News wrap: India proposes labor reforms

At a Labour Ministry event on October 16, India’s Prime Minister Narendra Modi announced a range of initiatives, titled ‘Shramev Jayate,’ to overhaul India’s labor sector. Modi stressed that the success of the newly launched ‘Make in India’ campaign hinged on labor reforms, saying: “Let’s start with trust. Ease of business is the first and foremost requirement if Make in India has to be made successful.”

According to the Indian Express coverage of the event, the proposed changes include cutting down on random inspections.

“All 1,800 labour inspectors will be disallowed from swooping down on companies and instead, a computerised system will randomly send them on inspections, based on data trends and objective criteria. Following inspections, they will have to upload their reports within 72 hours and cannot modify them thereafter.”

“Central labour inspectors have already been sent text messages on behalf of the Prime Minister to sensitise them to the reforms, and the ministry is hopeful that the annual inspections — currently about 3 lakh — will come down sharply.”

Mint describes a new website that will help companies comply with different labor laws.

“Speaking about the single-window platform for compliance with labour laws, Modi said it would allow companies to file, starting Thursday, one labour compliance report online for 16 laws. “E-governance is easy governance,” he said, reiterating his vision of minimum government and maximum governance.”

The article also reports that Modi’s new announcements are in line with the NDA’s budget announcements.

 “The reworking of the labour laws is consistent with the NDA’s approach, first spelt out in the July budget, to streamline rules and regulations to create a better business environment. In the budget session of Parliament, it eliminated a tranche of outdated laws and is now awaiting the recommendations of a high-level panel to initiate another round.”

Other changes include a revamped government health insurance program (Rashtriya Swasthya Bima Yojana) as well as a new skill development and apprenticeship scheme. ANI notes that this will be helpful in creating a pool of skilled workers.

“The long awaited amendment to the Apprentice Act will enable industry to scale up the number of Apprentices from 3 lakh to approximately 23 lakh thereby leading to large employment and creation of a skills talent pool for industry.”

However, as the Financial Express notes, some sticky issues have been left to states.

 “While the Centre has left it to the states to address the more contentious issue of allowing more flexibility in employment by companies through the hire and fire system, it is willing to build an atmosphere where labour reforms could move forward, even if slowly, in a positive direction.”

Firstpost Biz notes that the new announcements echo suggestions made in India’s Economic Survey from 2012.

“Many of the labour reforms now being proposed formed part of last year’s Economic Survey, prepared when Raghuram Rajan was Chief Economic Advisor to the finance ministry under P Chidambaram. The 2012-13 Economic Survey noted that India had too many labour laws (45 of them between centre and states, according to Arvind Panagariya). And states which had more flexible labour laws tended to have better industrial performance. The Survey noted: “Estimates using plant-level data suggest that firms in labour-intensive industries and in states with flexible labour laws have 14 percent higher TFP (total factor productivity) than their counterparts in states with more stringent labour laws.”

Business Standard reports that members of India Inc. are happy with Modi’s announcements.

“Chambers of business welcomed it, saying these had been long-pending demands of the sector. “We welcome the 'Shram Suvidha Portal' to facilitate a single window for compliance with labour laws. Simplification of procedures has been a long-standing concern for industry…(this) will bring in a lot of transparency and accountability,” said Chandrajit Banerjee, director-general at the Confederation of Indian Industry. He said with greater ease of doing business and availability of skilled personnel, growth of the manufacturing sector will get a big fillip.”

However, as the Indian Express reports, labor unions welcome the move but remain skeptical.

“However, trade unions remained sceptical of the government’s stance. “The announcement of the new schemes is most welcome but we have to wait and watch for the actual implementation,” said B N Rai, president, Bharatiya Mazdoor Sangh.”