Modi and labour reforms: Will be able to satisfy both the industries and unions?

On Thursday, when prime minister Narendra Modi unveiled some steps towards labour reforms, he was responding to long pending demands from business houses and international institutions such as the World Bank; but the critical question is if he has found the fine balance between the needs of the industry and labour. A highlight of his announcement was the reform of the “inspection raj” in which labour inspectors visited industries according to their will. According to the new arrangement, the process will be automated, which will prevent inspectors from selecting the units to be inspected locally, while inspection reports have to be uploaded within 72 hours. According to Modi, the old system harassed businesses while the new one will bring in transparency and ease in dealing with the government. [caption id=“attachment_1761255” align=“alignleft” width=“380”]  PTI[/caption] Another point is the announcement of an universal account number for labourers which will allow easy transfer of their provident fund accounts. Apparently, about Rs 27, 000 crore is lying idle because of the earlier immovability. “I need to return this money to the poor,” Modi said, adding that it was a part of his vision. The reforms will also make paperwork easy - instead of 50 forms, companies will now need to fill only one form, that too online. At first sight, Modi seems have combined the demands of the industry and welfare of the labourers, but going by the contradictory reactions from both, he certainly has a long way to go. While ASSOCHAM complimented the “government for initiating the labour law reforms as it will create a conducive environment for growth of trade and Industry and bring transparency in social security benefits to help workers,” Tapan Sen, General Secretary CITU and Rajya Sabha member said: “it’s only cheating of workers, as while the government is launching these schemes, simultaneously it is changing the labour laws to push out the labour from their purview”. Similarly, both FICCI and CII welcomed the measures, while Gurudas Gupta, General Secretary, AITUC, said: “the PM is going in for drastic changes which will ultimately benefit the employees to carry out a hire-and-fire policy and harm working people. This is being done to give a free hand to the corporates. This will depress wage levels and shall create a situation for low paid apprentices in place of permanent labour and even contract workers”. Whether it’s the Modi government or the previous UPA government, labour reforms have mostly been seen as reforms of the labour laws, which the country and states (labour being a concurrent subject) have in plenty. In fact, the UPA had initiated amending many of the labour laws, with a view to helping Indian industries to compete in the global market. In 2005, a tripartite discussion under the then common minimum programme had agreed that “the management would require operational flexibility which includes power to right-size the work force” The myriad labour laws and the extremely disempowered conditions of labour, a majority of which is in the unorganised sector, makes labour reforms a very complicated endeavour. For instance, writing for the BBC, economist Kaushik Basu, highlights the case of the Industrial Disputes Act (IDA), 1947, which he says “is a good example of a well-meaning policy that is founded on antiquated economics and a handsome misunderstanding of the way markets function.” “In fact an amendment made to the IDA in the mid-1980s requires that any firm employing more than 100 workers needs to get permission from the state government before retrenching workers (and in practice that permission is seldom given), he adds. His point is that IDA makes firing of workers very hard, which limits the flexibility of free contracting. From the perspective of industries, and even from the point of view of the prospects of short term contracts for manufacture that companies undertake which require short term workers, it may be true; but from the point of view of labourers, it affects their welfare and security. There may be certainly some justification on tweaking laws to make more trained labour easily available to the industries, without considerable legal hassles, but then the labour also has a right to feel secure. It may also be true that because of the rigidity of some of our laws, companies are unable to expand and innovate. Experts such as Basu point out that labour data from the 1980s show that companies employing more than 100 people have gone down because of the labour laws. While the labour unions fear a free hire and fire policy, what reformists want is the ability to write different types of contracts - some short term, some long term and an easy regime from the government in terms of controls and supervision. Will Modi be able to convince both the businesses and the labour that he stands for growth as well as welfare? A planning commission working group document that contributed to the 11th Plan (during the UPA) is worth a revisit in the present context. It said: “The UPA rejects the idea of automatic hire and fire. It recognizes that some changes in labour laws may be required but such changes must fully protect the interests of workers and families and must take place after full consultation with trade unions. The UPA will pursue a dialogue with industry and trade unions on this issue before coming up with specific proposals. However, labour laws other than the Industrial Disputes Act that creates an Inspector Raj will be re- examined and procedures harmonised and streamlined. The UPA government firmly believes that labour-management relations in our country must be marked by consultations, cooperation and consensus, not confrontation. Tripartite consultations with trade unions and industry on all proposals concerning them will be actively pursued. Rights and benefits earned by workers, including the right to strike according to law, will not be taken away or curtailed.” This sounds reasonable and sound in principle. Perhaps, this is the line that the Modi government should also pursue while pushing for reforms.