Reforming labor laws.

AuthorDesai, Meghnad
PositionGuest-Editor's Foreword

India has for several decades now got itself into a situation of denial and delay in the matter of reforming the labor laws. The laws were passed some before independence and some after on the mistaken analogy of a developed industrialized country with a majority of its workforce in large factories. Socialist thought, reformist as well as revolutionary, had the industrial worker at its centre. The capitalist system was supposed to be sustained by exploitation of the worker-the proletariat--and hence regulation of the employer-worker relationship took prime place in reform legislation.

India has a slim minority employed in the organized sector, barely 5 % of its total work force. Yet the rights of this tiny minority are guarded by a phalanx of laws and regulations which has had the effect of retarding manufacturing growth in India. The principal legislations concern the ability to hire workers on non-permanent contracts, and, as that is difficult, the even more difficult task of terminating their employment on any grounds whatsoever. Firms find it difficult to liquidate themselves as that may cause unemployment of their workers. To this may be added over a hundred annual inspections and enforcement of regulations which add to the transactions costs of doing business...

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