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Labour Law Relaxations: Ease of doing business

Indian Labour laws have since long been considered archaic, bureaucratic & an impediment to rapid industrial investment in India.

Indian Labour laws have since long been considered archaic, bureaucratic and seen as an impediment to rapid industrial investment in India. The circumstances in which these laws were framed (long subjugation to British Rule, bonded labour practices and exploitation in 18th & 19th centuries) justified the structure many decades ago, but not in the current times.

While the world faces the economic consequences of the current situation, India has made a very strategic move by relaxing its labour laws, state by state, as an emergency measure in order to give a much-required boost to the economy. This relaxation has brought about a higher rate of availability of land, flexibility in labour laws which will be a highly attractive option for the global markets to invest in India, an ease in the flexibility of the supply chain movement and a hassle-free economy where the emphasis is primarily laid on growth and greater investment.

The present relaxations shall not only create ease of business but will help in increased production.

Government Implemented Changes:

For the state governments, easing the labour laws was their best option available considering the worldwide economic slowdown and it was clearly the right step at the right time. The Government has been quick to realize that there was the need for higher employment, the creation of demand for products and services thus narrowing the demand-supply gap. A liberalized labour regimen will not only fill in the large gaps in the demand-supply chain but will also create new job opportunities via the greater investment by the foreign markets looking to expand.

The International Labour Organisation has responded to the current changes within the labour industry by the state governments positively.

The most drastic change has been implemented by the state of Uttar Pradesh. It has made defunct all laws including the Minimum Wages Act. The laws that are relaxed include those relating to the settling of industrial disputes, occupational safety, health and working conditions of workers as well as those pertaining to trade unions, contract workers and migrant labourers for the next three years.

Meanwhile, in Rajasthan, the government has increased the threshold for layoffs to 300, from the previous limit of 100. Moreover, the membership threshold for trade unions has been increased from 15 per cent to 30 per cent as well. Working hours have also been raised to 12 hours per day from the earlier eight. Other states, such as Punjab, Himachal Pradesh and Gujarat have also increased the working hours in keeping with these state-wise changes.

This current Covid crisis has resulted in worker shortages and therefore, it has been necessitated to have people working extra hours till the issue of workers is resolved. Therefore, overtime working hours is one of the areas being looked at.

In the state of Kerala, it will be possible to get a new industrial license within a week of filing the application and hence slowly, every state will follow suit.

The Uttar Pradesh Cabinet followed the same by approving an ordinance to relax certain aspects of the existing labour laws. The Madhya Pradesh cabinet too has promulgated an ordinance.

Further, Gujarat, Haryana, Uttarakhand, Himachal Pradesh, Assam, Goa, Uttar Pradesh, and Madhya Pradesh have notified these relaxations in labour laws through their rules.

Benefits derived:

Labour policies are devised to maintain economic development, social justice, industrial harmony, and the welfare of labour within the nation as well as to incite greater investments from investors from all over the world. To promote these activities, various reforms and initiatives have been brought upon by the government throughout the years. The reforms that have been implemented by several states are given below, with a primary focus on Uttar Pradesh and Madhya Pradesh.

The ordinance in the state of Uttar Pradesh and the relaxation norms suggested in the state of Madhya Pradesh, as mentioned above, shall prove to be very helpful in ensuring that the industry adapts and rises to the new economic realities.

It has been a tiresome procedure, but the government is looking to push forth several crucial bills pertaining to industrial relations which allows companies to hire workers on a fixed-term contract for any duration as specified by the respective industry. This legislation which shall be tabled in the Parliament’s winter session shall not change any important laws on hiring and firing, but instead, allow various flexibilities for the state governments to relax certain conditions through an executive order.

The current changes have been implemented with a view to streamlining forty-four different labour laws into four separate codes which is simply another step towards formalizing the $2.7 trillion economies.

This reform can be included amongst the other reforms recently announced by the government, in order to boost investment which includes the aggressive cuts in corporate taxes, relaxation of foreign investor rules along what is now known as the largest privatization drive in more than a decade.

The biggest advantage of these reforms is that new companies will be willing to come to India because of lower labour disputes, easier to set up businesses and winding up plants.

Strategic Economic Boost:

These reforms have made it possible for the world to view India as a better option than China for a shift in the manufacturing business. This is a golden opportunity for the country to rebrand itself as the most investor-friendly nation and the manufacturing hub, taking over from China, previously.

The Prime Minister’s cabinet has already approved the Industrial Relations Code Bill on Wednesday, which has further empowered the state governments to change the ceiling on the employee count for a company to retrench its workers without government approval. Even though the present upper threshold limit of 100 workers has not been changed, this bill has allowed the government to amend this number without seeking any prior approval from the Parliament.


With the fear of a major economic downslide looming over lawmakers, the government has sought to introduce reforms to keep the economy from spiraling out of control and boost investments and growth despite the current situation all over the world. The relaxations brought about by the government not only provide a huge window of opportunity to the Indian and foreign investors but also create a plethora of options for growth, investment increase and flexibility in business within the nation.

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