NewsMobile Explainer: All about the recent labour law changes in Indian states

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Labour laws continue to be a sticking point for many investors who prefer not to invest in India. It is under these circumstances that certain states such as Goa, Gujarat, Karnataka, Madhya Pradesh and Uttar Pradesh have reformed their labour laws in recent days.

NewsMobile takes a deep dive into the matter.

What was the need for these amendments?

Many rating agencies have predicted that India’s GDP growth will slip to 0.8 % for the Financial Year 2020-21.

Many investors are pulling out of China in recent times and investing in destinations such as Vietnam.

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India has a great potential in solving many of its problems associated with economic development.

However, despite an improved ranking in the World Bank’s ‘Ease of Doing Business’ report, India still continues to receive lesser investments compared to some of the other nations.

Three issues: Lack of land reforms, labour reforms and uncertain tax laws were being seen as major issues.

Now, the government has set out to reform the labour laws and hopes to attract investments in the under developed states of UP, MP and other areas.

Also it is estimated that nearly 90% of the 47 crore workforce did not benefit from these laws.

What are these reforms about?

Briefly, these laws seek to amend or suspend (in the case of UP) about 40 Central Labour laws and a host of State Laws.

The 7th Schedule of the Indian Constitution lists the subject of ‘Labour laws’ as a concurrent subject over which the Union and State governments are empowered to make laws.

These laws that have been enacted by the state governments named above seek to amend and give force to the principles of hire & fire, increased working hours from 8-12 hours and remove many obstacles in the form of bureaucratic approvals and permissions and any sort of red-tapism.

UP has gone ahead and suspended these labour laws for a period of three years and after public pressure has brought back the working hours to 8 hours from 12.

UP has therefore suspended all labours such as the Minimum Wages Act, protection to women workers and other relevant laws.

UP has only retained provisions against bonded labour and protection to construction workers amongst other legislations.

Madhya Pradesh government, on the other hand, has streamlined clearances and reduced the time period for clearance and the documents required.

What are the advantages of these amendments?

The individual labour from these states may not need to have to migrate to far away states in search of jobs. They were forced to leave their states and go to other states where they faced migratory pressures and a hostile society that looked down upon these very workers who built urban India.

With investments expected in these states, these migrants will be able to find jobs closer home.

The companies will find it easier to operate their business entities with fewer compliance requirements and easier permissions. A market like India will only become more attractive with its demographic dividend.

Overall, it is expected that the economy will benefit due to an enhanced investment, creation of jobs, demand generated growth.

What are the disadvantages of these reforms?

The labour now has no protection and will be guaranteed timely payment of wages but will be left at the mercy of the companies who will be free to determine the wages, as the Minimum Wages Act has been done away with.

Women who had special protection against sexual harassment cannot claim any remedy.

The laws guaranteeing work hours, holidays and sick leave have been done away with and will be considered against the Fundamental Right of the citizens (Article 23 of the Indian Constitution)

This may lead to protracted fights between the company management and the labour unions, rather than having a harmonious relationship.

The companies will anyway take at least 18-24 months to establish a plant and this protection will then prove to be insufficient.

Wipro Chairman Azim Premji has termed this a “false choice” which has soiled the “social contract” between the business community and labour.

The Madhya Pradesh model is being praised and is being recommended as the law that is to be emulated.

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