India's long-awaited labour reforms make for greater ease of business. They reduce compliance costs for large firms but will add to costs for small and medium firms and also push up labour costs. It's hard to see the reforms providing any thrust to business in the medium term.
These reforms had been enacted nearly five years ago but they have been notified only now. They reduced 29 laws to 4 labour codes; slash the number of regulations that cover businesses. They make compliance easier for big firms.
The new codes cover all workers instead of specified industries in the earlier version. This will mean compliance or more compliance for a whole range of firms, especially small and medium firmns.
Industry's main demand was ease of firing. The new code raises the threshold were permission for layoffs is not required from 100 workers to 300 workers. This is not going to induce investment into labour-intensive sectors such as textiles, leather, auto compoents etc. along the lines of Soutth-East Asia. Moreover, most states already have the higher threshold, so it's not going to make any difference on the ground.
The new laws cover gig workers. They will specify minimum wages across four categories of workers under six different working conditions. All workers will be covered by welfare benefits such as Provident Fund, insurance, sick leave, mandatory health check-ups for workers over 40, etc. This will tend to push up labour costs. It will hugely impact businesses such as Uber, Ola, Amazon, Flipkart etc.
It's hard to see businesses complying with the requirement of benefits to workers. They will outsource jobs from firms that do not comply - and that means more income for government officials who monitor compliance.
Overall, there are benefits for companies as well as workers with the new codes tilting more towards the latter.
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