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Legislative amendments to the labour laws were signed of by the NDA govt’s Union Cabinet last week. Photo: Pradeep Gaur/Mint
Legislative amendments to the labour laws were signed of by the NDA govt’s Union Cabinet last week. Photo: Pradeep Gaur/Mint

A happy consensus on reforms

Rajasthan and Haryana are moving to reform labour laws, despite the states being ruled by parties at either ends of India's political spectrum

Last week, there was a happy coincidence. On the day the Union cabinet signed off on the first round of long overdue reforms in labour laws, the Rajasthan state assembly, which had kicked off the entire debate, approved the legislative amendments.

Critics would be quick to point out that both governments are headed by the Bharatiya Janata Party (BJP)—it leads the coalition, the National Democratic Alliance (NDA), at the centre and its government in Rajasthan enjoys a three-quarter majority. That is correct. But, it is also a fact that Haryana, a state ruled by the Congress and heading for polls, proposed amendments to the very same laws: Factories Act, Apprentices Act, and Returns and Registers Act.

It is, as a Union cabinet minister pointed out, low hanging fruit, compared with, say, reforming the contentious Industrial Disputes Act. Yet it is an important change in that not only does it create a friendlier environment for employment, it also, equally importantly, contributes in altering the national mindset. In this a political consensus between the two principal national parties, the BJP and the Congress, augurs well.

It is extremely important for political consensus on broad policies. (Like foreign minister Sushma Swaraj pointed out at her joint press conference with US secretary of state John Kerry that foreign policy is a continuous process and does not change with governments.) Abrupt reversals can cause complete chaos, especially given that India is rapidly assuming the size of a mid-sized economy. It can be a nightmare not just to investors, but also to other stakeholders.

So far the so-called pro-labour policies have been allowed to hold the economy hostage while restricting employment to a privileged few in the organized sector. Something similar to the misguided licensing policy that shackled the growth of Indian industry and alongside the private sector till its accelerated dismantling began in 1991. Coincidentally, both the BJP and the Congress—then in the driver’s seat in government—were similarly aligned in thinking.

The desired changes in labour laws seek to make employment opportunity (especially by relaxing the rules of the Apprentices Act), an equally important objective of policy as security of those employed. At present, given the skewed nature of the debate, the two are weighed against each other as an either-or option. Actually they are complementary. In any case the security of labour has become a misnomer with employers constantly resorting to contract employment and temporary recruits to avoid potential litigation and labour unrest associated with tenure employees. Not only has this trend weakened the organized labour movement, it has also exposed them to exploitation.

The NDA is proposing to introduce the legislation for approval of Parliament in the ongoing monsoon session. It will be a first test for the otherwise tacit consensus on reforms between the BJP and the Congress. With Haryana’s overt support for the reforms, it is likely the Congress will go along—key to the NDA ensuring a smooth passage in the Rajya Sabha where at present it is in minority.

A similar test awaits the changes proposed in the insurance laws in the country. After proposing the long-awaited increase in the cap on foreign investment limits in the budget, the government is now moving to effect 97 amendments to the original Bill—the Insurance Laws (Amendment) Bill, 2008—in this session of Parliament.

Officially, the Congress has not opposed the amendments, which is good news, even though it has not explicitly supported them either. The amendments actually complete a full circle. The idea of a 49% cap for foreign investment was first proposed by the first NDA with Yashwant Sinha as finance minister. The Congress, however, opposed it and the government had to peg it at 26%.

Thereafter, when the Congress-led United Progressive Alliance (UPA) came to power, they wanted to similarly raise the FDI limits. But this time the BJP cussedly opposed it and given the limitations of a coalition, the UPA simply dropped the idea.

Now once again roles are reversed, though expectations are that the Congress will go along—especially since the changes have come to be associated with the UPA, and opposition at this stage will be assumed to be mere pique. Frankly, with mere 44 MPs in the Lok Sabha, the Congress is in no position to dictate terms, especially having lost its moral right to be the leader of the opposition.

Regardless of the logic, the growing consensus on economic policy, a happy coincidence or otherwise, is welcome.

Anil Padmanabhan is deputy managing editor of Mint and writes every week on the intersection of politics and economics. Comments are welcome at capitalcalculus@livemint.com

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