Labour
Reforms: Federated Consensus?
Labour Reform in India calls for a change in mind
set from its staunchly socialist past. To come about, it must jettison its
highly defensive anti-capitalist-pro-worker stance. The changed thinking needs
to produce balanced legislation that helps the scaling up and facilitation of big
and sophisticated manufacture, and the massive, well-paid employment it will
engender.
In 1991, the infamous licence-permit raj that
produced bizarre distortions too, was finally dismantled. And now, the Modi government, with the first
majority mandate in over 30 years, seeks to usher in many elements of long awaited stage two of the structural
reforms.
In this, attracting enhanced foreign capital, relaxing
rigid labour laws, easing land acquisition/purchase, quickening the pace of
granting government permissions, bringing the country under a single general
sales tax (GST) regime, freeing up space for the private sector in insurance,
auctioning national assets to the highest bidder, are all of a piece.
In the matter of labour law reform so far, the most
substantive beginning has been made at state level, with Rajasthan taking the
lead, most notably its Factories Act, allowing establishments with up to 300
workers, from the previous 100, to unilaterally close down or dismiss workers;
this without having to take the government’s prior permission. Maharashtra,
Madhya Pradesh, Haryana and other BJP ruled states are likely to follow suit, much
to the annoyance of the trade unions.
The central government, on its part, wants to merge the
Trade Union Act, The Industrial Disputes Act and the Industrial Employment
(Standing Orders) Act into a single law for industrial relations going forward.
However, it is hamstrung because of inadequate strength in the Rajya Sabha.
This makes it difficult to pass any contentious legislation without opposition
support. And the opposition sees labour reform as pro-business and anti-worker.
So far therefore, the centre has only managed to
amend the Apprentices Act 1961, to boost the future trained work force, and do
away with some reporting and register-keeping functions.
At the 46th Indian Labour Conference,
which the prime minister inaugurated recently, he stated that future ‘changes
in labour laws will be made with the concurrence of the unions’. This may have
come from a desire not to open any new fronts as he braces for an expectedly
stormy monsoon session of parliament. But it may nevertheless be a difficult, if
not impossible, ambition to fulfil.
India does however have some of the most rigid
labour legislation in the world. As a consequence, most manufacturers prefer to
stay small. A 2009 statistic from McKinsey &Co. has an astounding 84% of
Indian factories choosing to stay miniscule, even as manufacturing overall
contributes just 16% to GDP out of the $ 2 trillion economy today.
This is tiny compared to China, that is now slowing down, but has had 32% of
its GDP which has reached $10-12 trillion, coming from manufacturing. And China
had no more than 25% of its factories employing less than 50 people in 2009.
But then, manufacturers in India are probably afraid to grow, given the rigours
of our labour laws, plus other extensive and oppressive red tape.
The antipathy to labour reforms in manufacturing are
immense, even though, in India, according to a recent Reuter report, ‘just 8%
of manufacturing workers are in formal employment. The rest are short-term
contractors who enjoy minimal security benefits’. This, no doubt is another
distortion meant to get around impossible labour laws. The indignity and
unfairness of this practice of appointing ‘contract workers’ without rights
caused violent riots in Haryana not so long ago.
But the allergy to reform doesn’t stop with manufacturing
organisations alone. The Indian Railways, India’s biggest employer, involved in
providing a service and manufacturing/engineering/maintenance/catering etc. has
run into an early wall of opposition at the suggestions of the Bibek Debroy
Committee. This from the trade unions, employees, its controlling senior
bureaucracy, all the way up to the Railway Board.
Ultimately, this government may have to make do with
as much labour reform as it can implement in the states, with ‘labour’ matters
conveniently placed in the concurrent list. For bigger things, it may have to
wait for a majority in both houses of parliament, perhaps post 2019.
For: The Quint
(695
words)
July 21st, 2015
Gautam Mukherjee
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