ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Assessing the Labour Market Regulation Debate

Creating 'Good Jobs'

The current regime seeks to reform labour laws with the understanding that these reforms will improve industrial growth and expand the possibilities of enterprise. However, there is already ample evidence from within India that this obsession with reforming labour law, particularly in the way the government has done it till now, will not take us any closer in creating more jobs or a healthy industrial sector. These reforms will not help fi rms adapt to ever-changing market conditions, nor will they ensure greater security of employment.

The debate on India’s labour market reforms has acquired a new vigour and significance with the Union Cabinet and the Rajasthan government approving amendments to key labour laws over the past few months. The Union Cabinet cleared amendments to the Factories Act, 1948, which includes increasing the limit of overtime for workers from 50 hours per quarter to 100 hours per quarter, lifting restrictions on night shifts by women in factories and reducing the eligibility for entitlements such as annual leave with wages to 90 days from 240 days. It has also made amendments to the Apprenticeship Act (1961), dropping the provision that called for the arrest and imprisonment of employers who did not implement this Act and to the Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by Certain Establishments) Act, which seeks to allow firms employing up to 40 workers to file a combined compliance report for 16 labour laws, up from nine.

Further, the Rajasthan assembly has also passed changes which reduce the applicability of the Factories Act to units with more than 20 workers with power and 40 without power (up from the norm of 10 and 20 workers, respectively); of the Contract Labour Act (CLA) to companies with more than 50 workers (from 20); and of the Industrial Disputes Acts (IDA) to factories employing 300 workers (up from 100). It has been often argued that it is India’s inflexible and rigid labour market regime that has hurt the growth of manufacturing and therefore it is widely believed that such changes will put India’s manufacturing sector on a high growth trajectory and accelerate productive employment creation (Basu 2005; Ahmed and Devarajan 2007).

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