New labour codes are long overdue & welcome, Pg10

Key Highlights:

• The government has notified the implementation of the four labour codes, five years after their passage in Parliament.
• These codes replace 29 existing laws, aiming to modernize labour market regulations and ease compliance.
• The codes seek to widen the security net for all workers, including gig workers and platform workers, and encourage formalization.
• The reforms also aim to boost female labour force participation and bring fixed-term employees on par with permanent employees.

Detailed Insights:

• The previous complex labour regulations imposed significant costs on businesses, limiting the emergence of large firms, especially in labour-intensive manufacturing.
• Disincentives to expand and hire have resulted in a majority of manufacturing firms having less than 10 workers, impacting manufacturing and job creation.
• High compliance costs have pushed firms to operate in the informal sector, trapping workers in low-productivity jobs.
• The increasing capital intensity of production is mismatched with India's labour-abundant economy, necessitating these reforms.
• A firm in India typically needs to comply with provisions under 1,536 acts, fulfill 69,233 compliances and complete 6,618 filings at various levels of government.
• Sixteen states have implemented 38 reforms, including land, labour, and licensing reforms, and decriminalisation of offences, complementing the Centre’s deregulation push.
• The Union Budget 2025-26 emphasized regulatory reforms, particularly in inspections and compliances, which should be addressed urgently.

Key Concepts Involved:

• Labour Codes: Comprehensive laws that consolidate and simplify existing labour laws.
• Gig Workers: Individuals who perform work outside of traditional employer-employee relationships.
• Formalization: The process of transitioning economic activities from the informal to the formal sector.