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An Analysis of Indian Labour Regulations and Their Impact

 

 

Rachit Wadhwa

 

 

ABSTRACT

 

India has a huge labour force. Over several decades, many laws have been enacted by the central as well as the state governments to protect the interests of the workers. This has resulted in a multitude of labour laws in the country which is often alleged to disincentivize the entrepreneurs and the manufacturing establishments leading to a demand for reforming the Indian labour laws. Various empirical arguments with reference to the manufacturing sector have been advanced to support the simplification of labour laws and bringing more flexibility in the Indian labour market. This paper provides an overview of the various labour acts under the central government. For an overall macroeconomic view, data from the RBI is used to analyze the performance of the Indian manufacturing sector in the light of these laws. Using ASI data for various years, this study tries to evaluate the relative importance of the labour-intensive sector and capital-intensive sector in the Indian economy. The paper also examines whether the newly passed labour codes overcome the shortcomings of the existing acts. A detailed state-level analysis is also done using the labour ecosystem index. The study finds a strong positive association between the index values and the future growth in gross state domestic product. From the state level comparison, it becomes evident that a comprehensive set of labour market reforms must focus not only on labour laws but also on the various factors affecting employment and employability.

 

Keywords: labour laws, manufacturing sector, labour reforms, labour ecosystem, India

 

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