Nageswaran: The benefits of India's labour reforms must reach those who will shape our economic progress

Over the next two decades, millions of young Indians will join the workforce each year, and whether India’s demographic edge becomes a national dividend or a missed opportunity will depend on whether work becomes more attractive, secure and enabling.

The Indian economy today is more diversified and dynamic than ever. Manufacturing is expanding, buoyed by infrastructure investments and targeted industrial programmes.

Yet, the nature of work is evolving. Many enterprises, particularly in labour-intensive sectors, hesitate to hire directly or at scale because the current compliance environment is complex, unpredictable and costly. This leads to a greater reliance on indirect or short-term hiring, which limits young workers’ ability to build stable careers and develop long-term capabilities.

Meanwhile, youth preferences have also changed. Many are drawn to flexible gig-based services that provide immediate income, or they wait for opportunities that align with their expectations of pay, dignity and living conditions. These social realities mean that India must work harder than before to make formal employment attractive, predictable and viable.

In this context, the government’s most consequential step for making India’s labour market vibrant, dynamic and a jobs-creating machine came just days ago: the long-awaited notification of the four labour codes.

For decades, India’s labour regime grew more complex than coherent, placing burdens on both workers and employers. A web of overlapping laws led to confusion rather than protection, discouraging formal hiring while leaving many workers unprotected.

The consolidation of these laws into four clear codes that govern wages, industrial relations, social security and occupational safety advances the causes of worker safety, dignity and employment generation.

If India is to generate employment on the scale required, the framework that governs work must be rooted in three principles:

One, predictability: Workers and enterprises alike benefit from clear and consistently applied rules. Predictable processes reduce disputes, inspire confidence and encourage expansion.

By harmonizing definitions and reducing fragmentation, the codes create a more stable environment for workers and enterprises. Clear rules reduce disputes and allow both sides to understand their rights and obligations.

Two, simplicity: A straightforward compliance system helps enterprises of all sizes operate formally. When rules are easier to follow, protections become more meaningful because compliance becomes universal rather than selective.

The consolidation of labour laws makes compliance more straightforward, especially for small and medium enterprises that have significant potential to generate jobs but often struggle with administrative burdens.

Three, affordability: Compliance should not be so burdensome that it discourages formal hiring or pushes activity into informal channels. A system that is too costly ultimately limits job creation and reduces opportunities for young people.

By reducing duplication and aligning procedures across wages, social security, safety and industrial relations, the codes lower the cost of compliance. This encourages formal hiring and helps shift more workers into stable roles.

These principles directly support employment generation and the labour codes embody these principles of a forward-looking employment framework. A regulatory environment built on predictability, simplicity and affordability encourages enterprises to grow and offer people long-term roles. Workers, in turn, gain access to skill-building opportunities and avenues for productivity growth as well as greater economic mobility.

The Government of India’s effort to consolidate numerous labour laws into four labour codes reflects an important step toward modernizing the legislative foundation of work. These codes, drafted after extensive consultation, seek to create clarity where complexity once prevailed.

The labour codes also expand social security to a wider pool of workers, including those in such emerging sectors as platform and gig work. This aligns with the broader goal of ensuring that India’s youth have access not only to jobs, but to protection, capability-building and mobility.

However, change does not occur solely on code notification. Implementation will decide success. Employers must feel supported rather than scrutinized. Workers must experience real improvements on the ground—not just on paper. Government, unions and industry will need to cooperate rather than collide. Regulation must maintain an open dialogue and foster continuous reform.

If India succeeds, the prize is profound: a labour market that is not built on precariousness, but on income prospects and trust between employers, employees (present and future) and a government that creates a transparent, fair and proportionate legal and regulatory environment. A future in which manufacturing and services alike offer upward mobility, where dignity is not demanded but assumed and where millions see employment not as mere subsistence but as a pathway to a life of dignity, prosperity and mobility.

India is now at a turning point. The choices made in labour governance will determine whether the country builds an employment ecosystem worthy of its young people. As India’s economic momentum holds strong, the moral and strategic imperative is to ensure that the benefits reach those whose aspirations will define India’s path in the decades ahead. The labour codes offer an opening—a chance to match economic ambition with human dignity.

These are the author’s personal views and this is the first of a two-part series.

The author is chief economic advisor to the Government of India.