Deregulating labour law restrictions

Press Information Bureau
Government of India
Ministry of Finance


Deregulating labour law restrictions

The Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman tabled the Economic Survey 2018-19 in Parliament today.

Deregulating labour law restrictions can create significantly more jobs, as seen by the recent changes in Rajasthan when compared to the rest of the states. The Survey states no major labour reforms were initiated by the states from 2007 to 2014. In 2014, Rajasthan was the first State that introduced labour reforms in the major Acts. Thereafter, many States followed Rajasthan. A comparison between the indicators for labour, capital and productivity of manufacturing firms makes it clear that flexibility labour laws creates a more conducive environment for growth of industry and employment generation. The States which are rigid in respect of their labour laws are suffering in all dimensions and are unable to create enough employment and cannot attract adequate capital into their States.

On average, plants in labour-intensive industries and in States that have transited towards more flexible markets are 25.4 per cent more productive than their counterparts in States which continue to have labour rigidities.

Size based Limitations posed by Key Labour Legislations

1Industrial Disputes Act, 1947, Chapter V relating to strikes, lockouts, retrenchment, layoffEmploying 100 or more workers
2Trade Union Act, 2001 – Registration of trade unionsMembership of 10 per cent or 100 workmen whichever is less
3Industrial Employment (Standing Orders) Act, 1946100 or more workmen
4Factories Act, 194810 or more workers with power and 20 or more workers without power
5Contract Labour (Regulation & Abolition) Act, 197020 or more workers engaged as contract labour
6The Minimum Wages Act, 1948Employment in the schedule having more than 1000 workers in the State
7Employees’ State Insurance Act, 1948 – ESI Scheme10 or more workers and employees monthly wage does not exceed Rs.21000/-
8Employees’ Provident Fund & Miscellaneous Provisions Act, 195220 or more workers

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