Can new labour codes help weakest states of India prosper?, Pg16

Key Highlights:

• The Centre has notified the implementation of four new labour codes, five years after they were passed by Parliament.
• These codes replace 29 existing laws, aiming to reform India's labour market and boost economic potential.
• The codes intend to modernize regulations, ease compliance, expand security for workers including gig and platform workers, and encourage formalization.
• A recent HSBC report suggests that India's emerging states, with their wage advantage, can attract mid-tech FDI by improving infrastructure and easing labour laws.
• States like Uttar Pradesh, Bihar, and Madhya Pradesh, with lower wage rates than Vietnam, have the potential for significant growth.

Detailed Insights:

• India's historical surplus labour and low wage rates have not translated into economic strength, unlike countries like China, Vietnam, and Bangladesh.
• These nations have successfully leveraged similar factors to surpass India, particularly in the manufacturing sector, which can absorb surplus labour.
• Global supply chains are being restructured in labour-intensive mid-tech sectors, presenting an opportunity for India's emerging states.
• While China's manufacturing dominance is shifting away from low wages, Vietnam's average wage is still lower than that of several developed Indian states.
• HSBC emphasizes that states like UP, Bihar, and MP can achieve growth by creating the right incentive structure, including easier labour laws and improved infrastructure.
• The new labour codes aim to provide a more predictable framework for labour engagement, potentially fostering job creation for India's youth.

Key Concepts Involved:

• Labour Codes: Comprehensive laws that regulate employment, wages, industrial relations, and social security for workers.
• Gig Workers: Individuals who perform work outside of traditional employer-employee relationships, often through online platforms.
• Formalization: The process of transitioning economic activities from the informal sector to the formal sector, with associated regulations and benefits.
• FDI (Foreign Direct Investment): An investment made by a firm or individual in one country into business interests located in another country.