 "Economic Survey: A 'virtuous cycle of job creation' via labour reforms")
By simplifying compliance, fostering labour flexibility, and promoting worker welfare, labour reforms in the country have created an enabling environment that balances ease of doing business with the protection of workers’ rights, according to the Economic Survey 2024-25.
Tabled in Parliament on Friday, the Survey further mentioned that together, these measures foster a “virtuous cycle of job creation”, supporting sustainable employment growth and economic inclusivity.
“Deregulation, in general, whether or not related to labour, will boost employment because it helps lower the cost of doing business and allows resources to be used for expanding capacity through more labour and better equipment,” said the Survey.
The Survey presented a comparative study regarding the restrictions on overtime for factory workers in India and other countries. It noted that the current Factories Act, 1948, allows only 75 hours of overtime in a quarter, while countries like Germany (351 hours), the UK (364 hours), and Malaysia (312 hours) allow much higher overtime hours. Meanwhile, the US has no limit on overtime hours.
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“As a result, these laws inadvertently hinder workers’ earning potential, ultimately affecting their financial well-being. Notably, under the new labour laws, seven states — Maharashtra, Haryana, Himachal Pradesh, Odisha, Punjab, Karnataka, and Uttar Pradesh — have increased the ceiling of overtime hours from 75 to up to 144 hours in any quarter,” the Survey said.
Referring to the old labour laws, the Survey notes that India’s labour regulations impose extensive compliance requirements on businesses. For example, the Factories Act, 1948, mandates the placement of spittoons, specifies the materials for toilet paper, and dictates the design of washrooms.
Similarly, other laws, like the Minimum Wages Act (1948) and the Maternity Benefit Act (1961), impose detailed specifications through rules on register paper colours, font sizes on wage slips, and the distance between work areas and crèche facilities.
“Rather than focusing on essential safety and hygiene standards, these micromanaging regulations create unnecessary administrative burdens that hinder business growth,” the Survey read.
Regarding women’s employment, the Survey notes that the existing labour laws intended to protect the rights of women workers have, more often than not, discouraged hiring by creating systemic barriers to their entry into the workforce.
“India’s new labour codes address this by enabling night shifts for women with safety measures, extending 26 weeks of maternity leave to gig and informal workers, and mandating crèche facilities in workplaces with 50 or more employees. The codes ensure equal pay and prohibit gender discrimination in recruitment while allowing women to work in all sectors, including hazardous roles, with safeguards. These reforms will promote gender inclusivity, workplace safety, and social security for women,” the Survey said.
On the employment front, the Survey noted that India has seen good growth in employment in recent years, as highlighted by labour market indicators that show strong signs of post-pandemic recovery and increased formalisation of the economy.
“This growth can be attributed to notable achievements in entrepreneurship, formalisation, skill development, and the transformation of the regulatory framework,” it added.