The Republic of India’s labour laws have been often cited as “archaic” or regressive, and as one of the reasons for India’s employment problems. According to media reports, the Rajasthan state government (BJP ruled) has proposed to bring about changes to the labour laws which apply in Rajasthan. It has proposed to amend the Contract Labour Act, the Factories Act, and the Industrial Disputes Act to make them less stringent.
Contract Labour Act Currently Applies to companies with more than 20 workers. Proposed to Apply to companies with more than 50 workers
Factories Act Currently Applies to premises with more than 10/20 workers with/without power Proposed to be applied to premises with more than 20/40 workers with/without power
Industrial Disputes Act Currently Retrenchment of up to 100 workers, without government permission. Proposed to Retrenchment of up to 300 workers, without government permission
These are proposed to be introduced in the state assembly (where the Govt has majority) next month and then sent for the President’s assent. We believe that this will ultimately encourage other states to follow suit, to stay competitive. Fostering competition among states can make some issues politically easier to implement, arguably. Mr Modi has talked about empowering states and a more constructive engagement with states. We think that the Rajasthan government’s initiative is an early sign that difficult reforms are no longer impossible
One should note that, subjects like labour, land, etc., fall under the “Concurrent list” and according to article 254(1) of the Constitution of India, in case of inconsistency between the Central and State Legislation, the Central Legislation prevails – and hence each state has to act within the bounds of central law. Amending the Central legislation requires parliament approval which can arguably be a difficult process. However, Article 254(2) of the Constitution of India provides for state legislation to prevail with the President’s assent, and hence laws can be amended such that each state can decide on specific aspects.