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India’s labour laws call for reform


The government assured parliament’s standing committee on labour that state-level changes in labour laws that diluted labour welfare would be struck down. At the same time, India’s labour laws are antiquated — some mandate water being made available in earthen pots — besides being too numerous, making compliance a burden.

Laws need to change, to make the labour market flexible, remove artificial bias towards capital-intensity and, at the same time, retain attraction for global brands that are ever more mindful of investor and consumer preference for ESG-compliance. ESG stands, of course, for Environmental, Social and Governance concerns.

In the US, investment that specifically targets ESG compliance has been shooting up — it grew 38% from 2016 to $12 trillion in 2017, out of a total assets under management of $46 trillion, and the share of ESG has only been rising since. Business Roundtable, comprising the top CEOs of America, declared a formal shift from treating shareholders as the primary beneficiary of corporate achievement to all stakeholders, and has, in the wake of the anti-racism protests, endorsed police reform. Business responds, of course, to the concerns of shareholders, consumers and employees. These concerns are pushing climate change, labour norms, corporate governance and the positive impact companies can play in social life to the top of corporate concerns. This sets the mood for allocation of funds in much of the developed world. India would shoot itself in the foot if, at this juncture, it seeks to attract investment into supply chains moving out of China by offering suppression of labour rights as the chief attraction. The trick is to build flexibility into labour markets while upholding labour norms that enable decent work.

Japan and South Korea have grown into manufacturing powerhouses on par with Germany and France, and all have workforces that are heavily unionised. Their employers and unions have learnt to collaborate in using unions to raise productivity and cushion the harshness of bad times. They offer lessons for India’s labour reforms.

Courtesy - The Economic Times.

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