India will benefit from agile labour codes. Look at China, Bangladesh and Vietnam for results

India will benefit from agile labour codes. Look at China, Bangladesh and Vietnam for results

• By Staff Writer

Most of India’s labor laws were framed shortly after independence when it was a predominantly manufacturing/agrarian economy, often stuck in the quagmire of a License Raj. The protectionist and socialist undertones determining the labor laws at the time led to the creation of a labyrinth of over 40 different legislations regulating different aspects of employer and employee relationships, which primarily catered to the needs and rights of the worker.

India’s existing laws focus on income and job security rather than boosting job creation. This is evident from provisions such as the prohibition of contract workers, strict laws pertaining to termination of employees, unionizing, and strikes. However, India’s liberalization drive has placed it in the center of a globalized world economy by boosting the services sector. Particularly IT/ITeS contributes over 7 percent of India’s GDP and that number is set to rise to 10 percent by 2025 and create 3  million jobs. In an increasingly shrinking world, workers need to cater to global norms and supply chains which need to be fostered by Indian legislation.

Covid-19 has highlighted new trends, such as work from home, part-time workers, and gig workers while exposing the failures of the existing system to facilitate ease of doing business. Multiple compliances and administrative procedures covering key issues such as business registration, rules governing migrant workers make it difficult for employers to unlock the potential of India’s skilled and unskilled workforce. The proposed labor codes will play a cardinal role in sparking India's economy’s V-Shaped recovery. China, and more recently Bangladesh and Vietnam, have shown the benefits of agile labor codes which India should look to emulate.

The pandemic and onset of technology have created new opportunities for employment, such as work from home, part-time employment, contract workers, and gig workers. Sharp spikes typically govern services such as IT/ITeS and e-commerce activities.

Unlike traditional manufacturing, these industries witness increased activity during festivals, holiday seasons, and sales. Adopting measures to recognize and promote contract working will aid businesses during phases of increased activity while providing part-time employment to many Indians.

As India pushes for global leadership, it must discard antiquated practices and apply an agile approach to facilitate growth. One such example is standing orders. Standing orders were devised to protect factory workers by stipulating conditions, such as working hours. The rigidity of such measures will affect the service industry, particularly businesses with global clients. Working according to client time zones, establishing patterns specific to projects, and options to work remotely will be hampered if sectors such as finance, consulting, IT/ITeS, and E-commerce is not exempted from notifying standing orders.

A critical factor to the success of the industry in a free-market economy is its operational independence. Major economies across the world, including those of the USA, China, and Japan, have a five-day workweek. This results in an avoidable increased compliance burden increase the costs for business with no additional products and hinder the ease of doing business for the industry. The new codes need to implement a single unified S&E registration.

One of the defining legacies of this government has been the push to digitize India and make it a global leader. India’s goal to become a trillion-dollar economy can only be achieved by establishing codes to foster growth and jobs and income of workers, which would, in turn, drive the security and stability of employees. The service industry driven by technology-intensive sectors such as IT/ITeS, e-commerce, financial services, and consultancy has immense potential. The labor laws need to promote employment, quality of employment, and income in these sectors by enabling businesses to operate in this sector.