Reform of labour laws is, thus, essential for creating a manufacturing - and a jobs - revolution. But Indian politics has typically shied away from this necessary task for fear of offending tiny, but vocal, organised labour. If the Rajasthan government is indeed taking the risk to do something about this, then it deserves full credit. Even at the Centre, few administrations have tried to undo the damage done by Indira Gandhi to India's employment laws. On one occasion, the last time the Bharatiya Janata Party was in power, then finance minister Yashwant Sinha tried to relax some of the provisions of the Industrial Disputes Act. There was such an uproar that he was forced to roll back his announcement. One of the changes Mr Sinha suggested was that the Act should apply when 1,000 workers were retrenched. This was perhaps too many. Reportedly, Rajasthan will amend the Act locally so that it applies when 300 workers are retrenched, as opposed to the current 100. This might make it easier to pass.
However, the legal issues are thorny. The Industrial Disputes Act is a piece of central legislation. It is now proposed to be amended by a state government. Fortunately, labour is part of the Concurrent List of the Constitution, which means it is a subject shared between the states and the Centre. Article 254 of the Constitution provides for occasions when state and central laws conflict. The second clause of that Article says that a law made by a state, even if it is "repugnant to" an earlier law from Parliament, can prevail in that state if it receives the president's assent. However, there is considerable uncertainty; some readings of recent Supreme Court judgments suggest that the states' ability to ignore or amend existing central legislation can be limited. Rajasthan, therefore, may have to endure a complicated legal battle over the constitutionality of its labour law amendments.
In the end, the question must, therefore, be asked: why is Rajasthan being forced to take this extreme step? The problematic law has been passed by the Centre; it is the Centre that should fix its own error. The current government even has a majority, and so it should be able to repeal these archaic labour laws. Nor should it foresee any trouble in the Rajya Sabha, since Congress Vice-President Rahul Gandhi has already said he favours flexible labour laws, and so did the party's election manifesto. In essence, while the Rajasthan government's step is laudable, it is born of a completely avoidable desperation. Rajasthan Chief Minister Vasundhara Raje has been quoted as saying, "I had promised 1.5 million jobs and this is one area which desperately needs to be opened up. I don't have a choice." The expectations raised by Prime Minister Narendra Modi are even higher; he does not have a choice either.