Labour reforms have been talked about since the start of the economic liberalisation process back in the early ’90s. Stringent laws governing the employment of labour in the organised sector were enacted in an earlier era, when socialism was the sole creed of the ruling Congress Party. Having brought the country to near economic ruination, wisdom dawned on the rulers to revisit various laws, which worked more as a brake on growth rather than as catalysts for productivity and good industrial relations. Employers were so constrained by these laws that they felt discouraged to add more people to their rolls. Indeed, expert studies were unanimous in establishing that employment in the organised manufacturing sector was actually depressed due to the stringent labour laws, which were so one-sided that there was no recourse to sack recalcitrant employees, scale down the work force due to economic factors, or to close down a factory for factors beyond one’s control. Lifetime employment was so guaranteed that there was no incentive for workers to safeguard discipline and/or productivity. However, despite a few weak attempts by the Narasimha Rao Government and later by the Vajpayee Government, no progress could be made on updating the obscure and obstructionist labour laws. The fear of the organised trade unions and their political representatives was such that even the talk of undertaking an exit policy became an anathema to ruling politicians. However, in the run-up to the recent Lok Sabha elections, and in the backdrop of the crippling economic slowdown, the talk of reforming the labour laws was once again revived. It was suggested that individual state governments could undertake the changes in the relevant central labour laws, provided the centre did not assert its superior position under the Constitution. Since these laws fall in the concurrent list, the central legislation automatically supersedes that enacted by the states. However, should the centre not object and the President accord assent to laws made by the states seeking to amend the pre-existing central legislation, the latter would duly become valid in their respective jurisdictions. In the above context, it is heartening to note that the Rajasthan Government of Chief Minister Vasundhara Raje has set the ball rolling. In a recent news report, it was revealed that the Raje Government is seeking to amend the Industrial Disputes Act, 1947, the Factories Act, 1948, and the Contract Labour Act, 1970. Admittedly, the proposed changes are modest, and do not go far in dismantling the restrictive regime of labour laws, which has constrained growth and employment expansion for decades. The proposed change in the Contract Labour Act seeks to enforce it to units employing 50 workers, instead of the present 20. And the change proposed in the Factories Act merely doubles the number of workers from the present 10 to 20 for units using power, and from 20 to 40 for those without power. The Industrial Disputes Act is sought to be amended to raise the limit from the present 100 to 300 workers for units seeking retrenchment of staff. Also, the stipulation for a labour union to be recognised is sought to be raised from a minimum membership of 15 per cent to at least 30 per cent of the total workforce. This should help cut down the multiplicity of trade unions in small- and medium-sized factories. There are numerous other laws, both central and state, which require a re-look in order to make the employment environment conducive both for job creation and growth.
A major reason why there has been negligible growth in employment in the organised sector is the multiplicity of stringent labour laws. Informal contract labour and camouflaging of real employment in benami small and medium units are undertaken, to bypass the killer labour laws. Instead of providing security and insurance to the workforce, these laws have virtually become anti-labour. Once the organised trade unions think through the implications of the proposed changes in the labour laws, they too will have to drop their opposition. For, their interest should lie in enhancing employment opportunities and growth, rather than in suppressing them. Hopefully, the lead taken by the Raje Government would soon be followed by other states keen to create new jobs and cordial industrial relations. Let the clock of progress move forward without being artificially held back by the obscure labour laws.