India's newly notified labour codes can act as an economic catalyst—but much else must fall in place

A major gain for the Indian economy from Friday’s move is at the normative level; for example, EU officials who must ascertain our labour standards for commercial engagement now have to deal with fewer central laws, instead of 44.

While 29 have been subsumed in the four notified codes—on wages, industrial relations, social security and occupational safety and health—several others remain, such as a law against sexual harassment at the workplace, a ban on child labour and legislation on emigrant workers.

At the level of states, over 100 labour laws remain on the books. Those that are in conflict with or have been rendered redundant by the four central codes need to be repealed. Central trade unions have opposed the new codes; while the Bharatiya Mazdoor Sangh has stayed away from formal protests, it has voiced misgivings too.

Although it might be hard to get trade unions fully on board, the Centre could make a gesture of conciliation by convening a meeting of the Indian Labour Conference, which last met in 2015.

A significant reform is that the codes address a fast-enlarging class of jobs: gig work. Such platforms maintain that they are willing to set aside funds for the social security of their gig workers, provided a legal framework is available. We have one all but ready now, even if it is only at the front end.

Back-end complements must not lag. If all gig employees wish to save for retirement by opening provident fund (PF) accounts, can the PF organization handle the load? Can the Employees’ State Insurance (ESI) network of hospitals serve the millions more who may gain health coverage as swathes of informal work turns formal? Has the Centre worked out how to get more healthcare providers enrolled as ESI contractors?

That said, the very widening of a safety net across India’s workforce is a good sign. Since upward mobility works in support of the economy, closing the split between formal and informal jobs should pay off.

Employers, of course, need to do their bit. E-commerce and other gig platforms, for instance, could hike their delivery charges to fund social security payments for workers. And now that patriarchal curbs on work done by women are to be dropped, a major relief, employers must offer enabling amenities and security.

For a single enterprise, wage bills are a cost, but for the economy as a whole, better placed workers result in greater overall demand for what it produces. So the rationality of savings on labour, if pursued by all employers, works against GDP growth.

Yet, the appeal of labour as a cost that’s more variable (or adaptable) than fixed is hard to deny, especially with AI tools offering to reset business operations. New norms may give our labour market added flexibility, but since they formalize much of what’s already in practice, their scope for a cost-efficiency boost seems limited.

Productivity would have to be raised through investment in skills and management ideas, with private-sector innovation and its profit motive driving job generation. Broadly, though, India’s labour reforms are a cue for employers to focus on their collective interest—which is to have a well-backed workforce that can spend more freely and reach for better lives.