Narendra Modi, India’s Leader, Moves to Reshape Labor Rules
|
Version 0 of 1. MUMBAI, India — Prime Minister Narendra Modi announced labor reforms on Thursday, simplifying employment rules and aiming to give a lift to manufacturing and job creation. “For the success of ‘Make in India,’ ease of doing business should be given priority,” said Mr. Modi, who was elected on a platform of development and job creation. Cumbersome labor regulations are among the biggest hurdles to setting up manufacturing in India, which fell to 134th place this year in a World Bank index of countries for doing business. Mr. Modi said that there would be greater accountability in the inspections of businesses, which say inspectors with discretionary powers routinely harass them. The Labor Ministry will also set up a website to allow companies to fill a single report for compliance with 16 labor laws. Mr. Modi said those initiatives were in line with his government’s motto of “minimum government and maximum governance.” At the same time, Mr. Modi emphasized that labor issues needed to be seen from the perspective of workers and not industrialists. He announced a program for skills development, in which the Labor Ministry will finance the first two years of training for apprentices in manufacturing units. He also promised easier portability of payroll-financed pension savings when people change jobs and move between states by using a universal account number. Because of the difficulty of transferring money, about $4.4 billion in such funds lies in inoperative accounts, where workers cannot obtain access. “I want to return the money to those poor people,” Mr. Modi said. The announcements were greeted positively by Indian business interests, which have been lobbying for a change in labor regulations. “This is something industry would welcome very strongly and has been awaiting for a long time,” said Bidisha Ganguly, chief economist at the Confederation of Indian Industry. Analysts said the moves would be particularly helpful to millions of small-scale manufacturers across India. More sweeping and contentious changes, however, are unlikely to be announced before the conclusion of state elections next year. “A lot of people have been talking about big bang reforms but the new government is undertaking incremental policy changes,” said Soumya Kanti Ghosh, chief economic adviser at the State Bank of India, a government-owned bank. He added, “Any move to make dramatic changes in labor regulations will not be taken in good stead by labor unions.” India’s labor laws, many conceived during British rule, have stifled manufacturing and hindered job creation. Companies with more than 100 employees must obtain government permission to fire workers, a provision that discourages companies from expanding and hiring. In 2012, about 84 percent of manufacturers in India employed fewer than 49 people, keeping a large majority of the work force in the informal sector with little job security and few benefits. “It’s extremely important for any government to address the barriers to productive job creation, in order to have an impact on poverty,” said Anu Madgavkar, a senior fellow at the McKinsey Global Institute. “The efforts underway to clarify, simplify and make less onerous our labor laws in the long term will be a positive for job creation and therefore a positive for India.” |