Indian Prime Minister Narendra Modi is preparing to launch the country's biggest overhaul of labour laws since Independence, in order to create millions of manufacturing jobs, all at the risk of stirring up a political backlash.
Officials at the central labour ministry have said the ministry was drafting a bill for the upcoming parliamentary session that proposes to loosen strict hire-and-fire rules and make it tougher for workers to form unions. If approved by the Parliament, this would be the biggest economic reform since India opened its economy in 1991. The Opposition and the labour activists will pose challenges though.
Asia-Pacific chief economist, Rajiv Biswas said Modi had very little option but to push ahead with the measures. “Without these reforms, the economy would stagnate and frustrated investors would look elsewhere,” he said. “You cannot make political opposition an excuse for not taking tough decisions.”
After successful and peaceful implementation of labour market in Rajasthan and Madhya Pradesh, the federal labour ministry now intends to do the same at a national level.
According to the proposed makeover, a factory employing fewer than 300 workers would be allowed to lay off workers without government permissions, but they will have to pay three times the current severance package.
The planned changes would also make it tougher for employees to form unions or go on strike, but make them eligible for minimum wage.
The current labour rules was the biggest constraint on Modi's 'Make in India' aim to induce a manufacturing boom by creating jobs for 200 million Indians in the next two decades.