Reform or Rights Rollback? India's Sweeping Labour Law Overhaul Sparks Debate

India is on the brink of implementing what many are calling its most significant economic reforms in decades: a sweeping overhaul of its labour laws. The government has compressed 29 federal laws into four simplified codes, dramatically reducing the regulatory burden on businesses. While companies hail this as a necessary step to boost manufacturing and global competitiveness, trade unions are fiercely protesting, arguing that the changes are an aggressive erosion of workers' rights.

Pritam Roy/BBC

💼 Simplifying Compliance and Attracting Investment

The core objective of the reform is to modernize outdated laws and simplify compliance.

• Reduced Regulatory Burden: The number of governing rules has plummeted from 1,400 to around 350, and the forms companies must fill out have dropped from 180 to 73. This drastically lightens the regulatory load.
• Ease of Doing Business: Businesses, which have long blamed restrictive labour practices for hindering India's manufacturing growth, have welcomed the change. Experts believe the move signals the government's intent to attract more Foreign Direct Investment (FDI) and integrate into Global Value Chains (GVCs).
• Addressing Inconsistencies: The new codes iron out "glaring inconsistencies" in previous legislation, such as varied definitions of the same rules, which an economist noted made it impossible to implement the old laws without violating some of them.

✅ Worker-Friendly Measures and Formalisation

The government argues the reforms aim to protect workers' rights while introducing several positive provisions, including legal recognition for the burgeoning gig workforce.

1. Key Worker Benefits: The codes include several worker-friendly measures, such as:

• Mandatory appointment letters.
• Uniform minimum wages.
• Free annual health check-ups for workers over 40.
• Gender-neutral pay.

2. Formalising the Economy: By strengthening social security and expanding the definition of employees to include gig workers, experts suggest these reforms could play a crucial role in formalizing India's vast informal economy.

🛑 The Two Major Contentions: Firing and Striking

Despite the welcome provisions, two contentious clauses have fueled widespread protests and anxieties among trade unions and workers.

1. Easier Retrenchment for Larger Firms

• The Change: The threshold for requiring government permission before laying off employees (retrenchment) has been increased from factories with 100 or more workers to those with 300 or more workers.
• Business View: Economists supporting the change argue that the old 100-worker threshold was "draconian," hampering India's competitiveness compared to rival manufacturing hubs like China and Vietnam. They believe the change will encourage firms to build larger-scale factories, boosting manufacturing and creating employment over time.
• Union View: Trade unions see this as excluding a huge section of the workforce from labour legislation protection. They argue that it will only benefit employers and fear that their ability to contest grievances is already hindered by a backlog of millions of pending cases.

2. Restrictions on Strikes

The Change: Workers must now give a 14-day notice before going on strike. This notice requirement was previously applicable only to state-run (public sector) companies but is now extended to all establishments.z

Union View: Unions contend that this measure further erodes workers' rights to collectively bargain. Protesters, including a factory worker, expressed concern that the laws would primarily benefit employers.

Counter-Argument: Critics of the codes, like Prof. Arun Kumar, warn against weakening workers' bargaining power, particularly as high unemployment and technological displacement already threaten jobs. He argues that these laws do not address the core issue of inadequate demand caused by low wages, which he believes is the main drag on private investment, not the old labour laws.

🌐 A Balancing Act

The overhaul is positioned as a key economic reform to unleash India's manufacturing potential and global integration. However, the implementation faces strong resistance from trade unions, who view the new codes as a "sweeping and aggressive abrogation of workers' hard-won rights". The debate thus centers on a crucial trade-off: simplifying the regulatory landscape to drive economic growth versus safeguarding the collective bargaining power and job security of the nation's workforce.