Eco Survey urges freer labour laws to create jobs, cites Rajasthan example

The Economic Survey of India for the year 2018-19 tabled in Parliament on Thursday has suggested deregulation of labour laws to create more jobs in the country.

The survey report was tabled in Parliament ahead of the Union Budget that is scheduled to be presented by Finance Minister Nirmala Sitharaman on July 5.

The Survey cites the example of the northwestern Indian state of Rajasthan where significantly more number of jobs were created, as compared to the rest of the states, following deregulation of labour law restrictions.

As per the Survey, no major labour reforms were initiated by the states in between the years 2007 and 2014. In the year 2014, Rajasthan was the first state in the country to introduce 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 in labour laws created a more conducive environment for growth of industry and employment generation.

The report further shows that those states which were rigid in respect of their labour laws have not only suffered in all dimensions but have also been unable to create enough employment. These states have also failed to attract adequate capital investment which is necessary for job creation.

States that have made the transition towards flexible labour laws have been found to be 25.4 per cent more productive than their counterparts in other states that continue to reel under rigid labour laws.