S. Mahendra Dev: India’s labour codes aren't just pro- workers and growth, they aim to deliver on multiple counts

It is also imperative that labour is not disadvantaged by excessive regulation, which hinders the growth of labour-intensive manufacturing.

The implementation of India’s four labour codes on wages, industrial relations, social security and occupational safety, health and working conditions represents a historic step towards protecting workers, increasing productivity and easing labour law compliance.

Over the last decade, the government has taken bold steps to encourage manufacturing, including its production-linked incentive scheme, ‘Make in India’ programme, National Logistics Policy, PM Gati Shakti and others. Thanks to its sustained infrastructure push, logistics costs have fallen.

Also, trade agreements are increasing foreign market access and contributing to export diversification. Labour reforms are part of a holistic approach to policy reforms aimed at enhancing growth.

Uncertainty is a big deterrent to private investment, as firms hesitate to commit capital when rules vary across jurisdictions, compliance costs are unpredictable or labour regulations change frequently. A fragmented regulatory landscape increases the risk of future liabilities and erodes the ability of firms to plan long-term expansion.

In this context, India’s labour codes help create a unified and predictable regulatory framework across the country by rationalizing 29 existing labour laws.

Consolidating numerous central and state-level laws reduces ambiguity, harmonizes definitions and standards, and eases compliance. Uniformity lowers transaction costs, enhances the ease of doing business and gives investors confidence that labour rules will be applied consistently over time and across states.

Thus, the codes contribute to a more stable policy environment that encourages firms to grow and enables India to better leverage its demographic and competitive advantages.

The formalization of India’s workforce is well underway. This is reflected in record-high additions to payrolls under the Employees’ Provident Fund Organisation. Labour reforms will act as a force multiplier for the formalization process.

Firms that scale up successfully will drive employment and productivity gains. By simplifying processes, the labour reforms encourage firms to invest and scale up. This not only increases formalization, but also addresses the ‘missing middle’ problem of Indian manufacturing, arising from smaller firms finding it difficult to transition to middle-sized status.

Increasing women’s workforce participation is crucial to harness India’s demographic dividend. The labour reforms facilitate a gender-inclusive workplace. Women will now be able to work night shifts subject to their consent and provisions for safety. This will offer women greater opportunities and give employers the flexibility needed to optimize their production processes.

For labour welfare too, the codes mark a big leap. There are provisions for a national wage floor, free annual health checkups, timely payment of wages, social security benefits through fixed-term employment and mandatory appointment letters. For the first time, gig and platform work has been defined and provisions made to ensure social security coverage for those doing it.

Further, the government had earlier introduced initiatives such as ‘One Nation One Ration Card.’ Strengthening this focus on internal migrants, the definition of ‘inter-state migrant workers’ now covers those employed directly, through contractors, or those who migrate on their own. These workers will now be entitled to portability of social security benefits.

All these provisions highlight the extent to which the new labour codes are aligned with the evolving structure of the Indian economy. As participation patterns shift, new forms of work emerge and mobility across states increases, labour regulation must adapt to ensure both protection and productivity.

By encouraging the participation of women in all sectors, recognizing gig workers under the social security framework and strengthening the rights and portability of benefits for migrant workers, the codes acknowledge the realities of a more mobile, digital and services-driven labour market. This helps build a regulatory architecture that is flexible, inclusive and forward-looking.

For sustained employment generation, it is essential to reduce unnecessary regulatory burdens while keeping worker welfare central. The new labour codes strike this balance. By simplifying compliance, harmonizing definitions and rationalizing procedures, they ease the operational load on firms. Also, by strengthening social security, expanding coverage and protection, they safeguard worker interests.

In combining these objectives, the codes emerge as both pro-growth and pro-labour, thus supporting investment, encouraging formalization and promoting a more efficient and equitable labour market.

The author is chairman, Economic Advisory Council to the Prime Minister (EAC-PM).