State governments have passed an ordinance to attract manufacturers and private investments in their states by removing hurdles as labour laws.
UP government plays a masterstroke, indeed he knows how to turn a good crisis in his favour.
What is good crisis?
Every economic crisis comes with an opportunity the one who understands and quickly acts turns the bane into a boon. The Uttar Pradesh and Madhya Pradesh government are the first to understand and grab the opportunity.
The Uttar Pradesh government has approved an ordinance exempting businesses from the purview of almost all labour laws for the next three years in a bid to provide a fillip to investments affected by the novel coronavirus in the state.
People from states of Bihar, UP, Rajasthan, West-Bengal,Jharkhand etc. on a daily basis migrate to bigger cities in search of employment.
This pandemic has clearly shown the huge population of labourers residing in other states. So when the states like UP and Bihar has the labour force why not bringing in industries to their own land?
Think once if IT companies and other white-collar industries have their offices in Bihar, UP, Jharkhand, Chattisgarh, Madhya Pradesh would you ever travel to states leaving behind your friends and family?
Similarly, these states have so fewer jobs whether white or blue collared jobs that the labours are left with no options. These states since a long time have become labour exporting machinery.
The new labour reforms will ease and help to do business in these states. The reform is aimed to stimulate and promote industrial activities.
Do you remember, when we were children, we use to write that
India is an agricultural country. 63% of Indians are farmers.
In this 20-25 years, the situation has changed now we are not anymore dependent on the farming industry. If you see the farming industry only contributes 15% of India’s GDP.
As this pandemic has forced people to sit down at their homes leaving them jobless and income loss now we have to create jobs. Again, we cannot go back to the days when there were 7 people in a family with only one earning member.
If I take an example, Bihar used to have industries earlier, not in huge scale but examples like Rohtas industries. Even now India has 50 industrial areas which include IT, electronics, textile, leather, agriculture as its priority but even the number is very less.
Kanpur again a city which was an industrial hub once has turned out to be a in shambles.
Now with the new labour reform, the obsolete glory can return again. The table can turn and it’s not just mandatory and beneficial for labours even white collared job opportunities will open. So when the source of income and employment opportunities will increase it will bring more opportunities in the education industry, business sector and many more.
India can see this as a chance to start many factories rather than depending on other countries. I will take an example of China here, as I regularly discuss with some Chinese friends and students, they tell me how their country helps them to open a business hence you will find every 3rd person of China is either a trader, supplier or manufacturer. The government supports the hard workers and if our country starts to produce products on their own it can give a huge competition to China.
India’s archaic labour law is the key reason why we are not a successful exporter.
Many countries give freedom to employers to hire and lay-off workers based on demands and dynamics.
Developed countries protect their workers through their policies.
On the other hand, India does the opposite, they protect jobs, not employees. Thus in India, we will find many employees working in off-roll and contractual basis jobs but then India has one of the best labour laws. But what is the point of having such labour laws when we can’t take advantage out of it.
In India, entrepreneurs must have a licence for starting a business and another license for shutting down. So any factory who have more than 99 employees you have to go to the labour department to take permission.
So many such investors and entrepreneurs moved to white-collar industries or service industries but then the geographic location and nature of scope become limited because business is always risky.
Many renowned Indian companies have registered multiple sisters concerning companies just to safeguard themselves and saving themselves from giving gratuity and provident funds.
Such stringent laws made for welfare of labour have actually proved to be counter-productive to the labours themselves. Employers deliberately choose not to scale to skip those laws and when you so not scale, you cannot compete with likes of China anymore. This phenomenon has been rightly described as “dwarfism” by the incumbent Chief Economic advisor of India Mr Krishnamurthy Subramanian.
The effect of downward economy creates a chain reaction. Take example of a fashion brand. No retail sale means no payments to small scale designers, job losses of direct employees of the brand. Tailors not required, logistics not required. Showroom cut down. The people indirectly employed by the direct employees of the brand like laundry, maids, security guards, restaurants, shopping mall, franchise owners, e-commerce company, payment processing company and their employees sees a loss in income too and hence the economy falls to recession.
The time is ripe to change the outlook of these labour laws. As the Labour market update 2016, 82% of the Indian workforce is employed in unorganised sectors.
With such humungous amount of workforce in unorganised sector, there is a huge potential to kick start the economic fate of India with right policies creating many organized sector and plethora of white and blue collared jobs. There is a reason special economic zone (SEZ’s) are a huge success and time has come to reap the benefits at large scale by proper implementation at large scale level.
If India has to compete in Global manufacturing it will also have to change it land laws accordingly. While Modi gov. has done a commendable job in bringing India in forefront of Ease of doing business index, it has a long way to go, along with that it has to attract private investment which is holding back because of such labour laws.
Nobody will invest a huge amount to start a business only to be at the mercy a government inspector and labour unions.