PM Narendra Modi to launch India’s biggest labour overhaul in decades

upcoming parliamentary session  to loosen strict hire-and-fire rules and make it tougher for workers to form unions.

Prime Minister Narendra Modi is preparing to launch India's biggest overhaul of labour laws since independence in a bid to create millions of manufacturing jobs

Prime Minister Narendra Modi is preparing to launch India’s biggest overhaul of labour laws since Independence in a bid to create millions of manufacturing jobs, at the risk of stirring up a political backlash that could block other critical reforms.

Three officials at the federal labour ministry said that the ministry was drafting a bill for the upcoming parliamentary session that proposes to loosen strict hire-and-fire rules and make it tougher for workers to form unions.

The changes, if approved by parliament, will be the biggest economic reform since India opened its economy in 1991, but it is likely to meet stiff opposition in parliament and from labour activists.

 “Without these reforms, the economy would stagnate, and frustrated investors would look elsewhere,” he said.

“You cannot make political opposition an excuse for not taking tough decisions.”

Since taking office in May last year, Modi has taken a series of incremental steps to make labour laws less onerous for businesses, but fear of a union-led political backlash made him leave the responsibility for unshackling the labour market with Indian states.

EASIER FIRING

As part of the proposed revamp, a factory employing fewer than 300 workers would be allowed to lay off workers without government permission. Currently, factories employing 100 workers or more need approval for layoffs.

But they will have to pay three times the current severance package, the labour ministry officials said.

Companies have long been demanding an increase in the ceiling as governments rarely grant such permissions for layoffs, making it difficult to respond to business downturns and encouraging them to stay small.

“It will facilitate ease of doing business while ensuring safety, health and social security of every worker,” a senior labour ministry official involved in the deliberations said.

The official said the bill was expected to be finalised in the next three or four weeks, and would then be sent to cabinet for approval.

The planned changes would also make it tougher for employees to form unions or go on strike, but would make all employees eligible for minimum wage.

Economists cite current labour rules as the biggest constraint on Modi’s “Make in India” ambition to spur a manufacturing boom creating jobs for 200 million Indians reaching working age over the next two decades.

The labour reforms, which are being opposed by labour unions, could also end up being labelled as “pro-corporate”.