India’s big problem of low-quality employment

Source: The post is based on the article “India’s big problem of low-quality employment” published in the Indian Express on 13^th August 2022.

Syllabus: GS 3 Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

Relevance: Job Creation in India; Inclusive growth.

News: Recently, a V.V. Giri National Labour Institute’s report titled “Impact Assessment Study of the Labour Reforms” was published. It was based on the labour reforms conducted in Rajasthan, Maharashtra, Andhra Pradesh, Tamil Nadu, Jharkhand, and Uttar Pradesh during the period 2004-05 to 2018-19.

What is the status of Employment Creation in India?

Between 1980 and 1990 Period: Every 1% of GDP growth generated roughly two lakh new jobs

Between 1990 to 2000 Period: Every 1% of GDP growth generated roughly one lakh jobs.

About the Labour Reforms in recent decade

Before 2014 Reforms: The government focused on improving labour administration by simplifying procedures and digitisation.

Post-2014 Reforms: The government shifted primacy focus on reforming the content of the laws. In this context, the union government designed a framework for labour law reforms.

Thereafter, it encouraged the state governments to implement changes, since labour is a state subject. Rajasthan took the initiative and other states followed the economic reforms.

What are the key findings of the Impact Assessment Study of the Labour Reforms?

The labour reforms undertaken so far had little effect on increasing employment in large enterprises in India.

Rajasthan, the first state to implement the reforms, seems to have benefitted the least from them. This is because the effects of labour reforms cannot be revealed immediately as it will take time.

In contrast to creation of jobs, the report says, employment in formal enterprises is becoming more informal.

What causes problems in labour reforms?

Labour Reforms couldn’t induce the creation of large enterprises, the primary objective of the reforms because the increase in the threshold of application (i.e., now 300 labour) of the Industrial Disputes Act is conceptually flawed.

Large investors are employing increasing numbers of people on short-term contracts, while perversely demanding more flexibility in laws.

The labour laws are the only one factor affecting business investment decisions. In addition to labour reforms, an enterprise must have a growing market for its products, and capital, machinery, materials, land, etc. to produce for the market.

The reforms failed to serve the primary purpose of labour laws like to protect workers, not promote the interests of investors.

What should be done?

Fundamental reforms are required in the theory of economic growth, i.e., more GDP does not automatically produce more incomes at the bottom.

In addition, India needs to focus on the creation of jobs, labour policies must focus on the generation of better-quality livelihoods for Indian citizen or all citizens’ ease of earning better livelihoods and with more dignity