Labour Reforms


  • Over 25% of the world’s workers are Indian
  • 300 million young people are set to enter the labour force by 2025
  • With an average age of 29, India’s population is in the middle of a demographic boom
  • By 2020, when the global economy is expected to run short of 56 million young people, India, with a youth surplus of 47 million, could fill the gap
Why labour reforms are needed?
  • Because above mentioned facts provides an opportunity to India
  • Because India still does not use its vast labour force productively or judiciously
  • 93% of India’s work force is in the unorganised sector, ranging from vegetable vending to diamond trading.
  • Also, over the last decade, the compounded annual growth rate (CAGR) of employment has slowed to 0.5%, with 13.9 million jobs created in 2012 when the labour force increased by 14.9 million. (Numbers are not so important. Don’t remember exact numbers)
What has the government done?
  • ShramSuvidha, a unified labour portal scheme, has been launched to provide timely redress of grievances and facilitate self-certification by industry.
  • More transparent labour inspection regime, with inspection reports uploaded within 72 hours.
  • A focus on cutting down red tape, by amending nearly 40 Central and 150 State labour laws, has been launched, with significant consequences on hiring and firing
  • Proposals for exempting small-scale industries, employing up to 40 workers, from 14 basic laws, including the Factories Act, the Industrial Disputes Act and the Maternity Benefits Act, are being considered.
  • Amendment in apprenticeship act.
What else can be done?
  • Enabling environment should be provided so that more jobs can be created
  • The labour law must be rationalised by defining minimum wages and linking them to inflation. Minimum wages ought to be revised annually, with penalties for their violation dramatically raised
  • With no labour laws applying to apprentices, care must be taken to ensure that they are not transformed into contract labour.
  • Contract labourers must be protected
  • India’s current labour policy provides little incentive for industrial employers to hire. To avoid complications, companies hire contractual labour without social security benefits or termination protection. A modern labour law that encourages employers to keep more workers in formal roles, with work-linked wages and social security benefits is vital. Flexibility to undertake layoffs, ensuring adequate benefits and a reasonable notice period, is needed.
States such as Rajasthan, Madhya Pradesh and Gujarat have made positive moves with respect to labour reforms. Given the emerging competition between states to attract investments, one may hope that other states also are likely to follow suit sooner rather than later.



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