Labour Codes: Well begun but left half done, the delay is stalling India’s economic transformation

Despite the promising intent behind the labour codes, their potential remains unrealised.

In the year 2020, India took a bold step in simplifying its complex labour laws by consolidating 44 statutes into four comprehensive labour codes. The move was hailed as a game-changer, promising to streamline regulations, foster ease of doing business, and pave the way for formal job creation. However, despite this monumental reform, the anticipated benefits are yet to materialise due to the delay in making the rules implementable. This delay not only hampers formal job creation but also obstructs equitable improvement in per capita income, economic growth, and expansion.

The four labour codes – Code on Wages, Industrial Relations Code, Occupational Safety, Health and Working Conditions Code, and Code on Social Security – were envisioned as a catalyst for transformative change. They aimed to simplify compliance, enhance flexibility, and promote a conducive environment for businesses to thrive. The Code on Wages was designed to rationalise and simplify wage structures, bringing transparency and consistency. The Industrial Relations Code sought to streamline the complex web of industrial relations, making it easier for employers and employees to engage in a productive dialogue. The Occupational Safety, Health and Working Conditions Code aimed at ensuring the well-being of workers, and the Code on Social Security aimed at expanding the social security net.

Despite the promising intent behind the labour codes, their potential remains unrealised due to the delay in formulating and notifying the rules necessary for their implementation. This bottleneck has severe repercussions for the Indian economy.

Impact on Formal Job Creation:
The delay in implementing the labour codes directly hampers formal job creation. Businesses, uncertain about the regulatory landscape, are hesitant to expand their workforce. The ambiguity surrounding compliance and regulations creates an environment of caution rather than confidence, thwarting the much-needed boost to employment.
Drawing reference from various insights and studies conducted internationally as well as within India it is a foregone conclusion that timely implementation of labour reforms is crucial for creating a conducive environment for formal job creation.

Equitable Improvement in Per Capita Income and Overall Wages:
Formal job creation is not just about quantity; it's also about quality. The labour codes were envisioned to create a balance between the interests of employers and employees, fostering an environment where both can thrive. The delay in implementation perpetuates an uneven playing field, hindering the equitable improvement of per capita income.
Labour reforms are the precursor to ensure equitable distribution of wealth and overall improvement of the wages and per capita income as has been the case in China.

Stalling Economic Growth and Expansion:
The delayed implementation of the labour codes acts as a roadblock to India's economic growth and expansion. A streamlined regulatory framework is essential for attracting investments, both domestic and foreign. Investors seek certainty and stability, attributes undermined by the current regulatory ambiguity.
Several Industry bodies within India including Indian Staffing Federation, CII, FICCI has consistently advocated for swift implementation of the labour codes to spur economic growth.

Global Competitiveness:
In an increasingly interconnected world, India's ability to compete globally is contingent on the agility of its regulatory framework. Delayed implementation of the labour codes places India at a disadvantage, hindering its competitiveness on the global stage.
While India has made progress over the years in Ease of Doing Business (complexity of labour laws being a key deterrent) the jury is still out – in the absence of any concrete implementation of the new codes – on India’s attractiveness on EODB.

To unlock the full potential of the labour codes and propel India into a new era of economic prosperity, it is imperative to expedite the formulation and notification of the rules governing their implementation. The government, industry stakeholders, and civil society must join forces to create a groundswell of demand for immediate action.

Government Accountability:
Citizens must hold the government accountable for the timely notification of rules. Transparency in the rule-making process, coupled with clear timelines, will instil confidence in businesses and investors.
The NITI Aayog's insights on regulatory reforms stress the importance of proactive government measures to create a business-friendly environment.

Industry Advocacy:
Industry associations and chambers of commerce should actively engage with the government to express the urgency of implementing the labour codes. A collaborative approach will ensure that the rules are pragmatic, address industry concerns, and align with the overarching goal of economic growth.
Various Industry Associations and Sectoral Trade Groups have been emphasising the role of industry collaboration in shaping policy outcomes and must continue to push ahead on the same.

Public Awareness:
Creating awareness among the public about the economic benefits of timely labour code implementation is crucial. A well-informed citizenry can exert pressure on policymakers to prioritise this issue and expedite the necessary measures.
Reiterative and iterative narratives must be maintained by leading publications and media houses should play a critical role in building this public awareness in shaping policy discourse.

In conclusion, the delay in implementing the rules governing the four labour codes is a stumbling block that India cannot afford. Swift and decisive action is needed to unleash the full potential of these reforms, fostering formal job creation, equitable improvement in per capita income, and robust economic growth. The time to act is now, and it is incumbent upon all stakeholders to push for the immediate and effective implementation of the labour codes for the benefit of the nation's economic future.

Considerable energy, time, and foresight has gone into compressing the 44 labour laws into the four concise buckets by multiple stakeholders led by the Union Ministry of Labour and Employment, various industry bodies, trade union bodies, and Public Policy experts over several years and to see all of that being on hold – is akin to putting India’s future on hold. Let's make amends and quick.

Rituparna Chakraborty is Co-Founder, TeamLease Services Ltd and Independent Director. Views are personal, and do not represent the stance of this publication.