave the way for each state having their own socio-economic background to take decisions to create more jobs within their boundaries. The move, if approved by the Centre, could result in a domino effect and other states are likely to follow suit.
Indian Staffing Federation (ISF), an apex body of staffing industry in India welcomed the Rajasthan Government's steps towards both political as well as economical innovation in labour reforms.
"We acknowledge this step by the Raje-led Government towards labour law reforms as a test case for the centre and setting an example for all other 28 states," Indian Staffing Federation President Rituparna Chakraborty had said.
Here is a look at these archaic laws:
The Industrial Disputes Act of 1947:
This law sets the rules for hiring and firing rules of the industrial sector. It says a company, having more than 100 employees, needs to take Government's permission before terminating workers, which is rarely granted. In the event of dismissal, the law says, a worker has up to three years to file an unfair dismissal claim. This law pushes up costs for midsized firms and encourages them to stay small.
The Factories Act of 1948:
This Act consolidates and amends the law regulating labour in factories. This act forbids women from working at night and forces other restrictions on their employment.
The Contract Labour Act of 1970:
This is an Act to regulate the employment of contract labour in certain establishments and to provide for its abolition in certain circumstances and for matters connected therewith. It applies to every establishment in which twenty or more workmen, art employed or were employed as contract labour.