Increasing unemployment is a major issue in India. Every year a whopping 10 million youth join the workforce and only a fraction of these are lucky enough to find a proper job. Absorption of workforce in the organized sector has been abysmal.
Time and again, industries and businesses have minced no words in emphatically stating that the biggest factor that prevents them from create quality employment is that their hands are tied down by antiquated labour laws.
By nature, business is a risky proposition subject to frequent ups and down. Situations may arise when sheer compulsion of survival in a downward phase may require owner to shed some work force. In extreme circumstances, management may even be forced to close business establishment. But, they are hamstrung by extant labour laws.
The owner enjoys no flexibility whatsoever. Forget lay-off or retrenchment en masse – that closure of any business establishment may necessities – he can’t retrench even one worker without having prior approval of government. He has to worry all the time about compliance with rules & regulations.
Moreover, considering deep rooted corruption at every level in the bureaucratic set up, he faces incessant heckling and harassment at the hands of corrupt officials and their political bosses. Very often than not, given the exorbitant price that latter extract as quid pro quo for granting permission, he is deterred from taking the extreme step. He is compelled to keep his business running even when it is making losses. Let us look at some of draconian laws.
Under the Industrial Disputes Act (IDA),1947, an undertaking employing more than 100 persons needs the permission of government before retrenching any worker or shutting the shop. In case of retrenchment, affected worker can approach the authorities for registering his objection at time after receiving the order. So, the risk of being hauled up haunts the owner continually!
IDA confers un-fettered rights on workers to form trade union (TU) to protect their interests. Under extant dispensation, 15% of workers can form a TU. This gives rise to multiplicity of TUs each creating its vested interest which vitiates industrial climate.
Then, there is the Factories Act (FA), 1947. It applies to factories employing 20 workers or more, if without electricity and 10 workers or more if with electricity. Complaints against an employer about violation of the Act are taken cognizance by a court even without prior written permission of state government.
Likewise, the stringent provisions of Contract Labour Act (CLA), 1970 are triggered for an establishment employing 20 workers or more. This hampers the ability of management to hire more temporary workers for fear of violating the extant provisions.
Clearly, the need for compliance with such rigid laws works at cross-purpose with requirement of business. While, the latter requires the management to freely adjust labour, raw materials, capital, technology and other inputs that go in to production, former simply prohibits him from implementing any of these steps thereby stalling the wheels of industries and businesses.
Caught between the deep sea and the devil, employers have devised ways and means to avoid getting caught in maze of labour laws. Thus, invariably they keep their regular workforce below 100 to circumvent provisions of IDA. As regards balance requirements, they meet by hiring temporary workers. Similar strategies are adopted to escape provisions of FA and CLA.
The biggest casualty of such regressive actions and reactions is the employment itself. A syndrome of keeping work force to the bare minimum pervades across the entire spectrum of industries and businesses. This severely affects both the numbers and quality of employment leaving majority of workforce to survive in the vagaries of the so called ‘informal’ sector.
Successive governments have taken note of the attenuating effect of antiquated labour laws on employment & growth and pledged to reform these. But, alas none has walked the talk. However, the present government led by Modi is different. It is walking the talk.
Recently, the President – based on recommendation of union cabinet – has granted assent to a slew of amendments to the extant legislations passed by Rajasthan assembly. Under IDA, 1947 the cap of persons employed has been increased to 300. Thus, businesses employing less than 300 will not be covered by the Act. Likewise, cap under FA, 1947 is increased to 40 for factories without electricity and 20 with electricity. Under CLA, 1970 the trigger point now is 50 workers.
Under IDA, 1947, in case of retrenchment, affected worker has to register his protest within 3 months. For forming a TU, requirement of workers has been raised to 30%. Under FA, 1947, court can take cognizance of complaints against an employer only with prior written permission of state government.
The government of Madhya Pradesh has also approved amendments on lines similar to that in Rajasthan. After passage by assembly and subsequent assent by President of India, this state too will see a significant relaxation in its labour laws. The central government is goading other states to follow suit.
As per constitution provisions, labour matters are on concurrent list implying that both central government and states have power to legislate. Considering that BJP/NDA does not enjoy majority support in upper house/Rajya Sabha, the former may face difficulty in getting amendment passed on such a sensitive subject at the central level. Therefore, Modi has prudently taken the route of goading states to do the needful.
Whereas, in states ruled by BJP or by its partners, we can look forward to the requisite amendment in the near future, for all India impact, the wait may be a bit longer. But, it looks a distinct possibility as having already registered resounding victories in Maharashtra and Haryana elections and gearing to capture more states viz., J&K, Jharkhand, Bihar etc, BJP/NDA will substantially increase its strength in upper house to ensure smooth passage of amendment by centre in the not too distant future.
Together with a host of other steps aimed at curbing ‘inspector raj’ and reducing registration requirements and filing returns, the unemployed youth can confidently look forward to a surge in opportunities for gainful and quality employment. A collateral gain will be a big boost to economic growth.
Fear of large scale loss of jobs is totally unfounded. This is being spread by vested interest (including union leaders) whose clout will be substantially diminished under the new dispensation. To counter this, there is need for increasing awareness – at a fundamental level – that more jobs will be created only when businesses are unshackled and allowed to grow by take decisions without any encumbrances from the government or its agencies.