Government eager to implement new labor laws to attract global investors

A favorable labor policy is essential to replace China as a manufacturing hub

The central government is expected to give priority to issues such as implementation of labor codes to strengthen the country's labor market and increase social security to unorganized workers in the new year 2023. When the G-20 Leaders' Conference is being held for the first time in India this year, it is believed that our policymakers will also try to promote employment-oriented programs to show that the country's government is trying to increase employment. Efforts will be made to cover large number of unorganized workers under social security schemes in 2023, Union Labor and Employment Minister Bhupendra Yadav said in a statement.

The implementation of the four labor laws which were supposed to be implemented across the country at the beginning of the financial year 2022 has been delayed till now due to one reason or the other. The Center has already passed four labor laws on social security, industrial relations, wages and occupational health and safety and working conditions, but their implementation will be possible only when both the Center and the states promulgate their own rules. Since labor standards are the same subject for the entire country, any labor law has to be implemented simultaneously at the central and state levels.

With at least five state assembly elections scheduled in the new year followed by Lok Sabha elections in 2024, the central government is eager to implement the new labor law in the country, but it remains to be seen how successful the central government will be in this given the political compulsion. The government has so far not rushed into the implementation of the Labor Reform Act in order to avoid the same situation as the Agriculture Act was opposed and the government had to back down from it. But now the implementation of the new labor law in 2023 seems possible as the rules are yet to be prepared by the states. However, no date has been announced by the government for the implementation of the new labor law. The government does not want to proceed on this issue until there is complete agreement from all stakeholders.

Complicated labor laws may not have hindered the country's economic growth, but they have proved to be a challenging business for industries and investors. More than fifty percent of the compliance standards applicable to industrial units are employee related. Less than ten percent of the total workforce in the country belongs to the organized sector. When both the Center and the states are ready to radically change the labor laws, which are challenging for the industries, it can be said that its implementation in the new year will be in the interest of both the industries and the workers of the country.

It is also a fact that the new labor law has been claimed to have protected the interests of both employers and employees, but its implementation has been lax. Due to decades old unworkable labor laws, we were lagging behind in terms of industrial competitiveness with Bangladesh and China, but the Product Linked Incentive Scheme launched by the Central Government has created favorable conditions for the country's industries and helped make goods competitive abroad. While the implementation of the Product Linked Incentive Scheme is proving to be beneficial to the country's industries, the implementation of new labor codes can play a major role in attracting investment from abroad i.e. Foreign Direct Investment (FDI).

In its first term, the Modi government made sweeping proposals to overhaul decades-old and outdated labor laws and even mulled repeal of several laws. While the consideration has mostly been finalized and most of the states in the country have framed the rules, implementation has been delayed due to laxity in a few states, state assembly elections and especially fear of employee protests.

In our country there is industrial competition between the states and the states also prepare the same industrial policy which suits them. Due to this, it cannot be denied that states are lax in making rules.

Opportunities to create new jobs in the private sector as compared to the public sector will arise only when the implementation of favorable labor laws for these sectors is speeded up. The deadlines for the implementation of the four labor laws have been missed many times, now when India is going to become a global production hub after the corona period, it has become necessary to reach a consensus among all the stakeholders.

China's economy is weakening and due to the new wave of Corona, China is facing the world today, India has got a great opportunity to take China's place in the industrial sector. Countries of the world will be attracted to invest in India only when they are assured of an easy doing business environment here. After the Corona period, India has progressed on many fronts from technology and has achieved the ability to survive even in the midst of the proposed global recession, let us expect success in 2023 in adapting the labor laws that are most important for the industries.