Not flexible enough for a growing economy.
There is need to review labour laws, says the Economic Survey, while detailing the arguments for and against the easing of these laws.
“The need is to bring these laws into the public space for open discussion and the weighing of the available scientific evidence, and then take decisions based on what emerges from such an exercise,” it says.
Citing various international studies, it says “India’s labour regulatory structure does not have the flexibility commensurate with a buoyant, growing economy”.
Retrenching workers in the current regulatory structure is very hard. “At first sight, this looks like a pro-labour legislation, one that protects the interests of workers,” says the Survey. This could, however, encourage a company to remain small or even abstain from getting into business.
“Hence, it is arguable that our labour laws, such as the Industrial Disputes Act of 1947, if appropriately reformed, can lead to a
greater demand for labour and, through that, improve economic well-being of workers,” says the Survey.
Workers can gain power through being conferred rights. They can also get power if market conditions are so created that there is increased demand for labour, which would “thereby increase the ability of workers to ask for more and realistically expect the demands to be satisfied”.
It cites the argument that the impact of any change in labour laws would be minimal, since their application is limited to the organised sector —- which is minuscule.
The counter-argument is also highlighted. “India’s organised sector would grow if, in keeping with the times, we could amend the labour regulatory system, which would also influence the culture and custom of the labour market and encourage employment in the organised sector,” it says.
