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Labour Regulations And Its Effects In India

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India is a labour-intensive country, with one of the largest and most skilled labour forces in the world. India is playing an important role in global manufacturing industries and the labourers are an integral part of these industries. With an ideology of ‘Vocal For Local‘, the Govt. of India (GOI) is promoting the local industries of India to multiply their production. Also through the labour regulation policies, the government is making sure that workers should not be exploited anywhere in the race of manufacturing. Labour regulations are quite important to make sure a smooth and hassle-free working Indian manufacturing industry. 

According to the data of the year 2017, India ranks second in terms of the labour force in the world with a labour force of 521,900,000.

What do you mean by Labour Regulations?

Labour regulation or labour laws are the laws enacted by the government i.e. to be followed by both the employee and the employer. Labour regulation helps in protecting labour rights and establishing a relationship between the employer and the trade union.

Labour Regulation in India:

To regulate the relationship between the employers and their workmen the Trade Dispute Act, 1929 (Act 7 of 1929) was introduced and this act is one of the earliest Indian acts in this context. In India, the labours laws are framed by both the state and the central government, also sometimes which results in an overlap in some laws. The rules and regulations for the labourers imposed in India have proved to be very difficult for the business but it has been successful in protecting the labour rights. 

In the financial year, 2020-2021 GOI merged 29 central government laws similar to state government laws into 4 basic labour codes. This is step was initiated to simplify the complex labour codes, modernize the laws, and promote the ease of doing business in India, alongside increasing the manufacturing capacities of Indian industries.

Currently, India follows 4 labour codes and which are the industrial relation code 2020, the code on social security 2020, the code on wages, 2019, and the occupational safety work and health code, 2020. All these labour codes aimed to improve the health and working conditions in the industry and protect the social rights of labourers.

The Contract Labour (Regulation and Abolition) Act, 1970:

Contract labour simply means labour hired for a firm via a contractor, contractual labours are usually hired for a specific period of time and their employment is not stable. Often it is been observed that these contractual labours are exploited by the contractors on the basis of wages and working conditions. Thus in 1970, the GOI came up with the contractual labour (Regulation and Abolition) Act under which contractual labour was limited to certain government regulations. Also, GOI banned contractual labour in many sectors to prevent the exploitation of workers. 

The act is applicable to every firm where 20 or more labourers are hired on contract. This law does not apply to those institutions where work is done intermittently, for example, if any firm contractual labour is hired only for 120 days of work then this act doesn’t apply there. This act doesn’t apply to any person who is appointed at a managerial or advisor level.

Labour Regulations affect the Manufacturing in Following Ways:

  • Labours in India are free to form a union and carry out a strike thus shutting down manufacturing for that period resulting in less production.
  • Under IDA (Industrial Dispute Act), any company with a worker strength of more than 100 people needs to seek government permission to terminate any worker. Also in many states, the employer needs to seek the government’s permission to reassign the task to any worker. in such cases, permissions are hardly granted. This kind of activity promotes disguised unemployment and limits the manufacturing capacity of industries.
  • Due to these regulations, many industries are shifting towards contractual labour but the Regulation and Abolition Act 1970 prohibits firms from employing contractual labour for certain tasks.
  • The government has fixed the working hours of labourers under the labour code thus, it limits the working capacity of workers and at the same time reduces the manufacturing capacities of industries.

With ease in labour regulations countries like Bangladesh, Vietnam and China have also outperformed India in the textile manufacturing and export industry.

Some of the Major Advantages of Labour Regulations:

  • Labour regulations restrict employers to exploit labourers by making them work for extra hours.
  • It also allows labour to get access to minimum fixed wages decided by the government.
  • The labour regulations protect the social rights of labours and provide them with equal opportunities.
  • Under labour regulation, it is the duty of the employer to maintain working premises safe and hygienic and to ensure the safety of workers.
  • The labour regulations also provide labours with access to medical and life insurance from the employer’s end. Also, they get provident funds from their employers.
  • Labour regulation provides rights to labours to form a union of more than 15 members and to raise their issues in front of the employer.

Some of the Major Drawbacks of Labour Regulations:

  • Labours regulations limit the manufacturing capacity of the industry by limiting the working hours of labour. Also, it indirectly limits the earning capacity of workers which they can get by working overtime.
  • For certain tasks, contractual labour has been banned by the government thus taking more time to complete a task and reducing the manufacturing speed.
  • In many cases, it has been observed that labour regulations result in reduced production thus creating fewer employment opportunities for the labours.
  • Under labour regulation, a firm needs to seek government permission for reassigning work to labour and in many other cases. Thus creating it quite hectic for a firm to regulate the manufacturing.

The GOI Initiatives for the Social Protection of Labour:

The GOI has launched many initiatives to protect the social rights of labourers and some of these schemes are mentioned below. 

  • E-Shram card: The E-Shram portal was launched by the GOi in August 2021 that provides E-Shram cards to the labourers and people working in unorganized sectors. The main purpose of issuing this card was to provide financial security to the poor labourers. In case of accidental death or disablement, the worker or his family gets an insurance cover of Rs 2,00,000.
  • Employees’ State Insurance Corporation Portal (ESIC): The ministry of labour and employment formed the Employees’ State Insurance Corporation (ESIC) as its statutory body. As per the Employees State Insurance Act 1948, any worker who is working under the wages of Rs 21,000/month can register himself for medical insurance under the ESI act.

Need for Amendment in Labour Regulations:

There is a need for amendments to labour regulations in India so that they can mutually benefit both the employee and employer. The GOI should provide ease in the reallocation of tasks to the labourers and allow them to work for extra time. However, the minimum wages for overtime should be fixed by the government. Also, the laws related to contractual labour must more flexible so that they can allow an employer to hire contractual labour to boost manufacturing.

India has one of the highest and the cheapest labour force in the world, but still, India has proved unable to compete in the global manufacturing industry. The main reason behind it is the labour regulation that limits the capabilities of the Indian manufacturing industry and is unable to get productivity from the labours. India can only improve its ranking in the global manufacturing industry only if ease is provided in labour regulations.

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Last Updated : 06 Jun, 2022
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