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   "Labour reforms in India, in the context of economic
  liberalization and globalisation, are much desired, but
  also feared and misinterpreted. The issue has been a
touchy one ever since the liberalisation era began in the
 early 1990s. The Common Minimum Programme (CMP)
   of the United Progressive Alliance (UPA) promises to
   carry out much awaited labour reforms in the Indian
  economy. The CMP has clearly indicated the need to
       streamline labour laws and enact Employment
  Guarantee Act. However, implementing these reforms
 would require much imagination and political will. The
 previous government had also proposed certain labour
reforms but could not muster the courage to carry them
   The need to enact labour reforms to compete
    with other countries arises because of the
    following reasons:
   Despite the advantage of cheap labour, the
    Indian textile industry's productivity is low
    compared to China and other major exporting
    countries because other exporting countries
    have set up giant manufacturing capacities
    which bring improved productivity while in India,
    exporters farm out their manufacturing to
    smaller units which results in low productivity
    and quality.
   Recent trend in garments is for 'smart clothes',
    which require better equipment and skills as
    otherwise the Indian exporter will lose out on
   The ID Act states that if a company
    employs more than 100 workers, the
    company cannot close shop without the
    permission of the government. Further
    appointment of contract labour, which is
    crucial to the garment industry, is not
   An analysis of India's labour laws such as the ID
    Act has indicated that such legislation, enacted
    to protect worker interests, actually leaves them
    worse off. Over the years, the statutory
    protections of the ID Act neither protected
    employment in the organised sector, which
    employs more than 100 workers, nor did it
    adequately address their compensation issues in
    establishments that turn sick.
   This is evidenced in the cases of textile mills of
    Mumbai and Ahmedabad where workers have
    been denied their terminal benefits as the
    companies continue to languish as sick units.
   India's share of the global garment business is
    2.75 per cent and under the new trade regime it
    has the capability to capture 6 per cent of the
    business by the year 2010. To achieve that,
    additional capacities need to be built up. The
    money for additional capacities can come from
    the Indian public through the IPO route or
    through FDIs.
   The catch however, is that neither the Indian
    entrepreneurs nor the foreign ones are
    particularly keen to set up plant and machinery
    in India owing to the archaic labour laws existing
   Some reforms have been initiated in the past
    five years but the Industrial Disputes (ID) Act,
    1947, which is the major bone of contention,
    has been left untouched.
   The ID Act makes provisions for the
    investigation and settlement of industrial
    disputes. When any employer discharges,
    dismisses, retrenches or otherwise terminates
    the services of a workman without complying
    with the conditions of retrenchment provided in
    the ID Act, the dispute or difference that can
    arise as a result between the workman and the
    employer is deemed to be an industrial dispute.
   A commission, called the Second National Commission
    on Labour (SNCL) was set up to look into the various
    aspects of labour laws and also the impact of
    globalisation on labour.
   SNCL's recommendations were submitted about a year
    ago. The report accepted globalisation and liberalisation
    processes as something that couldn't be wished away. It
    recommended the unification of all existing legislation,
    including the Industrial Disputes Act and the Trade
    Unions Act.
   SNCL has recommended that the management's demand
    on closure, lay-off, etc. whittling the number to 300, as
    an unfettered option. On contract labour, the tenor of
    the report is ambiguous, seeking to create distinction
    between core and non-core activities. The report
    recommends disallowing of contract labour in core
    activities except to meet sporadic demands. However,
    neither core nor non - core activities have been defined.
   The SNCL further recommended that if employees make
    an application for closure, permission will be deemed to
    be granted if that approval has not been granted within
   If India wishes to shine better, it has to boost
    the marketability of its human resources. India's
    labour laws have to work towards `drawing in'
    human resources — entrepreneurial talent and
    employees — into the market so that natural
    resources and savings will follow.
   When natural resources and savings follow
    human resources into the market, the nation's
    marketable and measurable output rises. If
    labour laws work towards `keeping out' human
    resources from the market, natural resources
    and savings too will stay outside the market.
    The nation's non-marketable and unaccountable
    output may rise, if at all.
   The reform of the economy began 12
    years ago, but significant labour reforms
    have yet to be initiated. Policy-makers and
    lawmakers have to enunciate new policies
    that would allow India's human resources
    to play the leadership role in growing the
    economy. It is time for change. India
    needs an `economic approach' to labour
    laws because human effort is the principal
    determinant of economic well being.

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