After the government passed agriculture bills to free up the Indian farmers from the vicious cycle of APMCs, traders, bureaucrats, and politicians, it has decided to reform the labour laws in order to attract manufacturing and usher the Atma Nirbhar Bharat project.
Previously the government decided to incorporate various central labour laws (numbering more than 40) into four codes- Wages, Industrial Relations, Social Security and Occupational Safety, and Health and Working Conditions- in order to simplify them for the workers and companies.
Out of four, the government had been able to pass the wages code in the last term but the rest of the bills were with the parliamentary committees which gave reports when the last Lok Sabha was about to end. Now, the government has withdrawn those bills and introduced new ones in which it has also incorporated the recommendation by the committees. So, the government has introduced three new bills titled- Industrial Relations Code Bill, 2020, Code on Social Security Bill, 2020 and Occupational Safety, Health and Working Conditions Code Bill, 2020- in the Lok Sabha to complete the labour reforms.
The new bills, when enacted as law, would bring many fundamental reforms in the labour market of the country. These laws will incentivize the companies to give formal jobs to the workers and would break the informal economy or gig economy. Moreover, the companies have been given the right to fire the workers without government approval if they have less than 300 workers in the new bill compared to only 100 in the previous ones.
This would encourage the companies to hire more and more formal workers rather than contractual ones because they can fire even the formal workers anytime if they are not happy with the performance.
The new bills by the union government would have a ripple effect and the states, at least BJP ruled ones, to amend and consolidate their labor laws. Given the fact that the union government has widely consulted the ministries and the industrial bodies and all their issues have been accommodated, the states can replicate the union government’s acts with minor tweaks.
“We have included 174 out of 233 of the recommendations of the standing committee on labour across three codes and they are being introduced again as they have undergone substantial changes,” Labour and employment minister Santosh Gangwar said in Lok Sabha while introducing the bills. “The government has held nine tripartite consultations, and 10 inter-ministerial consultations during the drafting stage of the codes,” he added.
The government’s efforts to simplify the labor laws will have a positive impact on industrial growth of the country and move up the country’s ranking in Ease of doing Business. Also, at a time when the global supply chain is being altered and the Western world is trying to weed out China, the flexible labour laws would lure the companies leaving the Communist country.
Till now, Southeast countries like Vietnam, Thailand, and Cambodia have been the major beneficiaries of the exodus of companies from China and India, despite having cheap labor and a large market, has got a very small share in the pie. But, the new labor laws have the capacity to change the situation for the better.
The timing of these reforms is very important as the US has recently proposed an ‘economic prosperity network’ to move the supply chain out of China and integrate it among ‘friendly countries’ like India, Australia, Japan, South korea. The new labor laws would help India to emerge as strongest pillar of the new global supply chain and become ‘factory of the world’.