New Delhi: Prime Minister Narendra Modi has dropped one of the most contentious elements of his proposed labour reforms, paving the way for his long-awaited industrial relations legislation to be introduced to India’s parliament by 6 April.

Modi has been battling opposition’s attempt to paint him as a government that favours the business elite over the poor by moving to make it easier to hire and fire factory workers and buy farmers’ land. He’s also faced hostility from unions and his party allies since he first sought to reform labour laws after coming to power in 2014. While smaller changes have passed, the most crucial reforms have until now remained out of reach.

India’s labour minister Santosh Kumar Gangwar said in an interview on Tuesday the administration had abandoned the plan that would have allowed companies with as many as 300 workers to lay off staff without seeking the government’s permission, and would keep the current limit of 100.

The changes are part of a process to streamline 44 different labour laws into four codes as the government pushes forward with its efforts to formalize the $2.3 trillion economy.

Modi’s administration will introduce an industrial relations bill in the parliament session that ends on 6 April, according to a person with knowledge of the matter who asked not to be identified. The bill, which seeks to ensure better packages for fired staff and longer notice periods by unions before announcing strikes, will be pushed as soon as it is cleared by the cabinet, the official said.

Industrial ambitions

Complex legislation has held back India’s industrial ambitions, despite programs such as ‘Make in India’ designed to stimulate domestic manufacturing. The manufacturing sector accounts for less than a fourth of GDP in Asia’s third-largest economy where more than 90% workers are part of the so-called informal sector.

The government’s move to overhaul labour laws, even in a diluted form, is a step in the right direction, said Madan Sabnavis, chief economist at Care Ratings Ltd. “Land and labor are two major reforms which the government has not taken because both are very controversial."

India has no reliable data to assess how many jobs were created in the one of the world’s fastest growing large economies.

Still, the labour ministry’s figures released 12 March show India added 136,000 workers across eight sectors between July to October 2017, while the latest private surveys reflect a bleak picture. In the week ended 25 February, India’s jobless rate rose to 6.1% compared to 5% in January, the highest monthly rate in the past 15 months, data from the Centre for Monitoring Indian Economy showed.

Modi swept to power in May 2014 with the biggest electoral mandate in three decades after promising to create 10 million jobs each year for the country’s burgeoning youth population.

Over the last four years, his government has succeeded in tweaking some laws. India has amended rules for payment of wages, bonuses, maternity benefits. It has proposed changes to the factories act and plans to amend fixed term employment, the official said.

India’s labour ministry is also working with the country’s planning body, NITI Aayog, on a draft national employment policy which is scheduled to be ready in three months, the official said. It will help map which sectors can generate more jobs for what could be the world’s largest workforce by 2027. Bloomberg

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