Economic Survey 2026: Labour codes to drive jobs, female participation, and 1.25% GDP Boost

The government’s step to consolidate 29 central laws into four comprehensive Labour Codes would simplify compliance: Economic Survey

• India's labor codes aim to boost formal jobs and worker security, especially for women.
• Employment rose by 16.83 crore from 2017-18 to 2023-24, driven by reforms
• Flexible, market-responsive training is crucial for inclusive growth.

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The employment and skilling ecosystem In India is being reshaped by demographic shifts, technological change, and evolving industry needs, including the expansion of gig and platform work, the Economic Survey 2025-26 said.

"Amid these developments, the effective implementation of Labour Codes would play a key role in supporting formal employment and improving security for women and gig workers. As definitions of work continue to evolve, dynamic labour policy and flexible regulatory frameworks would ensure employment expansion, worker security and well-being," the Survey noted.

The central government in November notified the four labour codes, which subsumed in it 29 former labour laws. The four codes are: Code of Wages, 2019; The Social Security Code, 2020; The Occupational Safety, Health, and Working Conditions Code, 2020; and The Industrial Relations Code, 2020.

The new codes mandate universal minimum wages, ensures gender equality in pay and hiring, standardises definition of wages, mandates overtime benefits, stipulates social security for gig and platform workers, improves dispute resolution mechanism, decriminalises minor offences, and reduces compliance costs.

"India has recorded significant employment growth in recent years, supported by structural reforms, tax rationalisation, and a sustained focus on skill development. Measures such as deregulation, GST 2.0, and labour reforms implemented by states have contributed to rising labour force participation and employment growth across industry and services," the Survey said.

According to the Ministry of Labour & Employment, employment in India stood at 64.33 crore in 2023-24 compared to 47.5 crore in 2017-18: a net addition of 16.83 crore jobs over six years.

The Survey said that India's workforce of over 56 crore holds tremendous potential for its economic growth. “Labour market indicators point to a steady job market, with improving labour force participation, declining unemployment, and robust job creation in both the organised and unorganised sectors,” it stated.

On the skills front, the Survey said that flexible vocational pathways starting at the school level will be required, going forward. "Recent skilling initiatives reflect a shift towards a more modular and labour-market-responsive framework, helping reduce skill mismatches and support employment generation. Targeted skilling for women and youth in high-productivity sectors will be critical for inclusive outcomes," it noted.

"Economics of labour codes"

Amid external headwinds, India’s push for global competitiveness hinges on reforms that simplify business processes and labour regulations, the Survey said.

“The government’s step to consolidate 29 central laws into four comprehensive Labour Codes would simplify compliance, update outdated provisions, and create a streamlined, effective framework that enhances ease of doing business while protecting workers’ rights and welfare,” it said.

It says that these reforms address key challenges, such as income volatility and benefit gaps, potentially contributing 1.25 per cent to GDP by 2029-30 through enhanced worker welfare and business agility. Citing SBI report, the Survey says that the implementation of the ‘Code on Wages’ would increase the disposable income of workers and has the potential to boost consumption by approximately ₹75,000 crore, in turn enhancing economic growth.

“Thus, the newly notified Labour Codes hold particular promise for boosting female LFPR, enhancing employment and formalisation, spurring inclusive growth and productivity amid India's demographic dividend,” the Survey said.

On female participation in workforce, the Survey said that research shows that fewer restrictions correlate with a lower female unemployment rate, higher Female Labour Force Participation Rate (FLFPR), more women in management roles, and a smaller wage gap compared to states with stricter restrictions on women's labour.

“Further, removing legal restrictions on women’s employment benefits women and economies. Allowing women to work at night is associated with a higher likelihood of women becoming top managers,” the Survey said. The new Labour Codes enable women to work across all establishments, including those with night shifts, with the necessary safety measures in place.

Need for 'upskilling'

The central challenge in India’s skilling landscape is not the absence of training effort but the weak translation of training into durable labour-market value, the Survey said.

"Making skilling truly work requires a shift in both mindset and mechanics: from producing trained persons to producing workers whose skills are valued, verified and retained," it noted.

For the same, the Survey reckons that the first step is to re-anchor incentives around outcomes and retention. Second is to treat employer linkage as a core design feature rather than an add-on.

Third is – the local labour market intelligence must inform course portfolios. "The failure of many skilling efforts lies less in the quality of training than in an inappropriate mix of courses relative to district-level demand," says the Survey.

Fourth, placement must be professionalised as a service. "Counselling that clarifies aptitude, wage expectations and likely job locations is essential to avoid disillusionment and premature quitting," it noted.

And fifth, the Survey says -- the credibility of the entire enterprise depends on integrity in attendance, assessment and verification. 'When ghost centres, inflated numbers or weak assessments creep in, they erode trust among employers, trainees and the public, and crowd out more sincere providers. Strong digital attendance with audit trails, third-party assessment integrity checks and transparent grievance redress processes are not administrative niceties; they are foundational to establishing the signal value of a certificate," it added.