Delhi: clash between governments and trade unions over labour market reform

Supporters say the new rules simplify the system and benefit companies and workers. Critics say the laws will “only benefit” owners, undermining employees' rights. Described as the “most radical” in decades, it reduces the previous 29 federal laws into four simplified codes, from 1,400 to 350 rules overall.

Delhi (AsiaNews) - The labour reform announced in recent days by Prime Minister Narendra Modi's government, a set of far-reaching regulations that aims to modernise a sector that has been neglected for too long, is sparking a heated debate in the country between supporters and critics. The aim is to overcome obsolete laws and ensure greater protection for millions of workers.

Furthermore, according to the head of the executive, it will guarantee ‘a solid basis for universal social security, minimum and timely payment of wages, safe workplaces and remunerative opportunities’. At the same time, the changes should also drive ‘the creation of new jobs and increase productivity’ across the entire economic sector.

Ambitious slogans and messages have also been relaunched by the Ministry of Labour, according to which the reform places workers, particularly women, young people, precarious workers and migrants, “at the centre of governance” with “expanded social security and transferable rights that apply nationwide”.

The reform, described as “the most radical in decades”, reduces the previous 29 federal laws regulating the market to four simplified codes. As a result, the number of regulations has fallen from 1,400 to around 350, while the number of forms that companies had to fill out has been reduced from 180 to 73, drastically lightening the regulatory burden on businesses.

The laws were passed by Parliament in 2020, but after five years of delays and much political controversy, they are finally ready to be applied uniformly across the country. Companies, which have long blamed restrictive labour practices for the decline of India's manufacturing sector, have welcomed these changes with great enthusiasm.

Trade unions, on the other hand, are calling for their withdrawal and describe the reform as the “most radical and aggressive repeal of workers” hard-won rights and privileges since independence'.

The changes have already sparked demonstrations across the country, such as the protest held in the capital on 26 November by left-wing trade unions not aligned with the directives of Prime Minister Modi's Bharatiya Janata Party (BJP).

At the protest site, Akashdeep Singh, a 33-year-old worker employed by an international beverage company on the outskirts of Delhi, told the BBC that ‘the laws will only benefit employers and not workers like us.’ Many others have expressed similar concerns.

The government says the long-awaited reforms aim to modernise outdated laws, simplify compliance and protect workers' rights, recognising India's growing precarious workforce for the first time in law.

Several measures in favour of workers – mandatory letters of employment, uniform minimum wages, free annual medical check-ups for those over 40 and gender-neutral pay – are positive steps. Together with lower compliance burdens, greater social security and a broader definition of employees that includes precarious workers, these reforms could help formalise India's vast informal economy, according to experts.

However, there are also critical elements in the reform, including two particularly controversial clauses that have sparked discontent among trade unions. These are rules that will make it easier for companies to dismiss workers and more difficult for employees to call legal strikes. Previously, factories with 100 or more workers had to obtain government authorisation before they could dismiss employees.

Now that threshold has been raised to 300. Some economists argue that the old rules prohibiting dismissals in companies with 100 or more employees were “draconian” and hampered competitiveness compared to countries such as Bangladesh, Vietnam and China. Others, however, argue that labour restrictions alone do not explain India's weak competitiveness or the slow pace of private sector investment in new plants.

Although ideological differences remain, experts agree that outdated and complex rules, often used by inspectors to hinder the work of factory owners, needed simplification. With more than half of the working-age population outside the labour market and nearly 60% of workers self-employed, the old rules could no longer work.

The impact of the new rules on manufacturing growth and investment remains uncertain, but in the short term, the transition will pose challenges for businesses. As labour is regulated by both state and central rules, employers may find themselves having to comply with dual regulations for a period, says BDO India, while the government faces continued resistance from trade unions.