Journal of Asian Public Policy

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Withering regulation? An interim review of Modi

government’s labour reforms

Suresh T. Gopalan

To cite this article: Suresh T. Gopalan (2016) Withering regulation? An interim review
of Modi government’s labour reforms, Journal of Asian Public Policy, 9:2, 170-184, DOI:
10.1080/17516234.2016.1165333

To link to this article: http://dx.doi.org/10.1080/17516234.2016.1165333

Published online: 07 Apr 2016.

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 JOURNAL OF ASIAN PUBLIC POLICY, 2016
VOL. 9, NO. 2, 170–184
http://dx.doi.org/10.1080/17516234.2016.1165333

Withering regulation? An interim review of Modi

government’s labour reforms
Suresh T. Gopalan
Centre for Political Studies, School of Social Sciences, Jawaharlal Nehru University, New Delhi, India

ABSTRACT KEYWORDS
Labour reforms seem to be one of the arenas where the Modi Modi government; labour
government has brought about marked policy interventions in a reforms; labour code on
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relatively shorter span of 1 year. Behind this sense of urgency, it is industrial relations; Factories
plausible to decipher a new rational calculation where labour ques- Act; labour regulation;
workers rights; trade unions
tion hold vector to other larger goals of the present leadership. This
paper aims to survey the labour reforms initiated by the Modi gov-
ernment since May 2014 and presents an interim review. I examine
two draft legislations at the bill stage, the labour code on industrial
relations and the Factories Act amendment bill, to explain how the
reforms obliquely wither the statutory regulations and also why the
government approach is premised on the view that the regulation is
patently flawed The paper tries to elaborate how the ideational
origins as well as the institutional inclination of the BJP government
tend to subordinate labour question to the larger economic agenda.

Introduction
History of policy reforms in India has often been reviled for their proverbially languid
strides. The liberal critics have always resented about the long intervals that it takes
before an existing policy norm rooted in planning era can be reformed. In subject, such
as labour where the norm making and social enforcement are delegated to multiple
agencies both at the federal and the state levels, it becomes all the more difficult to
induce fresh policy departures. Since the advent of economic reforms in the early 1990s,
labour question has remained a contentious subject. While the earlier governments
inclined to concede certain incremental reforms within the framework of existing
regulation, the industry associations resented its continuation and demanded ever
more leverage for labour market flexibilities. The system of protective regulation was
most resolutely defended by the Trade Unions and they resisted any interference that
could weaken the labour rights that are fast shrinking in the new economy. In between
these rather entrenched policy articulations entered the labour reforms debates in
public domain, which was essentially an advocacy discourse clamouring for flexibilities.
Until the 2014 general elections, this situation looked more like stable configuration of

CONTACT Suresh T. Gopalan tgsuresh@mail.jnu.ac.in Centre for Political Studies, School of Social Sciences,
Jawaharlal Nehru University, New Delhi, 110067, India
© 2016 Informa UK Limited, trading as Taylor & Francis Group
 JOURNAL OF ASIAN PUBLIC POLICY 171

relations not easily amenable for substantive changes. But the Modi government’s 1 year
in office has brought about fundamental reorientation in the labour policy eroding the
state – labour social contract that India had crafted during the planning era.
This paper aims to survey the labour reforms initiated by the Modi government
since May 2014 and presents an interim review. The main concern explored here is to
identify policy instruments representative of the new orientation being introduced. For
that purpose, I will examine the key legislations in bill stages intended for reforming the
existing policy framework and that chart out a new direction for the future. Since the
focus is the domain of labour reforms where substantive policy articulations are by now
discernible, the scope of the paper is confined to those relevant legislations. Therefore,
an exhaustive coverage of all the government initiatives on labour and employment is
not attempted here. The paper is organized into four sections, beginning with brief
inquiry tracing the political origins of Bharatiya Janata Party’s (BJP) labour policy. How
the government moved decisively to labour reforms is outlined in the second section.
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The third section examines the key legislations including the Labour Code on Industrial
Relations Bill 2014 and Factories Act (1948) Amendment Bill 2014. What is attempted
here is an exposition of these legislations from the perspective of labour. The concluding
section will present an interim review where I will try to place the reforms in the broader
perspective of democracy and redistribution.

Political origins of BJP’s labour policy

It might appear as a fleeting interregnum, but in 19 months since May 2014, the
constitutive elements of India’s earlier labour policy have been marginalized and a
whole new set of norms and practices are introduced. Given India’s complicated govern-
ance legacy known for its interminable consultative process and therefore the delays,
this can well be touted as a remarkable record. The Ministry of Labour and Employment
(MoLE) under Bandaru Dattatreya has created a dense field of policy articulations
comprising of administrative directives, draft legislations and public comments signal-
ling the new directions in the labour policy. The shift has already found expressions in
the institutional practices of the Labour Department both at the federal level as well as
in some of the BJP ruled provinces such as Rajasthan and Maharashtra. The Rajasthan
assembly has passed three amendment bills relating to the Industrial Disputes Act
(1947), Contract Labour Act (1970) and the Factories Act (1947). One of the contentious
changes introduced through these is to allow companies employing up to 300 workers
to lay off workers or close down without prior approval from the government (Jha 2014).
There are clear signs that the Modi government has identified labour as a critical arena
where policy intervention has become a compelling necessity. The outcome from labour
policy hinges on the larger economic and development turnaround, a rhetorical con-
struct BJP invoked frequently during the election campaign. The urgency of labour
reforms unveiled in the first year, therefore, is in fact along predictable lines. Behind
this sense of urgency, it is plausible to decipher a new rational calculation where labour
question hold vector to other larger goals of the BJP leadership. The calculus hold a
telescope to development turnaround, for which, it is necessary to enable capital, more
precisely the social actors who control capital in the form of industrial capacity to
operate and to be free from social and regulatory obligations. Existing labour regulatory
 172 S. T. GOPALAN

framework is seen in this context as a grossly constraining factor, holding back from
realizing the full economic potential of any form of investment. It then became the
urgent compulsion for the government to reform the labour regulatory framework.
Labour question in any society is closely intertwined with economic and institutional
factors. The process of labour is contingent upon how institutional actors such as the
state and its norms are able to regulate social exchanges between labour and industry.
To understand as to why the Modi government attach immediate attention to labour
reform without even taking recourse to conventional deliberative route is because a
political view solidified within the Party by that time. During the 2014, election cam-
paign two interesting convergences significantly recast the BJP as a political party which
for long claimed to adhere to Hindutva variant of nationalism which until a few years
ago regarded self-reliance and swadeshi as foundational principles of economic nation-
alism. The Swadeshi Jagaran Manch an intellectual collective affiliated to Rashtriya
Swayam Sevak Sangh (RSS) was in the forefront of a stream of thought which spear-
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headed a sustained critique of development models mediated by foreign capital and

technology. But this inward looking economic nationalist movement gradually waned its
influence within the BJP when economic nationalism was rearticulated with a more
outward orientation that sought to reposition India in the global economic and political
landscape. After two decades of economic reforms the idea of a globalizing India had
become an aspirational source for a bourgeoning middle class in India. BJP’s traditional
social and electoral base well attuned to appeals of Hindutva and parochial nationalism
had exhausted their electoral possibilities. For any electoral breakthrough it must
address the new middle class sensibilities fashioned around global economic mobilities,
employment and education. With the political exhaustion of traditional rhetorical
themes of Hindutva staring gloomily at the future, prompted the BJP to forsake inward
looking nativist economic ideas. The political imperative to transcend beyond traditional
electoral constituencies entailed revising afresh rhetorical repositories that can appeal
the post-reform middle class. These compulsions were all too visible in the rhetorical
devises employed by the BJP during the election campaign (BJP 2014). As the leading
campaigner for the BJP, Modi continuously invoked the idea of development and
promised it to be a far more inclusive social goal. His usage of the notion of develop-
ment was largely as populist devise, vague in details but potent in terms of mobilization
of public opinion.
This ideational shift has a curious genesis within BJP as it gained acceptance without
any serious debate among diverse political constituencies representing swadeshi, the
trade union, the Bharatiya Masdoor Sangh (BMS) and the traditionalists. It quietly
subdued the shrill of Hindutva ideology. The new developmentalism was assigned a
larger political role where it effectively responded to the aspirational longings of
different sections of society, but in closer look, the idea is enigmatic at best as it is
left to the beholder to define what it meant for social classes located at different
economic and territorial locations. Modi’s election campaign supplied strong fillip to
these abstract notions of development by clearly signalling at vital role for big business,
global mobile capital and local entrepreneurialism. As the leader of one of the largest
political parties in India, one would expect Modi to represent and articulate the institu-
tionalized form of political power, the state. But it is an irony that in much of his public
campaign development was projected as an outcome from exchanges between market
 JOURNAL OF ASIAN PUBLIC POLICY 173

and business. Seldom was an instance when he purportedly referred to the state or its
crucial role in the redistributional dynamics in India. The accent was more sharply on the
necessity to create conditions for investment. Modi seems to believe in a peculiar
version of capitalism which was not mediated by the norms of the state nor there
exist any social contract between labour and capital. He went much beyond and in fact
crossed a political rubicon when he made direct interface and cultivated personal
contact with leading industrial and business firms. Media reports about the personal
proximity between Narendra Modi and the industrialist Gautam Adani had lend cre-
dence to the perception about the political patronage of business (Bahree 2014,
Business Standard 2014). Before Modi no political leader of national stature has ever
established open coalition with corporate elite. In fact as a well observed political
prudence in Indian public life and also as a moral position, the Indian leaders for long
maintained a certain distance for corporate elite. Modi broke this delicate code of public
morality and showed scant reverence to the idea of separation of spheres between
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politics and business. He developed close proximity with business leaders and his
interaction with them acquired certain regularity. The corporate elite in turn made
themselves available as his staunch non-party constituency periodically supporting his
public initiatives. In the end Modi was able to craft a capitalist growth coalition with
direct interface with corporate elite.

Towards labour reforms

Post-colonial history of India’s labour regulation has been marked by two parallel
movements often in contention with each other. The idea of labour regulation seeking
to provide legal and institutional safeguards to workers through a system of state
recognized rights represent one of the key articles of national political consensus
since the early years of the Republic. By regulation, I here refer to the statutory
regulations inducing a form of control through a set of rules, procedures and institutions
established by legislations designated bring about certain parameters in labour-wage
exchanges (Standing 2009). A diverse range of ideational streams including Nehruvian
socialism, central planning and history of labour movements went into the making of
national consensus on the need for labour regulation. India’s federal parliament and
provincial assemblies have enacted a series of labour legislations that contained protec-
tive and enabling legal provisions for labour. In course of planning era, the government
instituted a system of labour administration mandated to implement the legislations.
The long era of labour legislations which lasted until the late 1970s represent an
illustrious movement shaping labour history. While the legislations produced a juridical
terrain where labour rights are recognized but it remained as a normative field without
much social impact. The fragile institutional capacity of the state is partly responsible for
this incongruity between norms of the state and their limited influence on the social
world of labour in India. But more crucially, the counter movements against regulation
were also a strong tendency. The Indian industrial corporations, although there were
exceptions, largely resisted the regulation and searched for ways and methods to
circumvent them. During the planning era, the opposition to regulation remain muted
without being articulated in the public domain. The capitalist opposition to labour
regulation surfaced in the form of formulated critique around the economic reforms
 174 S. T. GOPALAN

debate in the early 1990s. The main targets of criticism were the system of licenses and
labour inspections, the two state practices seen as deeply stifling for entrepreneurialism
and capitalist economic freedom. These debates transformed the anti-regulation from a
quiet resistance to more open and vocal opposition to in the post-reform years when
capital, more than the state, is seen as the catalyst of economic development. During
the Congress led Unite Progressive Alliance (UPA) government questions pertaining to
labour regulation in particular how it creates conditions often referred as rigidities and
arbitrariness in labour administration were raised by liberal economists (Debroy and
Kaushik 2005). The public debate dominated by persuasive economic advocacies for
capitalist economic freedom managed to animate public opinion against the idea of
statutory regulation. Some of the key principles of labour rights including employment
protection, trade union rights and social protection are seen as gross impediments to
the industrial relations and dampen investment and entrepreneurialism. The discursive
terrain of labour regulation was shifting towards a fundamentally different direction. By
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the closing years of the UPA II, the public debate essentially turned into an anti-labour
regulation chorus. When Modi arrived on the national political stage in 2014, the long
consensus on labour regulation as a social contract in India has become too fragile to
survive into the new economic future.

Labour code and industrial relations bill 2015

In April 2015, the Ministry of Labour proposed a draft Labour Code on Industrial
Relations Bill 2015 to be placed before the monsoon session of the parliament
(Government of India 2015). According to the government, the draft is an outcome
from extensive consultative processes involving all stakeholders including the Trade
Unions. But initial responses to the bill available in the news reports suggest strong
opposition from Trade Unions to many of its provisions. The industry associations, on
the contrary, have given general approval for the Modi government’s labour reform
initiatives. In the new labour regulations, we can discern liberal accommodation of some
of the lingering concerns of the industrial firms as well as the resolve of the Modi
government to reduce obstacles to ‘ease of doing business in India’. The monsoon
session convened in July–August could not take up much legislative business as the
upper house of the parliament was continuously disrupted by the Congress led opposi-
tion and frequent adjournments for the entire duration of the session. The Labour Code
on Industrial Relations Bill still awaits its first reading in the parliament. Although the bill
has not yet become a legislative act for the time being, the government has created the
legal and political conditions pre-requisites for its future passage. Given that the Modi
cabinet has now been formally committed to the bill, it becoming the future labour law
in India looks plausible, if not in the present form. The question that will be answered in
course of time is whether the Trade Unions or the opposition parties will be able to
resist it from becoming the law. For the workers, the Labour Code holds up a mirror
which reflects back the kind of things stored up for their future. I will examine the bill
and show how its provisions are pitted adversely against the workers and potentially
erode the collective agency of the workers. What does the legislation seeks to achieve in
terms of larger purposes? It seems that the government looks at the Labour Code as a
legal instrument that can go a long way to free labour from regulation, to bestow
 JOURNAL OF ASIAN PUBLIC POLICY 175

greater leverage for industrial firms and to induce flexibilities in labour market
formations.
In the first place, the bill proposes to bring together three important federal laws on
industrial relations; the colonial era Trade Union Act of 1926 which sets out the legal
provisions for registration of trade unions and defines functional aspects of registered
unions, the Industrial Disputes Act of 1947 which provides for legal mechanism to settle
disputes between workers and owners of industrial firms and also put in place a set of
principles to regulate retrenchments, lay-offs, closures etc…and thirdly the Industrial
Employment (Standing Orders) Act 1946 which was enacted to define conditions of
employment. The amalgamation of three bills assumes significance as it represents the
BJP government’s objective to reduce and codify the number of labour laws for effective
implementation. Codification of laws will remove the maze of multiple authority struc-
tures and will certainly make it more effective legal instrument for enforcement. But a
pertinent question is what kinds of legal provisions are being proposed in the bill
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assume importance, if they are on way to become part of a more effective law.
Modi government’s approach to labour question signify quite a radical departure in
the public policy history of post-colonial India. The changes suggested in the Labour
Code are clearly aimed at unsettling foundational principles that governed the interac-
tions between labour, state and capital until now. This will take us to confront the close
linkages that exist between law and politics in general and to see how these two
aspects, far from being distinctive domains of norm productions, tend to reinforce
each other. In that sense, laws in any society are, in the final analysis, ideological
expressions of social forces that control the state and dominant institutions. Therefore,
any act of legislation does involve a political contention seeking to introduce new norms
for the kind of social compliance it envisages. This precept resonate old determinism of
Marxism, in the case of the present context has become almost a truism. I therefore
identify the Labour Code as a particular ideational terrain where the state articulates the
anxieties of organized capitalism and seeks to find instant fixes for them. In the follow-
ing discussion I examine three areas where the collective interests of workers come into
direct resistance from the state. I will elaborate in the first section how the Labour Code
assign reverse social engineering role to the workers in the industrial establishments.
Chapter II of the Labour Code proposes the constitution of Works Committee (WC)
comprising equal number of representatives from employers and workers. The WC,
despite its labour oriented nomenclature will not come into life unless initiated by the
management of the industrial firm. The selection process of workers representatives are
leveraged against workers as it is the management who will be selecting the represen-
tative in consultation with their trade union. The way this provision is worded leaves it
susceptible for interpretations of convenience and scope for the management to fill the
WC with their handpicked workers. If this is not enough a debilitating procedural model,
the Code defines the functional role of the WC in more incapacitating terms. It defines
the ‘duty’ of the WC is to ‘promote measures for securing and preserving amity and
good relations between the employer and workers’ (quoted from the draft bill). The
work place harmony has become the burden of responsibility of the workers. The WC
will in effect be converted into an agency that strives for social compliance as deemed
appropriate by the management. The only way this could possibly be achieved is
through heightened social surveillance from the part of the WC against any repositories
 176 S. T. GOPALAN

of dissent among their comrades. Hence this provision has completely pre-empted any
possibilities of interest articulation by workers. Because it has become obligatory on the
part of the WC to maintain workplace ‘amity’, a responsibility has been thrust upon the
WC in the form of a legally binding duty.
Second problem with the bill is the way it induces elements of corporatist subordina-
tion of trade union where it seeks to alter the existing mode of interest representation
by the workers. Labour politics in India is characterized by three features; diversity of
trade unions, affiliations with political parties and democratic autonomy in interest
articulations. Trade unions have strong presence in state industrial sectors. The propo-
sals in the Labour Code are symptomatic to substantially alter the present features of
labour politics in India. The Modi government’s objectives seem to bring trade unions
into a passive associational sphere that can be incorporated into state corporatist
system. There are three distinctive devises craft into the bill to thrust it in that direction.
First, the bill proposes to significantly increase the threshold number of workers eligible
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for registration. Under the Trade Union Act (1926) seven workers could move an
application for registration. The Labour Code proposes to increase this to 10% of the
total workers in an establishment or 100 workers whichever is less. Even in large
industrial firms for 100 workers to form a cohesive group and to adopt a resolution
authorizing them to be applicants of registrations, as the chapter 11:6 (c) stipulates, will
be a difficult social mission for the workers. As labour history registers, trade unions are
initiated by a group of rights conscious of working class activists, campaigners or
intellectuals. It is this group with appropriate social technologies and ideational inter-
actions transform other workers into active member who will later be available for
collective actions. Third, the bill seeks to confine Trade Unions into an inward oriented
workers association with restricted interface with political or social forces from outside.
The bill had reduced the number of non-employee honorary members in the organiza-
tional committee of the trade union. At present half of the office bearers can be from
outside the industrial establishments who are full time trade union activists affiliated to
political parties. The Labour Code has proposed a penal regime, the purpose of which
looks mainly to discipline the Trade Unions on largely technical grounds. Section 103,
subsection 7 imposes a penalty up to 10,000 rupees on the office bearers if a union
default in sending statement as required by the bill. Subsection mentions that if a
person makes any false entry in the statement of annual returns will be punishable
with a fine extendable to 25,000 rupees. In subsection 9 if a person attempts to ‘deceive’
a worker will be punished with fine up to twenty five thousand rupees.
Labour legislations enacted by democratic parliaments are usually sensitive to ques-
tions of rights and entitlements of the workers and recognize different forms of their
collective actions. The Labour Code on Industrial Relations Bill drafted by the Modi
government starkly deviates from this well-established norms of democratic legislative
traditions. The tone of the bill is averse towards any form of collective actions by
workers. As a democratic legislation, social actors concerned will expect a basic mini-
mum protection in relation to the legitimate modes through which socially articulate
their demands. An undertone of aversion to rights articulation by the workers run
through the bill which finds its sharpest expression in Chapter. III. The provisions listed
under Section 71 are such that they make legal strike nearly impossible. As Boumik
(2015) has noted the Chapter began with a premise that strikes are patently illegal.
 JOURNAL OF ASIAN PUBLIC POLICY 177

Section 71 titled ‘Prohibition of Strikes and Lockout’ contains a series of procedural

preconditions before a legitimate strike can possibly commence. They include 6-week
notice to employer, expiry of pendency of any conciliatory proceedings, conclusion of
arbitration proceedings, during a settlement or award is in operation. Any non-
compliance with these preconditions will make a labour strike illegal. Subsection 8
stipulates further restraints against most forms of protest repertoire that are part of
workers collective actions by characterizing protests such as ‘go-slow’, squatting on the
work premise, ‘gherao’, or demonstration at the residence of employer as ‘coercive
actions’ and therefore illegal. Chapter VIII treats strikes and lockouts on equal terms, it
is needless to mention here how these two are patently different. One of the most
contentious proposals that has provoked serious criticism from Trade Unions is Chapter
IX. In tune with its larger objective of leveraging capital and to absolve employers from
regulatory obligations, the Ministry of Labour has proposed in Chapter IX to increase the
threshold requiring prior permission for retrenchments and lay-offs from existing 100 to
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300 workers. The threefold increase will tantamount to doing away completely with
regulation in lay-offs which will now on become an internal labour policy that can
arbitrarily be decided upon by the employers even in large enterprises.

Factories act amendments

The MoLE led by Bandaru Dattatreya began the reformist initiatives soon after Modi
government settled in power. In August 2014, barely 4 months into office, Dattatreya’s
Ministry introduced an important amendment concerning labour, the Factories Act
(1948) Amendments Bill 2014 in the parliament (Government of India 2014). The
amendments vetted through different administrative levels and approved by the cabinet
was symptomatic for Modi government’s approach to labour. The Factories Act (1948) in
its original form is a comprehensive legislation introduced by the central government
containing protective measures covering industrial safety, health and welfare for labour.
It also enunciates a set of regulatory principles regarding the conditions of work in
factories. While it is a legislation enacted under jurisdiction of the central government, it
is implemented by the state governments mainly through the chief inspector of fac-
tories. The Act above all remained a legal source for some of the foundational aspects of
labour relations and conditions of employment in India. The dualistic nature of Indian
labour system where it is divided into two definitional categories; one formal sector
where labour regulatory norms are applied and the second an informal sector which is
excluded from the purview of the labour laws is implicated in this Act. The industry
association have for long targeted the Factories Act as an archaic source of labour
rigidities. It has been a peculiar historical condition in India where the small and medium
industries which constitute the bulk of manufacturing and processing have been unease
about being subjected to labour regulations. During the planning era there had been
popular narratives about how inspection system has collapsed into a rentier regime. In
the post-reform debate dominated by anti-regulationist arguments, inspection of fac-
tories has been indicted as a system of bureaucratic stranglehold over economic free-
dom. By the time Modi assumed office, there had already been a public sympathy for
capitalist victims of the inspection raj. The vastly dispersed low capital and low
 178 S. T. GOPALAN

technology factories and processing units have been demanding autonomy from the
compulsions of factories act over labour recruitments.
The amendments proposed by the Ministry seek to address these concerns by
providing legal fixes to ease the burden of regulation on enterprises. To put amend-
ments in perspective I will focus on three issues that illuminate how the government
accommodate economic concerns of the enterprises and broaden the legal scope for
non-compliance. First sets of amendments are relating defining the term ‘hazardous
process’. The Ministry proposes to redefine the term as process in which hazardous
substance is used. In the original act, hazardous process covers a broad range of factory
activities in which hazardous substance may not necessarily be in use. But this definition
covers processing activities which are hazardous to workers safety and health. The
amendments will substitute Section 2(cb) of the 1948 act by a new restricted definition
in which an industrial activity becomes hazardous only when hazardous substance
involved. Second, hazardous substance is defined in accordance with the Environment
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(Protection) Act 1986 and will be notified time to time. Since the substitution of
Section 2 with new definition, the First Schedule will be deleted from the act. The
Ministry’s proposal is loaded with serious health consequences for the workers. It is
pertinent to observe here that India’s record in industrial safety is extremely low.
As mentioned earlier the Factories Act is the legal source that determine whether an
enterprise is qualified to be brought under regulations or not. It has often been cited
that only 9% of industries are defined as organized sector and therefore covered under
existing labour laws. The scope of regulation is confined to only a fraction of industrial
employment. The rest usually referred as the informal sector or the unorganized sector is
excluded from the purview of labour laws as they do not qualify under the existing
Factories Act to be defined as factory. The definition of ‘factory’ at present is based on
the number of workers and use of electricity. An enterprise is defined as factory if it
employs 10 workers with electricity or 20 workers without electricity. The Ministry
proposes to change this definition by delegating power to the state governments to
prescribe the threshold number of workers for the purpose of definition. Although the
state governments are endowed with flexibilities within their jurisdiction for deciding
the threshold, the amendment cap the upper limit to 20 workers with electricity and 40
workers without electricity.
The redefinition of factory implicated in the amendment is fraught with far-reaching
consequences for workers in small industrial units across India. Under the existing
legislative framework, industrial units registered as factories and employing a prescribed
number of workers are required to comply with relevant provisions of the Factories Act
pertaining to safety standards, working conditions and welfare coverage. More impor-
tantly these units will come under the regulatory framework and are obliged to report
their compliance standards to the government. In other words, the workers in the small
industrial units engaged in a range of low end manufacturing, processing and repair
works had the legal protection from work related hazards as well as arbitrary imposition
of employers will upon them. While in the Indian context, it may be noted that the
existence of legal provisions cannot be treated as ipso facto as the compliance standards
are rather loosely and unevenly enforced by different provincial governments.
Nevertheless active presence of legal regulation offers social possibilities for workers
to strive for and realize those rights. Having a normative field purported for labour
 JOURNAL OF ASIAN PUBLIC POLICY 179

protection also brings into fore institutional actors such as the local state to act upon
when appropriate social pressures are mounted through labour activism or intervention.
The significance of the original definition of factory is a decisive marker that separate
industrial activities and the social labour involved in to two distinctive categories, an
inclusive organized sector where labour regulatory norms are applicable and secondly
an exclusionary segment labelled as the unorganized sector where these norms are
exempted from. With the norms of the state remain passive, the workers in unorganized
factory sector are exposed to hazards of work and are subjected to arbitrary will of the
employer. These conditions deny the workers any formal interface with modern norms
of the state or political conceptions of their own social being.
This regulatory regime will erode its legal ambit in substantial terms, if the proposed
amendments to the Clause (2) of the Factories Act (1948) come through. The draft
proposal has empowered the state governments to reset the number of workers up to
20 for enterprises with power and 40 for those without power to be defined as factories.
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At one single stroke the MoLE has doubled the numerical strength of workers used in
the definition of factory. The legal implication for this revision is that the industrial units
operating within these limits are freed from the regulatory purview of the labour laws,
safety standards and commitment to social welfare provisions. They will no longer be
required to file any compliance report to the government. The factory premise of such
units will be exempted from inspection by labour administrators. In the Indian context
where small enterprises are owned by social actors who are more inclined to follow
traditional form of labour mobilization which often involve coercion and appeals to
cultural identities, this move could further exacerbate already perilous survival for the
wage seekers in India.
From the government’s perspective, the amendment can be touted as an industries
oriented policy revisions, a commitment that Modi made during his election campaign
and that resonate in his ‘make in India’ initiative. The Indian industries in particular in the
small scale manufacturing and processing have been deeply averse to legal compliance
norms for long. To be absolved of all regulatory obligations, therefore, is windfall for
employers in this sector. But the legal freedom for factory employers will bring about a
whole range of unfreedom for the workers. As the factories are exempted from regula-
tion, the workers in such factories will be denied whatever protective legal coverage
they were given earlier. In India’s peculiar social milieu, it is tantamount to stripping
away workers the modicum of entitlements and claims they had until now. It will create
or broaden the social circumference of working class incorporated into the lower strata
of the industrial sector. In effect, the amendments will legalize non-compliance of labour
standards by industrial units. More significant is the magnitude of changes it will be
bringing about in terms of substantial shrinkage in the size of the organized sector.
Historical trends have consistently been greater concentration of factories with small
employment size. During 2011–2012, a significant 58% of the total factory sector
comprised of 1,75,710 units employed up to 30 workers. Annual Survey of Industries
data when correlated with the proposed redefinition will lay bare how it will redraw the
entire industrial sector as roughly 72% of the factories will be out of the coverage of
labour laws.
The scope of regulation has been further reduced even in industrial units that come
under the Act. There are two amendments seeking to increase labour time flexibilities, a
 180 S. T. GOPALAN

demand that employers of some of the seasonal based manufacturing firms had for
long. The Ministry has conceded this demand of employers for greater leverage in terms
of how to organize labour time without being constrained by the law. Clause 36 of the
Bill seeks to change the Section 56 of the original Act relating to the length of working
hours or what is referred as spread over in official parlance. The Chief Inspector of
Factories has already been authorized to increase the working hours from 10:5 to
12 hours a day. Although 12 hours exceed the statutory 8 hours a day, it has not
been calculated as overtime. Regardless of this extended working hours already in
force, the bill proposes to substitute Section 56 with a new provision that enables the
state government to increase the spread over in a factory or a class of factories through
a notification in the official gazette. The rationale for extending the spread over is that it
will meet the special requirement of certain class of industries. The second provision
relating to labour time flexibilities is to amend Section 64 and 65 of Clause 38 and 39 to
increase overtime hours from existing 50 hours per quarter of a year to 100 hours
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extendable up to 125 hours.

A number of provisions contained in the draft labour code and the amendments to
the Factories Act are far-reaching in intent and scope. From the perspective of the
workers’ rights, the proposals are plainly aimed at eroding the existing regulatory
regime and therefore are portent legal instruments pitted against their modicum of
rights that seek to discipline them as a social class. The response of the Trade Unions to
the Modi government’s labour reforms in general and the draft legislations in particular
have predictably been critical. The Trade Union leaders have articulated their opposition
to what they call the ‘worst attack’ on workers rights in different consultative forums as
well as in public (Frontline 2015). While the resistance of left Trade Unions including the
Centre of Indian Trade Union (CITU) and All India Trade Union Congress (AITUC) and
even the Congress Party affiliated Indian Trade Union Congress (INTUC) is along antici-
pated lines, the opposition by the BJP affiliated BMS is revealing as it registers the
deepening rift between the Modi government and the Trade Unions. An unintended
consequence of the labour reform seems to be the united resistance by the Trade
Unions which are otherwise divided along political and party affiliations.

Modi government’s labour reforms: an interim appraisal

Labour seems to be one of the arenas where the Modi government has brought about
marked policy changes. Within a relatively short span of 19 months, there have already
been definite indications about the direction in which India’s labour policy is evolving
into. From administrative decisions, policy pronouncements and draft legislations, we
have substantive materials in the public domain that will help us to delineate how the
government is planning to address the labour question? What are the broader perspec-
tive that informs the new policy departures? and How these are assigning a social role
for labour in India? The broad range of reforms announced so far has pervaded an
uneasy sense of infringements among trade unions as well as the labour rights activists
(Rajalakshmi 2014). The MoLE under Bandaru Dattatreya has devised a set of schemes for
labour which mark perceptible break with the policy norms existed until now. The new
policy prescriptions fast gaining momentum as governing norms is informed by an
ideational strand that seeks to subordinate social labour to the new economic model
 JOURNAL OF ASIAN PUBLIC POLICY 181

from which earlier social contract between labour and state has been excluded. Under
the BJP, labour seems to have eroded its autonomy as an important policy arena as it
has increasingly been subjected to larger economic compulsions and an eagerness to
dismantle existing institutional norms of regulation. It is plausible to say that the labour
policy of the Modi government has largely been dictated by economic imperative which
premised on the idea that development is a function of business, new technologies and
limited state. The institutional role earlier been given to the state in terms of regulation
has been implicated for being barriers of economic growth and therefore to be
removed.
In this section, I present a preliminary appraisal of the labour policy of the Modi
government. There are perceptible signs of a turn towards a new regime of labour
flexibilities. Much of the administrative as well as legislative instruments proposed by
the MoLE are designed for this purpose. I will outline the larger historical context to
explain what do the new turn really represent. I will posit that the policy shift being
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effected by the BJP government signify a foundational break with the institutional
norms on labour historically evolved in post-colonial India. These norms were built on
the national consensus shared by most political parties. Four aspects of this norma-
tive field remained as salient markers of the Indian labour policy for about six
decades. First was the idea of regulation mediated by the state which sought to
ensure a basic minimum social protection for workers. The origins of this idea can be
traced back to the early postcolonial social contract between the state, labour and
capital. As the Factory Act of 1948 showed the scope of regulation was broader and
inclusive. However the limited institutional reach of the state in India resulted in the
partial erosion of regulation at the site and stages of enforcement. Yet, having
modern norms holds forth a promise to workers to articulate their rights in places
and contexts where it was possible by using those categories as both legal and
political conceptions.
Second aspect is pertaining to the relation between labour and collective political
actions. Since the early years of the Republic, there has been a national political
consensus to recognize the political agency of labour. This recognition came partly
from India’s experience in national movement where trade union agitational politics
formed a distinctive strand. It also resonate with the international norms particularly that
of Britain where labour politics brought about transformative effect on both the social
capacity of workers to negotiate capital, but also to fashion the national politics itself.
The recognition of trade union as legitimate agency and the diverse forms of protest
repertoire they created in course of time were significant in terms shaping political
agency which can represent workers not only in tripartite consultations but in larger
democratic arena as well. Third, labour was recognized as a social category to be
included in the redistributional dynamics of the state. Both in the state industrial sector
and in registered privately owned factories wage calculations included social compo-
nents where the state has direct fiscal obligations. Fourth is normative intervention to
modernize pre-existing social forms of labour that are incongruous with conceptions of
rights, equality and justice, the foundational principles of the post-colonial India. The
state introduced legislative instruments, prohibitive in intent, to restrict and gradually
abolish social labour bounded in caste, intermediaries, employment of children and
gender based wage discrimination etc. these modernist strivings of Indian labour laws
 182 S. T. GOPALAN

were often confronted resistance from traditional social actors involved in wage-labour
exchanges as narrative of wage seeking from rural India registers.
The four aspects outlined were the constituent categories and enduring values India’s
labour policy. A social contract on regulation, inclusive redistributional principles, recog-
nition of political agency and a modernist thrust against older forms of labour relations,
all in varying degree shaped the course of labour history in India. It appears that the
tenure of Modi government will certainly drive rupturing elements into this normative
field. Perhaps the future labour historians would attest it as a period of disjuncture
characterized by the fragmentation of old social contract between the state and labour. I
will elaborate how the new norms and institutional practices induced by the govern-
ment steadily eroding an enduring consensus on labour in India.
In the first place, the labour reforms initiated by the MoLE have in effect absolved the
state from a range of social obligations towards workers including both fiscal and legal. I
would characterize this change in terms of a shift from a social contract between the
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state and labour to that of the state and capital. In the beginning of this chapter, I have
mentioned how public debates in the wake of economic reforms were dominated by
arguments against as planning era vestige anachronically inhibiting the very spirit of
free entrepreneurialism. Labour laws were implicated for being instruments of an over-
bearing state which uses a system of licenses, registrations, approvals to control employ-
ers in the industrial sector, a system which had also become source for bureaucratic
rent-seeking. The long term effect of regulation has been, as the argument goes, to
distorting industrial growth, throttle the spirit of free enterprise and business. Besides
legal provisions for employment protection have produced labour market rigidities
causing employers the burden of unnecessary social cost. Whereas the need of the
contemporary times is to create conditions where flexibilities in employment, labour
time and wages can become functional norms dictated by market and economic
imperatives. Modi in particular seems to be convinced of the virtues of business
unfettered from regulation and politics for that it will create wealth and its redistribu-
tional logics. Therefore, it’s the entrepreneurs, by extension capitalism, that needed
protection from an intrusive bureaucracy, burden of labour laws and trade unions.
These contingencies necessitate reworking of social contract or at least it warranted
new interface between the state and capital.
Since the beginning of the tenure, the Modi government has identified labour reform
as a policy imperative. A perceptible sense of urgency was evident in the speed and
scale at which the Ministry of Labour has introduced the reforms. From the adminis-
trative decisions to draft legislations the proposed reform measures will usher far
reaching consequences for the Indian working classes in the new economy. The govern-
ment has invoked familiar liberal arguments to rationalize its attempt to recast the
existing framework. As the argument goes, the existing labour laws and labour admin-
istration system tend to create rigidities which not only privilege regular employees but
at the same time distort labour market. Another legacy of the panning era labour laws,
according to the liberal critics, is the excessive legalism. Therefore, the proposed labour
codes will amalgamate a number of overlapping labour laws into a single unified
legislation thus making labour administration a much less complex system paving way
for more efficient enforcement. However, these claims have only enthused the business
community and predictably alienated the workers.
 JOURNAL OF ASIAN PUBLIC POLICY 183

The Modi government’s approach to labour reforms has its origins in a set of
ideational premises and institutional inclinations. They include a peculiar blend of
state corporatist tendencies, neoliberal economic ideas and an amateurish impulse to
find instant remedies. But India’s institutional as well as social settings are not readily
amenable for such recasting. When examined as a mode of public policy engagement,
the labour reform raises pertinent questions about the manner in which they are
conceived and carried out. First, the MoLE sought to circumvent the institutional process
usually followed in India’s democratic setting. As Sundar (2014) has observed a social
dialogue was missing from the reform process. Second, at the level of conception, the
government subordinated the labour question to the larger economic agenda of creat-
ing a new industrial milieu where ease of doing business and attracting investment to
‘make in India’ override other priorities. Third, the government’s approach seems to be
based on a premise that statutory regulations are patently flawed. The proposed labour
codes, if they ever become central laws, will erode the institutional as well as the
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normative foundations of India’s protective legislations. The intent to wither statutory

regulations is writ large on the draft labour codes. The stage seems to be set for a long
contention between the Modi government and the Trade Unions and perhaps the
beginning of new age of labour flexibilities and labour politics that it would eventually
shape.

Disclosure statement
No potential conflict of interest was reported by the author.

Notes on contributor
Suresh T. Gopalan is an associate professor in Centre for Political Studies (CPS), Jawaharlal Nehru
University (JNU), New Delhi. He has earned his Ph D in Chinese Studies from JNU and M. A. in
Politics and International Relations from Mahatma Gandhi University, Kerala. His research interests
are the comparative political economy of India and China with special focus on labour. He is
currently working on how labour informalities are organized and institutionally sustained in the
construction sectors in Delhi and Shanghai. He has published on issues relating to construction
labour in China, labour in global production networks in India, and Chinese nationalism. Suresh
has been a Visiting Research Fellow at the Asia Research Institute (ARI), National University of
Singapore (2012), Asia Fellow of the Asian Scholarship Foundation (Bangkok) to Chengdu and
Shanghai (2008), and Fellow of the Fulbright American Studies Institute, University of Delaware, US
(2004).

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