Modi's BJP introducing labour reforms

Modi's BJP introducing labour reforms

Prime Minister Narendra Modi may be going slow in opening up the economy but his government is focusing on labour reforms in the hopes of promoting manufacturing and boosting growth.

Two dozen amendments to four different labour laws, including the Factories Act, are passed by the Cabinet and await legislative approval.

They will ease regulations and increase the welfare of workers by doing away with outdated laws that, for instance, bar women from working night shifts in factories.

The new amendments range from provisions for giving protective equipment to workers doing hazardous work to compulsory canteen facilities in factories employing 200 or more workers instead of the current 250 or more.

These reforms are needed to "ensure ease of business", Labour Minister Narendra Singh Tomar told Parliament on Monday. But the government has left aside for now the contentious issue of firing workers.

India has a labyrinth of multiple labour laws that are over half a century old. In a report this year, the World Bank said India has one of the world's most rigid labour markets and that modernisation and simplification of its labour laws are needed to create jobs and increase productivity.

Past Indian governments, while acknowledging the need for reforms, have refrained from any major changes, fearing resistance from powerful trade unions and losing crucial votes from workers.

But Mr Modi, whose Bharatiya Janata Party (BJP) is seen to be pro-business, has promised to strengthen Indian manufacturing to turn India into a manufacturing powerhouse like China.

Labour reforms are seen as crucial to achieve this.

"No one is investing in manufacturing in India due to the difficulty of doing business," said Mr V. Subramanian, a retired government official who dealt with labour issues, citing rigid labour laws as one of the reasons.

"These reforms (brought by the government) are not earth-shattering, but even a marginal change will give a boost," he said. "I don't think they should go gung ho (on labour reforms); it could backfire. The government needs to take it slow."

Indeed, the Modi government has stayed away from changing laws related to the firing of workers, a tough prospect given opposition from several labour unions.

Under current laws, firms need government approval for firing more than 100 workers, and approvals are not easily given.

A move by the state of Rajasthan making hiring and firing easier has already stoked controversy and put trade unions on the warpath. The BJP-ruled state has allowed firms to fire up to 300 workers without government permission and made it tougher for labour unions to operate.

Unions are worried that similar reforms will be carried out at the federal level.

"This is unilateralism (on the part of the government). We don't know what they are going to bring, they haven't shared it with us," said Mr Tapan Sen, an MP from the Communist Party of India, adding that he expects Mr Modi to take measures along the lines of Rajasthan's.

Industry bodies like the Confederation of Indian Industry, however, have welcomed the reforms, expressing optimism that they will have a positive impact on business sentiment.

Indeed, some in the manufacturing sector say more reforms are needed, given that rigid laws only encourage businesses to look for ways to bypass them.

Some, like Mr Nebu Jacob, who runs a garments export house in Delhi, want greater flexibility.

"Ours is seasonal work. For instance, European customers don't look to India for winter production... So during leaner periods, I don't need the staff, but if I hire I can't fire. That is eating into margins. I am not saying that workers should not get adequate facilities but there should be flexibility."

This article was first published on August 7, 2014.
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