The Hindu Business Line : Unwise to put off labour reforms

All talk of liberalisation is futile without squarely facing up to the imperative of labour reforms. They are an integral part of the economic reforms process itself. Other efforts at raising the standard of performance on the economic front to world class are apt to stall if those managing enterprises find themselves hamstrung by outdated trade union laws and dilatory methods of adjudication of industrial disputes.

For instance, the unwieldy number of adjudicating authorities — conciliation officers, conciliation boards, courts of inquiry, labour courts, industrial tribunals and the national industrial tribunal — under the Industrial Disputes Act and the complex procedures are out of sync with the essential pre-requisites for the success and even the survival of companies in a globally integrated economy.

Productivity, customer service, cost-effectiveness, keeping to delivery schedules, technological upgradation and modernisation have emerged as the criteria for judging the quality of management of companies, and labour reforms hold the key to increased competitiveness and investment flows in all these respects. The need for introducing labour market flexibility and simplifying labour laws has no doubt been emphasised by the President and Prime Minister downwards from time to time, but without any visible follow-up.

The case for labour reforms could not have been argued better than in this extract from the Economic Survey of 2005-06: "... Indian Labour Laws are highly protective of labour, and labour markets are relatively inflexible. These laws apply only to the organised sector. Consequently, these laws have restricted labour mobility, have led to capital-intensive methods in the organised sector and adversely affected the sector's long-run demand for labour".

More than 100 developing countries have reformed their labour laws in consonance with present day realities; only in India are the political leaders and policy-makers fearful of meeting the issue head on. They need not be, since China, no less solicitous about the working class, has shown the way.

Tough measures

All available reports suggest that China has drastically changed its labour market system from a rigid security of employment to one in which labour is extremely mobile. According to The Wall Street Journal, between 1998 and 2003, the Chinese government undertook massive lay-offs of 50 million workers, or more than one-third the state-sector workforce. It also sold off most of the small- and medium-sized state-owned enterprises. These tough measures are said to have greatly helped China in generating employment as well as redeploying workers who were laid off in the process of restructuring of enterprises.

The overwhelming conclusion of domestic and foreign business interests, keen to strengthen and expand their industrial, commercial and financial ties with India, is that loosening the labour laws would foster growth and job creation, while reducing India's reliance on shorter-term capital flows. The IMF has been persistently calling for labour market reforms, including expanded contract employment and streamlined labour regulations and reporting requirements, and pointing out that such flexibility would help generate jobs for India's rapidly expanding labour force.

It is wise on the part of the Government to act before pressures mounted on all sides, forcing it to do so. It already has before it the report submitted more than a year ago by the Second National Commission on Labour, recommending, among other things, unification of all existing labour legislation, enforcement of norms of productivity, reduction of holidays, greater freedom for downsizing, retrenchment, lay-offs and closure, and the nature of the safety nets to be provided.

An Empowered Group should be asked to build up a consensus round them in consultation with all those interested in ensuring a smooth passage towards the developed country status for India by 2020.

B.S.RAGHAVAN

More Stories on : Labour Reforms | Offhand

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Not well planned

Can India weather climate change?

Relic of the past

Unwise to put off labour reforms

Appointment of directors in public sector banks — Will governance be a casualty of impracticable provisions?

Even 2-day delay in remitting TDS can attract prosecution

Endorsements are premised on a perfect meritocracy

When money becomes menacing

Rupee control

Senior citizens' SOS