JOIN USThe need for labour reforms in India has been widely pointed out and emphasised, and governments, both at the Centre and in the states, have been enthusiastic about them. The first-generation economic reforms of the 1990s did not achieve their full potential because of the absence of supporting reforms in the factor markets comprising capital, labour and land. The central government has been keen and supportive, and Prime Minister Narendra Modi recently talked of reforming all “land, labour, liquidity and laws.” So the steps taken by some state governments in the last several weeks to amend their labour laws and regulations should be considered welcome initiatives, though done disparately and haphazardly. The Karnataka government last week decided to make important changes in laws relating to closure, retrenchment and layoffs, contract regulations, registration and overtime work. The number of workers required for the laws to apply to their employer has been raised so that fewer companies will come under their purview. In a system where provisions for legal protection had actually created rigidities over the years, some relaxations are called for.
Some other states have also sought to implement similar changes. BJP-ruled states like UP, Madhya Pradesh and Gujarat, Congress-ruled states like Rajasthan and Punjab and states ruled by other parties, like Odisha and Andhra Pradesh, have gone in for such changes. The changes were largely effected in the last several weeks, in the midst of the Covid-19 pandemic. But the method of bringing in the reforms was more jarring than the timing. The governments made the changes through ordinances or administrative orders. The right course should have been to frame and enact the necessary legislation in the legislatures after due consideration. Labour is in the concurrent list, and the Centre is already seized of the matter. There should be consultations between the Centre and the states, which should go by that process rather than try to work and rework individual laws.
All initiatives for labour reforms in India should also take into consideration the fact that there is no social security net or unemployment benefits for workers in the country. Many proposals have been made to ensure that workers are not left without support when the labour market is made more flexible, and those ideas should not be ignored. A well-regulated labour market is in the interest of all stakeholders — the workers, the employers and the government — and will aid the economy. The economy, which was limping before the pandemic struck and is crippled now, can recover and revive only with major reforms, but those reforms must have a human face and intent.