Reform in Practice: Sumita Dawra (Former Secretary, MoLE) on India’s New Labour Codes

What is one area of regulation in India that should be deregulated?

India has aspirations of being Viksit Bharat. By 2047, we aspire to be a $32 trillion-plus economy. At the same time, we are also the fastest-growing major economy in the world today, and the latest IMF projections bear that out.  As we grow with that kind of a potential and that kind of an aspiration, there is a need for a lot of reforms. Many reforms have happened, like in GST, and the recent most reform in GST. If you look only at the recent reforms, then the employment-linked incentive has been approved by the cabinet.

Similarly, the skilling centers of excellence, the infrastructure investments, the reforms in logistics, a lot of  reforms have been going on. Also, in the renewable energy sphere, a lot of policies or electric vehicles, and a lot of growth drivers are there in the economy. You look at the growth drivers in terms of services sector, the FinTech, the data and technology, or you look at e-commerce, you look at manufacturing, the Make in India, and the PLI together have created many more  good examples.

If you see electronics, or you see food processing, or you see automobiles, or you see pharmaceuticals, medical devices, and et cetera. Now, in these circumstances, with this kind of potential and the geopolitical aspects being in the flux, we also need to step up on the requirements of the reform and policy process. In that context,  the recent most labor reforms, historic, since independence, the most historic progressive labor reforms in the country, I think this is the biggest reform we were waiting for, much-awaited, very impactful. A lot depends on the implementation now.

The notification itself is a big, bold step by the government, very progressive. It's going to impact labor welfare, improve labor productivity, put more purchasing  power in the hands of the labor. At the same time, it's going to promote ease of doing business, reduce compliance burden tremendously. It's going to bring in technology and administrative operations of the labor laws. It's definitely going to be more attractive to investors, and more attractive for global supply chains.

Also, as we are doing FTAs with different countries, the EU being one example where the FTA is going on, these aspects of social security  for the labor welfare, is going to be very important from the ESG point of view for the firms, the environment, social and governance responsibilities. The global investor sentiment is definitely going to go up with this reform. Having said that, at the same time, there's an ongoing need for more reforms to happen. One would expect that certain states and certain sectors of the economy, certain states in India and certain sectors of the economy,  would grow faster than the average for us to be able to deliver on a Viksit Bharat with 10% plus growth rate for the country.

What would successful reform look like, and how do we get there?

This is in terms of the labor laws. The labor codes having been notified, and I said it's a very bold decision of the government. It's called the mother of all reforms, famously  by an economist. I would agree there. How do we ensure that we get the outcomes desired? There are many stakeholders to implementing the labor reforms. The center and the states are coming out, going to pre-publish their rules again. There'll be stakeholder consultations, and then the final notification.

Then there's going to be a lot of other related activity which will happen in terms of making sure that they're operationalized in a harmonious, standardized manner,  and with the involvement of the workers, the states, and the concerned stakeholders. Also, technology has to be enabled. Already, we have single window approvals, but those have to be strengthened. They have to be streamlined so that we have a genuine single window, whether we talk about Shram Suvidha or we talk about Samadhan, which is for taking grievances of the labor force.

Technology and  the commitment of the stakeholders is very important, including that of the employers, who also have to prepare for a number of things as the codes roll out, including being digitally compliant with the requirements. They have to report the compliance on any violation also digitally. They have to prepare for wages, the changes in the minimum wages, and the timely payments, so on and so forth. All these requirements are there, including the trade unions have a very important role to play  in terms of outreach to the workforce and making them aware of the minimum wages, the timely payment, and so on and so forth.

The social security coverage. Our own organizations have to also prepare for that rollout. All this coming together, converging, and with a lot of persistence, I'm sure as we go forward over the next couple of months and then couple of years, you will see the short-term and the longer-term outputs and outcomes being delivered.