The Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman tabled the Economic Survey 2018-19 in Parliament today.

Deregulating labour law restrictions can create significantly more jobs, as seen by the recent changes in Rajasthan when compared to the rest of the states.  The Survey states no major labour reforms were initiated by the states from 2007 to 2014.  In 2014, Rajasthan was the first State that introduced labour reforms in the major Acts.  Thereafter, many States followed Rajasthan.  A comparison between the indicators for labour, capital and productivity of manufacturing firms makes it clear that flexibility labour laws creates a more conducive environment for growth of industry and employment generation.  The States which are rigid in respect of their labour laws are suffering in all dimensions and are unable to create enough employment and cannot attract adequate capital into their States.

On average, plants in labour-intensive industries and in States that have transited towards more flexible markets are 25.4 per cent more productive than their counterparts in States which continue to have labour rigidities.

Size based Limitations posed by Key Labour Legislations

S. No.	Labour Acts	Applicability of Establishments
1	Industrial Disputes Act, 1947, Chapter V relating to strikes, lockouts, retrenchment, layoff	Employing 100 or more workers
2	Trade Union Act, 2001 – Registration of trade unions	Membership of 10 per cent or 100 workmen whichever is less
3	Industrial Employment (Standing Orders) Act, 1946	100 or more workmen
4	Factories Act, 1948	10 or more workers with power and 20 or more workers without power
5	Contract Labour (Regulation & Abolition) Act, 1970	20 or more workers engaged as contract labour
6	The Minimum Wages Act, 1948	Employment in the schedule having more than 1000 workers in the State
7	Employees’ State Insurance Act, 1948 – ESI Scheme	10 or more workers and employees monthly wage does not exceed ₹ 21000/-
8	Employees’ Provident Fund & Miscellaneous Provisions Act, 1952	20 or more workers

 

Flexible labour laws linked to higher manufacturing productivity and employment generation across states after state-level reforms. Deregulation of labour law restrictions is presented as a driver of industrial growth and employment, with States that adopted more flexible labour-market rules achieving higher manufacturing productivity and attracting capital. The document highlights that size-based applicability thresholds in major labour statutes-covering industrial disputes, trade union registration, standing orders, factories regulation, contract labour, minimum wages coverage, social security schemes and provident fund applicability-determine when regulatory obligations apply and thus shape the regulatory burden on establishments.