In a historic policy reform, the Government of India led by Prime Minister Narendra Modi has passed three key Labour Reform Bills in the parliament recently. PM Modi has himself hailed the same by saying that ‘the reforms will ensure well-being of our industrious workers and give a boost to economic growth'. Describing them as shining examples of ‘Minimum Government, Maximum Governance', the PM further added that the reforms will contribute to a better working environment, which will accelerate the pace of economic growth.
Deepak Sood, Secretary General, ASSOCHAM, has termed these labour reforms as a critical structural change that would bring about a new paradigm of the business environment. "Combining 29 different labour laws into four Codes would not only make compliance a lot easier but also boost investor confidence - both domestic and global, as competitiveness increases. The labour reforms must be viewed as a Win:Win for the employees and employer. The flexibility would rather result in the generation of additional employment, as has been clearly brought out by such a dispensation in Rajasthan," Sood told The Machinist.
Aditi Sharma - Vice-President - Quality, Manufacturing, HSE, Cummins India, calls the Labour Reform Bills as ‘a positive step towards Atma Nirbhar Bharat'. She further explains: "We have been seeing several reform measures in recent times being implemented to boost the Indian economy. The merger of the central labour laws into four codes is a big and a welcome step towards addressing the recent challenges of staggering economy. India has always been trying to attract foreign investments but easing of stringent regulations is the key enabler. The labour reforms are a positive step towards that, coupled with the recent rationalisation of tax regime and few other upcoming measures. Although it might be criticised that the labour reforms might make the workforce more vulnerable, but I feel that this was a much-needed reform which would act as a stimulus for growth engine and unshackle economic growth of India Inc. Yes, it is true that standalone, these labour law reforms might not be enough to drive this change, but a positive move towards India's ambitious growth strategy to be one of the leading economies globally and making India as the world's most ‘open and investment-friendly' economy."
Ashish Kapoor, Director - HR, Eaton, believes that ‘the reformed Labour bill has consolidated everything under a single act and now there is no need to refer to multiple different labour laws. Kapoor also says that the reforms also bring in flexibility for India's manufacturing sector to adjust their operations to the significant market changes. "Eaton has been a fair employer and will continue to focus on its employees to deliver Robust, Reliable and Efficient products in India. With Eaton's growing footprint in India, the reform will benefit the operations and make it a lot easier for us to do business," he says.
Farrokh Cooper, Chairman & Managing Director, Cooper Corporation Pvt. Ltd. welcomes the reforms by calling it a ‘bold step'. He believes that the new labour codes would contribute to enhanced safety, health & working conditions, industrial relations and social security for the labourers. "We have always believed that labour is the foundation of industry and deserves equal dignity and growth potential. It is important how you interact with them consistently and openly and how you ensure transparency in all communications with them. We believe that the relationship built through this creates a marvelous synergy in a company that could do wonders," Cooper explains. He further cites examples from his organisation explaining how good labour policies can have a positive impact. "The new labour codes have provided flexibility for the deployment of temporary workers and fixed-term employees, allowing them to learn on-the-job and to become eligible for better opportunities and livelihoods. We at Cooper have done same 15 years ago! And that is why we have more than 300 employees working with us more than 30 years now." Cooper also finds resonance in key government initiatives like ‘Skill India', ‘Make in India' and ‘Vocal for Local'. He says that Cooper Corporation's legacy of 100 years has been built on these values. "Twenty years ago, when most skilled workers decided to work in Pune and other cities with minimal job opportunities, attracting them to home and keeping them back was a challenge. We resolve this by consistently improving the abilities of the less skilled workers, empowering them, and even providing them with a skill allowance as a monetary benefit," he shares.
Benefit to the economy and the manufacturing industry
There is no doubt that these long awaited reforms will have a positive impact on the economy in general as well as on the manufacturing industry in particular. Sood ASSOCHAM points out that the manufacturing industry has undergone a marked change in terms of technology and business models. "The manufacturing units, nowadays, do not operate in silos; rather, they are part of global or local value chains. The manpower requirements in these units require constant skilling, flexibility, re-skilling. All this makes flexible labour laws imperative. For the broader picture, manufacturing accounts for over 77 per cent of the country's industrial production and is amongst the largest generators of employment. The new laws, would thus, provide a great impetus to economic development."
Sharma of Cummins India also feels that ‘in alignment with our PM's vision of Atma Nirbhar Bharat or Self-reliant India aimed towards making India ‘a bigger and more important part of the global economy', it is important to pursue policies, regulations and reform of existing protectionist laws with ones which are self- sustaining and self-generating. "With the volatility in the global business scenario, India needs to move quickly to take advantage of becoming a leading manufacturing hub. The amendment is apt and a key enabler to boost the sentiments of the industry. I feel that the new labour law reforms will give a boost in attracting investments in mid-sized and large industries both from domestic investors and from outside India and add more jobs on a net basis," Sharma explains.
Kapoor of Eaton believes that the manufacturing industry is becoming more competitive and this reform will enable the industry to create more job opportunities. "More employment will augur well for the general economy in the longer run. The bill allows for employee benefits; for example fixed term employees will also gain access to provident fund, E.S.I.C, gratuity payment, etc. We hope this will ensure more productivity, improved costs and agility to adapt to changing market conditions," he adds.
Cooper strongly believes that the reforms will also allow the workers to maximise their potential. "In the case of the manufacturing sector, the provisions in the codes would ensure a stronger labour market and, at the same time, improve productivity. To a great extent, the Industry 4.0 revolution must be human-centred and the codes facilitate this. Wealth is created by labour, and as human beings, we must ensure that they get better deals," he explains.
Cooper also points out that the old labour laws became obsolete when the nature of the market changed drastically after liberalisation in the 1990s, creating a blockade rather than supporting anyone. "Productivity, efficiency and technology are the core of every good company. Land, labour, capital, technology and entrepreneurship are five foundations of every great organization. Labor and Entrepreneurs are live assets and require a coherent and balanced strategy. The new codes to greater extend ensures win-win situation for both employees and employers which will give a boost to the Indian economy," he adds further.
Impact on India's ‘Ease of Doing Business' status
PM Modi has also said that the Labour reforms will ensure ‘Ease of Doing Business'. ASSOCHAM's Secretary General Sood agrees. He says: "Rigid labour laws, at the state, local and the central levels had traditionally been a major issue for new investment. The industries, facing dynamic business cycles, had no flexibility to align or realign their manpower base. This had traditionally given rise to the 'inspector raj', which has changed a lot for the better. With the new labour laws, India's ranking on ‘Ease of Doing Business' is certain to improve as competitiveness is increased."
Eaton's Kapoor feels that the new bill will help reduce the burden on employers for multiple compliances as the restrictions on closure and retrenchment have been simplified.
Sharma from Cummins also highlights that the erstwhile stringent rules were hindrances towards flexibility of doing business. However, the new forms are a paradigm shift aimed towards creating a Win-Win situation both for employer as well as for employees. "The applicability clauses will give more flexibility in hiring and get the best efficiencies through the reforms. The clamp on the industrial strikes which was a big bane for industrialists and a source of deterrent for investments. What I found most encouraging is the National Social Security Board whose recommendations will result in expansion of social security net for both formal and informal workers and one big step towards societal responsibility with 1 - 2 percent from turnover being allocated for such welfare schemes." Sharma also points out that the reskilling fund for retrenched employees will be a moral boost and would further ease out the societal obstacles for doing business in India Inc especially in rural India where the erstwhile stringent laws have stalled big investments in the past. "Several other measures such as mandatory appointment letter and defining the defining the Inter-State Migrant Worker for the first time makes it easy to hire skilled workforce across state boundaries, maximum daily work hours regulated and women employment scope enhancement ensuring right social and safety requirements will ensure better efficiencies and output. The Occupational Safety, Health and Working Conditions Code, 2020, amends laws regulating occupational safety, health and working conditions of employees. The empowerment given to state government to exempt any factory from the provisions of the Code to create more economic activity and jobs without compromising on the important requirements is a welcome step that would ease of doing business across state boundaries of India," Sharma adds.
Cooper states that while we have made leaps and bounds and strengthened our rank in the global ‘Ease of Doing Business', a lot needs to be done. Cooper also strongly suggests that labour reforms will help to build on these issues, but we need a system of ‘Faceless' statutory regulators. "Human contacts between Citizen and Government officials are causing problems and can be prevented by 100 percent through a ‘Faceless Technology Interface' that will be real-time, less complex and quicker. Artificial Intelligence (AI) and India's IT technology and service provider have the capacity to develop and run systems that will radically improve the ease of doing business," Cooper states.
What more the Government needs to do
Of course, getting the reforms passed in the parliament is one thing. Implementing them on ground is a different ball game all together. As ASSOCHAM's Sood says, implementation in letter and spirit at the local and state levels would be the key differentiators. "Proactive states would get noticed by investors. Those with a larger pool of labour resources and a congenial business environment would be the favourites amongst investors. Besides, a lot of emphasis has to be placed on the re-skilling of the manpower. The good thing is the new laws provide for the same. A constant connect with the trade and labour organisations would also help," Sood adds.
Cooper points out that the business is always based on risk taking capacity of the investors. "The government has largely realised that we must protect our markets. Industry and industrialists pay massive taxes and must be protected as a "Samaritan Citizen" in times of distress. In a situation like COVID, European nations have provided large industries with financial assistance, irrespective of their size. We understand the importance of small and medium-sized enterprises, but we should not forget that large factories are the backbone of the industrial echo system and must be considered on a par with the jobs quantum produced by them. We want Government to lower the income taxes and provide special provisions for large industries. A better tax regime is required," he insists.
Kapoor of Eaton feels that ‘the reforms are in the right direction and we hope to see the progress continue, additional focus area can be on technical upskilling'.
Sharma of Eaton emphasises that the governance of the state machinery during such reforms becomes extremely crucial. "As most critics say that these reforms are more corporate-friendly and less worker-friendly is a point of debate. What we need right now is a strict governance on the changed reforms. With the recent reforms the bargaining power of workforce is diluted, and they are more vulnerable. To keep the sentiments high, Government needs to keep a strict vigilance to ensure no misuse of the clauses at the slightest pretext at an operational level," she explains. Again, as Sharma highlights, there needs to be more clarity in the functioning and implementation of reskilling fund which is a key element for social security of retrenched workers. It is extremely important to keep a vigil watch on the flouting of safety norms as the flexibility as per Occupational Safety, Health and Working Conditions Code, 2020. "There needs to be a very effective sustainable governance process to protect interests of workforce and ensure that companies do not impose arbitrary working conditions which might make workers and especially women vulnerable to unsafe working conditions. The labour reforms is great positive move towards the Vision of Self Reliant India and "Make in India" campaign, but these need to be coupled with reforms to promote rapid infrastructure development and a deep dive of policies and implementation strategies to create an open, fair and non-discriminatory business ecosystem," Sharma says on a concluding note.
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