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In news:

Indian economy and businesses have been affected due to Covid-19 pandemic. In order to make an economic recovery, some states announced relaxing or doing away with major labour laws to attract investment.

What some states have done:

1. The Uttar Pradesh government has proposed an Ordinance exempting firms from almost all labour laws for the next three years.

2. The Gujarat government has announced that it will allow new companies setting up shops over the next 1,200 days to be exempt from major labour laws.

3. The Madhya Pradesh government has notified changes in labour laws to do away with the need to avail multiple licences for hiring contract workers and setting up factories.

Labour laws in India:

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Are labour laws restrictive in India: 

  • Indian labour laws are often characterised as “inflexible”.
  • Due to labour laws, firms (those employing more than 100 workersdither from hiring new workers because firing them requires government approvals. 
  • There are too many laws, often unnecessarily complicated, and not effectively implemented.
  • All this has laid the foundation for corruption and rent-seeking.
image 100

Will relaxing labour laws generate employment:

  • Theoretically, it is possible to generate more employment in a market with fewer labour regulations.
  • However, as the experience of states that have relaxed labour laws in the past suggests, dismantling worker protection laws have failed to attract investments and increase employment.

What is needed:

  • If India had fewer and easier-to-follow labour laws, firms would be able to expand and contract depending on the market conditions.
  • This would result in formalisation, thus, helping workers as they would get better salaries and social security benefits.
  • The government should partner with the industry and allocate 3% or 5% of the GDP towards sharing the wage burden and ensuring the health of the labourers.

Governmental effort:

The government has created four codes to rationalise the multiple laws. This has not been approved by the parliament yet.

  1. Codes on Wages
  2. Code on Industrial relations
  3. Code on Occupational safety, health and working conditions
  4. Code on Social Security and Welfare

What other govt’s are doing:

image 2022 08 17T122550.861

Source:”Indian Express “.


Examine whether Indian labour laws are restrictive. Can labour laws make labour welfare and economic development go hand in hand? Suggest measures in this regard.