The lower place India has as a destination for business investments in India, necessitated overhaul of the existing systems. Make in India campaign, also warranted reforms to make industry structures flexible and employees more productive. While industry associations demand removal of restriction on hiring and firing, reduction of pressures on compensation, bonus and social security, and continuity in operations without strike, union leaders are demanding protection to contract labour, continuation of social security benefits and payment of bonus and freedom to oppose erring employers. Besides central government, state governments like Rajasthan and Maharashtra have announced a slew of reforms in relation to Factories act, Contract Labour act and Industrial disputes act. The approach of the governments is termed by political parties and labour unions anti-labour. There is a demand to involve stakeholders in the process of reforms.

1. International Journal of Advanced Scientific Research & Development (IJASRD)
ISSN: 2394 – 8906
www.ijasrd.org, Pp: 18 – 22
Two Day National Seminar on “Make in India: How Get the Manufacturing Going” 18 | P a g e
R.V.S. College of Arts & Science, Karaikal
Make in India Needs Labour Reforms
S. N. Kanagarathinam 1
ABSTRACT: The lower place India has as a destination for business investments in India,
necessitated overhaul of the existing systems. Make in India campaign, also warranted
reforms to make industry structures flexible and employees more productive. While industry
associations demand removal of restriction on hiring and firing, reduction of pressures on
compensation, bonus and social security, and continuity in operations without strike, union
leaders are demanding protection to contract labour, continuation of social security benefits
and payment of bonus and freedom to oppose erring employers. Besides central government,
state governments like Rajasthan and Maharashtra have announced a slew of reforms in
relation to Factories act, Contract Labour act and Industrial disputes act. The approach of
the governments is termed by political parties and labour unions anti-labour. There is a
demand to involve stakeholders in the process of reforms.
KEYWORDS: Reforms, Demands, Legislations
India is one of the fastest growing economies in the world. It could be easily one of
the most attractive investment destinations due to its huge pool of talent, cost competitiveness
and vast market driven by an emerging middle class. However, India’s position in the
‘Doing Business’ annual reports published by the World Bank continues to be less than
favourable. The latest rankings place India 142nd
among 185 countries; lower than its BRICS
(Brazil, Russia, India, China, South Africa) counterparts1
. There is an urgency to focus on
improving the position and towards this end the Make in India campaign is launched.
Obviously, Make in India requires overhauling of the political and administrative systems,
reforming business environment and creating work culture that is characterized by ethics,
efficiency and economy. This paper focuses on the labour reforms, which are critical in
making India a manufacturing hub.
Labor reforms on the agenda of growth
The five key parameters used by the Economic Survey 2014-15, for promoting
domestic manufacturing are: productivity, growth (national and international), resource
attraction, skilled labour and tradability of the sector. India has competitive advantage in the
area of labour2
. Labour Bureau Report pointed out that 300 million youth will enter India’s
labour force by 2025. It has also stated that in the next three years, Indians will account for 25
per cent of the world’s workers. By 2020, there will be shortage of youth worldwide and
India will be the only country with a surplus of 47 million youth workers3
.
The 14th
Finance Commission observed that if conditions for manufacturing have to
improve the initiatives required are4
:
 Upgrading skills rapidly
 Making regulations and tax less onerous
 Building infrastructure
 Reforming labour laws and
 Enabling connectivity
1
Assistant Professor, RVS Institute of Management Studies & Computer Application, Karaikal.

2. International Journal of Advanced Scientific Research & Development (IJASRD)
ISSN: 2394 – 8906
www.ijasrd.org, Pp: 18 – 22
Two Day National Seminar on “Make in India: How Get the Manufacturing Going” 19 | P a g e
R.V.S. College of Arts & Science, Karaikal
Labour reforms are required to make the labour more productive and competitive, and
skill development centers are required to tackle the issue of limited availability of skilled
manpower.
Difficulty with existing labour laws
According to World Bank India has one of the world's most rigid labour markets.
Industrialists often cite India’s complex labour rules as one of the major hurdles that have
kept away large-scale private investments in India.
The recent “Ease of Doing Business in India” survey report by KPMG-CII found that
47 per cent of its 120 respondents faced moderate to major difficulty in fulfilling with overall
labour laws. The respondents opined that the government needs to consider proposals for
amendments in labour legislations such as the Industrial Disputes Act, Contract Labour
(Regulation & Abolition) Act, Trade Unions Act and Factories Act.5
Narendra Singh Tomar, Union Minister for Labour and Employment said, a
comprehensive labour reform is on top of the Modi government agenda. He pointed out that
there are more than 100 laws in India that govern the labour sector. Of them 44 are at the
Central level. Some of the archaic laws governing the labour markets in India include
Industrial Disputes Act, 1947; Minimum Wages Act, 1948; Payment of Wages Act, 1936;
Payment of Bonus Act, 1965; Factories Act, 1948; Shops and Establishments Act; Maternity
Benefits Act, 1961; Employees' Compensation Act, 1952; and, Contract Labour (Regulation
& Abolition) Act, 1970. Tomar maintained that many of these regulations impede industrial
growth and hurt the economy as well as workers6
.
The Direction of Reforms
Announcing the stand of government, Modi said, “Ease of business is the greatest
requirement for India's success. Ease of business will be a priority under Make in India.
Labour's problems from labour's point of view too. Shram yogis will be rashtra yogis7
”.
Industry bodies, including Federation of Indian Chambers of Commerce and Industry
(FICCI) and Indian Merchants’ Chamber (IMC) want that the government should not further
delay labour reforms. The following initiatives are proposed for consideration of government.
FICCI’s former chairman of western region SushilJiwarajka argued for the following
changes.
 Increase limit to 300 from 100 employees for granting permission for closure of a
unit.
 'Under the Contract Labour Act, compensation payable on termination be increased
instead of making employees permanent.
 A 14-day notice should be made compulsory for strike/lock out so that there is
adequate time for a negotiated settlement.
Chandrajit Banerjee, Director General of Confederation of Indian Industry (CII) lamented
that simplification of procedures has been a long standing concern for industry8
.
Thus an examination of the demands of the industrialists can be summarized as
 Hire and fire system that permits management to retrench the surplus workers
whenever they feel.

3. International Journal of Advanced Scientific Research & Development (IJASRD)
ISSN: 2394 – 8906
www.ijasrd.org, Pp: 18 – 22
Two Day National Seminar on “Make in India: How Get the Manufacturing Going” 20 | P a g e
R.V.S. College of Arts & Science, Karaikal
 Engagement of temporary and contract labour in place of permanent workers.
 No social security net with regard to the retrenched employees.
 Removal of the burden of higher wages to the contract workers/temporary staffs.
 There should not be any strike, tool down etc. that disturb industrial peace.
 No trade union activities.
The trade unions also demand for reforms in the labour law and they seek protection to
contract labour in respect of job guarantee, bonus, social security etc.
 Protection for the permanent workers and their jobs.
 Workers should be allowed full participation in the management.
 Workers should get bonus if the industry is making profits.
 Contract workers who are working on the permanent nature of work and should be
made permanent. They should be paid salary and other perquisites, pension and bonus
etc.
 Bonus to employees who are out of ceiling of Bonus Act, by changing the formula.
Reform in Inspection system9
Modi announced that the government had decided to end the Inspector Raj and
replace it with a system based on “responsibility and trust.” He observed: “If a person
driving can take care of own safety, why do we expect that person as an industrial employer
will not take care of own and his or her workers as well own safety by maintenance of
boilers, machinery etc.” In support of this view, a Haryana government labour official said
that Haryana already has a system based on self-certification. Large garment units in the state
prefer inspections to show their buyers, that they have good work environment. The PM
launched an online portal for employers to file returns online for compliance with 16 labour
laws. Based on lots drawn by computers, inspection will be conducted in the organizations.
Labour officials in States gave mixed comments on self-certification.
 For -The limited staff in labor departments are overburdened. For example, there are
25 labour inspectors in all of Delhi State and over 1,000 units under each inspector.
As such, it is physically impossible to inspect each every year. Self-certification may
decrease arbitrary inspections and harassment by inspectors as well as false
complaints made by unions and workers.
 Against - Self-certification may lead to industries certifying without complying.
Some states leading reforms
Rajasthan and Madhya Pradesh have already gone ahead with an overhaul of state
labour laws. As per official estimates, in Rajasthan, around 85 per cent of factories employ
less than 100 workers. The reforms introduced by Rajasthan government are10
:
Industrial Disputes Act
1. Firms employing up to 300 workers can retrench or shut shop without government's
permission (against current limit of 100)

4. International Journal of Advanced Scientific Research & Development (IJASRD)
ISSN: 2394 – 8906
www.ijasrd.org, Pp: 18 – 22
Two Day National Seminar on “Make in India: How Get the Manufacturing Going” 21 | P a g e
R.V.S. College of Arts & Science, Karaikal
2. In case of retrenchment, a worker should raise an objection within 3 months (there is
no time limit at present)
3. Trade union can be formed only if it gets 30% of the workers as members (15%
condition currently)
Factories Act
1. The Act will apply to factories with 40 workers, if without electricity; and 20 workers,
if with electricity (the present condition respectively is 20 and 10)
2. Complaints against an employer about violation of this Act would not receive
cognizance by a court without prior written permission from the state government.
3. A provision for compounding of offences has been added.
Contract Labour Act
1. The Act will apply to companies employing more than 50 workers (against 20
currently)
2. The industries will be able to hire more temporary workers without passing on to
them the benefits contract workers are entitled to.
Criticisms - The proposed reforms are criticized as anti-labour and pro-capitalist by
many. Their arguments can be summarized as follows11
.
 Preaching god, practicing devil - The government strategy to dilute the various
Labour Acts reflect interest in neo-liberal policies and shows that the government is
not concerned about the interest of poor and poorest people of the nation. On one
hand government is praising and recognizing the contributions of the working class,
and on the other it is making all its efforts to take away some of the legitimate rights
of the working class in the name of labour reforms.
 Laggard cannot lead - India is yet to ratify ILO's Convention No.87 and 98 on right
to organize and collective bargaining. In fact, Trade Unions are demanding for
ratification of these two Conventions for quite a long time and campaigning for the
same vigorously. It has to fulfill this, to be globally recognized as an enlightened
nation.
 Legitimizing exploitation - The current reforms are an initiation to legitimately
recognize the illegal activities in the factories which are growing gradually under the
protective measure of the government. The government has legalized the exploitation
of working class by its reformist stance.
Protests
In Maharashtra, the Shiv Sena’s labourwing the Bharatiya Kamgar Sena (BKS) has
threatened to launch an agitation. Suryakant Mahadik, BKS Chairman told Business
Standard: “'The Modi-led government’s Make in India or Chief Minister Devendra Fadnavis”
call for Make in Maharashtra cannot succeed without active support of the labour community.
Sachin Ahir, President of Rashtriya Mill Mazdoor Sangh insisted that the government should
not work in haste but take all the stake holders into confidence12
. INTUC feels that problem

5. International Journal of Advanced Scientific Research & Development (IJASRD)
ISSN: 2394 – 8906
www.ijasrd.org, Pp: 18 – 22
Two Day National Seminar on “Make in India: How Get the Manufacturing Going” 22 | P a g e
R.V.S. College of Arts & Science, Karaikal
of industry should be shared equally by the workers and the management. Lack of
cooperation from workers is due to the fact that there are a number of industries which are
not paying the normal regular wages and which were closed down without paying legal
liabilities to the workers. There must be some of understanding between the management
and the workers/trade union about the labour reforms and government should carry reforms
with support of stakeholders.
Reference
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[4] BS Reporter, Eco Survey pitches tax reforms & skill upgrade for 'Make in India, February
28, 2015.
[5] Surabhi, Make in India brings labour reforms back on agenda, The Financial Express,
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[6] Labour reforms for 'Make in India' - Inclusion http://inclusion.skoch.in/story/308/labour-
reforms-for-make-in-india-
[7] AnumehaYadaav, Modi Rolls out labour reforms, The Hindu, October 17, 2014.
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reforms in Maharashtra, Business Standard, February 25, 2015.
[9]] Our Bureu, PM unveils labour reforms to make it easy to do business...
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2014
[10] SomeshJha, President Okays Rajasthan labour reforms: Firms with 300 workers need no
govt nod to sack, Business Standard, November 8, 2014.
[11] T.K. Rajalakshmi, Labour under attack, Front Line, November 14, 2014.
[12] Sanjay Jog, BJP-led govt faces challenge to convince Shiv Sena, BMS to push labour
reforms in Maharashtra, Business Standard, February 25, 2015.