"Labour reforms in India, in the context of economic liberalization and globalisation, are much desired, but also feared and misinterpreted. The issue has been a touchy one ever since the liberalisation era began in the early 1990s. The Common Minimum Programme (CMP) of the United Progressive Alliance (UPA) promises to carry out much awaited labour reforms in the Indian economy. The CMP has clearly indicated the need to streamline labour laws and enact Employment Guarantee Act. However, implementing these reforms would require much imagination and political will. The previous government had also proposed certain labour reforms but could not muster the courage to carry them out.

The need to enact labour reforms to compete with other countries arises because of the following reasons: Despite the advantage of cheap labour, the Indian textile industry's productivity is low compared to China and other major exporting countries because other exporting countries have set up giant manufacturing capacities which bring improved productivity while in India, exporters farm out their manufacturing to smaller units which results in low productivity and quality. Recent trend in garments is for 'smart clothes', which require better equipment and skills as otherwise the Indian exporter will lose out on competitiveness.

The ID Act states that if a company employs more than 100 workers, the company cannot close shop without the permission of the government. Further appointment of contract labour, which is crucial to the garment industry, is not permitted.

An analysis of India's labour laws such as the ID Act has indicated that such legislation, enacted to protect worker interests, actually leaves them worse off. Over the years, the statutory protections of the ID Act neither protected employment in the organised sector, which employs more than 100 workers, nor did it adequately address their compensation issues in establishments that turn sick. This is evidenced in the cases of textile mills of Mumbai and Ahmedabad where workers have been denied their terminal benefits as the companies continue to languish as sick units.

India's share of the global garment business is 2.75 per cent and under the new trade regime it has the capability to capture 6 per cent of the business by the year 2010. To achieve that, additional capacities need to be built up. The money for additional capacities can come from the Indian public through the IPO route or through FDIs. The catch however, is that neither the Indian entrepreneurs nor the foreign ones are particularly keen to set up plant and machinery in India owing to the archaic labour laws existing here.

Some reforms have been initiated in the past five years but the Industrial Disputes (ID) Act, 1947, which is the major bone of contention, has been left untouched. The ID Act makes provisions for the investigation and settlement of industrial disputes. When any employer discharges, dismisses, retrenches or otherwise terminates the services of a workman without complying with the conditions of retrenchment provided in the ID Act, the dispute or difference that can arise as a result between the workman and the employer is deemed to be an industrial dispute.

A commission, called the Second National Commission on Labour (SNCL) was set up to look into the various aspects of labour laws and also the impact of globalisation on labour. SNCL's recommendations were submitted about a year ago. The report accepted globalisation and liberalisation processes as something that couldn't be wished away. It recommended the unification of all existing legislation, including the Industrial Disputes Act and the Trade Unions Act. SNCL has recommended that the management's demand on closure, lay-off, etc. whittling the number to 300, as an unfettered option. On contract labour, the tenor of the report is ambiguous, seeking to create distinction between core and non-core activities. The report recommends disallowing of contract labour in core activities except to meet sporadic demands. However, neither core nor non - core activities have been defined. The SNCL further recommended that if employees make an application for closure, permission will be deemed to be granted if that approval has not been granted within

If India wishes to shine better, it has to boost the marketability of its human resources. India's labour laws have to work towards `drawing in' human resources — entrepreneurial talent and employees — into the market so that natural resources and savings will follow. When natural resources and savings follow human resources into the market, the nation's marketable and measurable output rises. If labour laws work towards `keeping out' human resources from the market, natural resources and savings too will stay outside the market. The nation's non-marketable and unaccountable output may rise, if at all.

The reform of the economy began 12 years ago, but significant labour reforms have yet to be initiated. Policy-makers and lawmakers have to enunciate new policies that would allow India's human resources to play the leadership role in growing the economy. It is time for change. India needs an `economic approach' to labour laws because human effort is the principal determinant of economic well being.


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