in the labour market aimed at increasing flexibility of labour use by bringing
about changes in legislative framework has been a subject of debate for over 20
years now. Labour reforms have often been associated with competitiveness.
However, attempts at reforming Indian labour market have been rather slow. Even
the globalization and liberalization process that began in India in 1991
impacted labour market in limited manner. No wonder, India missed the opportunity
of being manufacturing hub of the world due to rigidities in labour market,
archaic labour laws and glaring skill deficit. In last twenty-five years, the
government of India has tried to bring in sporadic changes in labour laws aimed
at lablour flexibilization.

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labour market in India remains pokerfaced when it comes to attracting foreign
direct investments especially in labour-intensive sectors such as leather
goods, textiles (apparel,accessories, etc.), gems and jewelry, sports goods,
weapons and ammunitions, furniture, rubber products, fabricated metal products
etc. It is imperative that labour reforms are viewed in a holistic manner so
that India is able to gain demographic dividends by becoming manufacturing
destination of the world owing to higher labour productivity, flexible labour
market practices and lower labour cost without compromising on labour

labour market is spoiled by over-arching complexities of archaic labour laws,
unmindful bureaucratic control and corrupt inspectorate having unlimited
abilities to exploit the susceptible factory owners at the cost of welfare of
the workers. Hence, labour market liberalization is urgent need of the day. It
is imperative that labour laws are progressive, bureaucratic control is
substituted by transparent governance and self-reporting and disclosure as well
as voluntary adoption of labour standards take over the flawed system of

and compliances. It goes without saying that labour market liberalization is
likely to augment employment flexibility, skill development and job creation on
a wide scale. However, free market evangelists put excessive emphasis on the
amendments in labour laws enabling the employers to hire, fire and regulate the
terms and conditions of employment of the working population according to
exigencies of emerging market scenarios. Such extreme position is not only
misplaced but also a major roadblock in converting labour reforms as foundation
of competitiveness in manufacturing and service sectors.



Historical Backdrop

is no doubt that the measures to regulate employment of labour–laws, rules and conventions—have
their origin in India in the recognition of unequal power balance between labour
and capital. Labour has been considered to be a weaker party vis-à-vis the
employer and therefore susceptible to exploitation and in need for protection.
The motivation to protect labour has been further strengthened by ideas of
equity and social justice that the national movement for Independence espoused
and which were finally also enshrined in the Indian Constitution (Singh, 2003).

of International Labour Organisation (ILO) in 1919 was a landmark event in the
annals of labour history internationally, mandating the necessity of labour
legislations to protect the interests of workers. It has developed conventions
and recommendations on labour standards for facilitating improvements in labour
conditions, which have been adopted by its member countries including India.
India is one of the founding members of the ILO and has been a permanent member
of the ILO Governing Body since 1922. Dr. Shankar Dayal Sharma,

President of India, speaking on the release of a commemorative stamp on the
occasion of the 75th anniversary of the ILO said that “The Constitution of of
treatment between men and women workers, ensuring a living wage and the social
security of workers. These are indeed laudable aims which we, in India, have
tried to secure through various constitutional and legislative mechanisms.”

with the birth of ILO, the All India Trade Unions Congress (AITUC) also came
into existence in India in 1920, which spearheaded the movement for legislation
to alleviate the conditions of workers. Since then, the trade union movements
in the country have played an important role in sharpening the scope and
content of regulatory measures.

ILO and the Declaration of Philadelphia have as their objectives social
justice, equality


Labour Regulations in India

need to legislate to protect the interest of workers and also to ensure the
smooth process of production in enterprises was recognised by the British
rulers of India. The colonial government passed the Factories Act in 1880 laying
down the minimum conditions of work in terms of hygiene, safety and hours of
work, etc. Several revisions were followed in the pre-Independence period in
1891, 1911, and so on. The Trade Union Act passed in 1926 set out procedures
for registration of unions and protection of unions from harassment. The
pressure for protection of workers against risks at work and life mounted in
the 1920s. As a result, several legislations were passed regulating work and
providing social security before Independence. The provision of compensation to
workmen for any injury during the course of employment was made in the Workman’s
Compensation Act passed in 1923. Payment of Wages Act was passed in 1936, to regulate
intervals between successive wage payments, over-time payments and deduction
from the wage paid to the worker. In the sphere of industrial relations, the
Trade Disputes Act of 1929 aimed to create an institutional framework to settle
disputes. The Great Depression and its effects on the Bombay industry with large-scale
wage cuts and resulting disputes led to some important regulations such as the
Bombay Industrial Dispute Act of 1932. The Act provided that an industrial
worker has the right to know the terms and conditions of his employment and the
rules of discipline he was expected to follow. The “general aim of the Bombay
legislations was to allow collective bargaining in a bilateral monopoly
situation” (Pages and Roy, 2006).

and dominant unions were recognised as the sole representatives of the workers.
Thus, the emergence of labour regulations in India can be traced back to the
period of British rule in India. Crucial labour laws governing various aspects
of work were, however, passed in quick succession of each other after
Independence. And since 1947, there has been a complete change in the approach
to labour legislation. The basic philosophy itself underwent a change and the
ideas of social justice and welfare state as enshrined in the Constitution of
India became the guiding principles for the formulation of labour regulations
(Thakur, 2007). The Constitution made specific mention of the duties that the
state owes to labour for their social regeneration and economic upliftment. One
of the significant duties which has a direct bearing on social security
legislation is the duty to make effective provision for securing public
assistance in the case of unemployment, old age, sickness, disablement and
other cases of undeserved want (Papola et al., 2007).

an independent democratic country, it was considered necessary that the rights
of employers to hire, dismiss and alter conditions of employment to the
workers’ detriments were subjected to judicial scrutiny. Accordingly, the
Industrial Disputes Act (IDA) enacted in 1947 provided protection to the
workmen against layoffs, retrenchment and closure and for creation, maintenance
and promotion of industrial peace in industrial enterprises. This Act was later
amended in 1972, 1976, and in 1982 seemingly giving progressively greater
protection to workers. Factories Act 1948, which replaced the one passed in
1884, aims at regulating the conditions of work in manufacturing establishments
and to ensure adequate safety, sanitary, health, welfare measures, hours of
work, leave with wages and weekly off for workers employed in ‘factories’
defined as establishments employing 10 or more workers using power and above 20
workers without use of power. Similarly, the Minimum Wage Act 1948 is the most
important legislation that was expected to help unorganised workers survive despite
the lack of bargaining power. The minimum wages for scheduled employment are to
be fixed and periodically revised by the central and state governments in their
respective spheres. The Act may be applied to every employment in which
collective bargaining did not operate and purports to fix the minimum wages in
such a manner as to enable the concerned workers subsist at least above the
official poverty line.

Industrial Employment (Standing Order) Act 1956 is another legislation
regulating the conditions of recruitment, discharge and disciplinary action
applicable to factories employing 50 or more workers. It requires the employers
to classify workers into different categories as permanent, temporary,
probationers, casual, apprentices and substitutes. The Contract Labour (Regulation
and Abolition) Act 1970 regulates the employment of contract labour and
prohibits its use in certain circumstances. It applies to all establishments
and contractors who currently or in the preceding year employed at least 20
contract workers. The idea behind this Act is to prevent denial of job security
in cases where it is feasible and of social security where it is legitimate
legal entitlement.

the sphere of social security, Employees State Insurance Act (ESIA) was
introduced in 1948, providing compulsory health insurance to the workers. The
Act provides for a social insurance scheme ensuring certain benefits in the
event of sickness, maternity and employment injury to workmen employed in or in
connection with, the work of non-seasonal factories. The Act has prescribed
self-contained code in regard to the insurance of employees covered by it.

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