LABOUR REFORMS IN INDIA

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• LABOUR REFORMS IN INDIA

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LABOUR REFORMS IN INDIA

• "Labour reforms in India, in the context of
  economic liberalization and globalisation, are
  much desired, but also feared and misinterpreted.
  The issue has been a touchy one ever since the
  liberalisation era began in the early 1990s. The
  Common Minimum Programme (CMP) of the United
  Progressive Alliance (UPA) promises to carry out
  much awaited labour reforms in the Indian
  economy. The CMP has clearly indicated  the need
  to streamline labour laws and enact Employment
  Guarantee Act. However, implementing these
  reforms would require much imagination and
  political will. The previous government had also
  proposed certain labour reforms but could not
  muster the courage to carry them out.

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• The need to enact labour reforms to compete with
  other countries arises because of the following
  reasons
• Despite the advantage of cheap labour, the Indian
  textile industry's productivity is low compared
  to China and other major exporting countries
  because other exporting countries have set up
  giant manufacturing capacities which bring
  improved productivity while in India, exporters
  farm out their manufacturing to smaller units
  which results in low productivity and quality.
• Recent trend in garments is for 'smart clothes',
  which require better equipment and skills as
  otherwise the Indian exporter will lose out on
  competitiveness.

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• The ID Act states that if a company employs more
  than 100 workers, the company cannot close shop
  without the permission of the government. Further
  appointment of contract labour, which is crucial
  to the garment industry, is not permitted.

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• An analysis of India's labour laws such as the ID
  Act has indicated that such legislation, enacted
  to protect worker interests, actually leaves them
  worse off. Over the years, the statutory
  protections of the ID Act neither protected
  employment in the organised sector, which employs
  more than 100 workers, nor did it adequately
  address their compensation issues in
  establishments that turn sick.
• This is evidenced in the cases of textile mills
  of Mumbai and Ahmedabad where workers have been
  denied their terminal benefits as the companies
  continue to languish as sick units.

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• India's share of the global garment business is
  2.75 per cent and under the new trade regime it
  has the capability to capture 6 per cent of the
  business by the year 2010. To achieve that,
  additional capacities need to be built up. The
  money for additional capacities can come from the
  Indian public through the IPO route or through
  FDIs.
• The catch however, is that neither the Indian
  entrepreneurs nor the foreign ones are
  particularly keen to set up plant and machinery
  in India owing to the archaic labour laws
  existing here.

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• Some reforms have been initiated in the past five
  years but the Industrial Disputes (ID) Act, 1947,
  which is the major bone of contention, has been
  left untouched.
• The ID Act makes provisions for the investigation
  and settlement of industrial disputes. When any
  employer discharges, dismisses, retrenches or
  otherwise terminates the services of a workman
  without complying with the conditions of
  retrenchment provided in the ID Act, the dispute
  or difference that can arise as a result between
  the workman and the employer is deemed to be an
  industrial dispute.

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• A commission, called the Second National
  Commission on Labour (SNCL) was set up to look
  into the various aspects of labour laws and also
  the impact of globalisation on labour.
• SNCL's recommendations were submitted about a
  year ago. The report accepted globalisation and
  liberalisation processes as something that
  couldn't be wished away. It recommended the
  unification of all existing legislation,
  including the Industrial Disputes Act and the
  Trade Unions Act.
• SNCL has recommended that the management's demand
  on closure, lay-off, etc. whittling the number to
  300, as an unfettered option. On contract labour,
  the tenor of the report is ambiguous, seeking to
  create distinction between core and non-core
  activities. The report recommends disallowing of
  contract labour in core activities except to meet
  sporadic demands. However, neither core nor non -
  core activities have been defined.
• The SNCL further recommended that if employees
  make an application for closure, permission will
  be deemed to be granted if that approval has not
  been granted within 60 days.

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• If India wishes to shine better, it has to boost
  the marketability of its human resources. India's
  labour laws have to work towards drawing in'
  human resources entrepreneurial talent and
  employees into the market so that natural
  resources and savings will follow.
• When natural resources and savings follow human
  resources into the market, the nation's
  marketable and measurable output rises. If labour
  laws work towards keeping out' human resources
  from the market, natural resources and savings
  too will stay outside the market. The nation's
  non-marketable and unaccountable output may rise,
  if at all.

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• The reform of the economy began 12 years ago, but
  significant labour reforms have yet to be
  initiated. Policy-makers and lawmakers have to
  enunciate new policies that would allow India's
  human resources to play the leadership role in
  growing the economy. It is time for change. India
  needs an economic approach' to labour laws
  because human effort is the principal determinant
  of economic well being.

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• THANK YOU