The Survey said it compared the number of operating factories employing more than 100 employees in the state, the average number of workers per factory, total output and total output per factory. (HT)
The Survey said it compared the number of operating factories employing more than 100 employees in the state, the average number of workers per factory, total output and total output per factory. (HT)

Economic Survey cites Rajasthan’s labour reform as ideal model to boost jobs, productivity

  • In Rajasthan, the average employee count in factories grew 4.17% in 2017 against a decline of 8.9% in 2013
  • Industries view the labour reforms introduced in Rajasthan as progressive, while workers’ unions say they are anti-worker and regressive

NEW DELHI : Underlining the need for flexibility in labour laws, the Economic Survey 2019 on Thursday cited the Rajasthan model of labour reforms to boost employment and factory productivity.

Taking 2014-15 as the base year when labour reforms picked up pace in Rajasthan, the Economic Survey said the state performed much better in terms of factory output, growth in the number of large factories and jobs creation than the rest of India.

“In 2014-15, the average number of firms with 100 employees or more are similar for Rajasthan and the rest of India. However, following the law change, the number of firms with 100 employees or more have increased at a significantly higher rate in Rajasthan than in the rest of India," said the Economic Survey.

The Survey said it compared the number of operating factories employing more than 100 employees in the state, the average number of workers per factory, total output and total output per factory.

“It can be clearly seen that, for all variables, compound annual growth rate post-labour reforms in Rajasthan has increased significantly vis-à-vis the rest of India," it said.

The Survey said two years before the reforms, the numbers of factories deploying more than 100 workers each in the state were growing on an average 3.65%, and two years post labour reforms, the growth accelerated to 9.33%. For the rest of India, this growth was 4.56% in 2013 and 5.52% in 2017.

Similarly, the average employee headcount in a Rajasthan factory grew 4.17% in 2017 compared to a decline of 8.9% in 2013.

Factory output during the same period grew more than seven times in Rajasthan, the Economic Survey said. The growth rate is a little less than double for the rest of India. The rest of India figure calculation took into account average growth in 20 large states in terms of size and economic activity.

While industries view the labour reforms introduced in Rajasthan as progressive, workers’ union see them as anti-worker and regressive. To reduce trade union influence, the state has amended laws to increase the minimum membership requirement to form a union as 30% of total workmen at an establishment from 15% earlier.

In another change, the state has said that no prior government nod is required for companies employing up to 300 people for firing and laying off workers or shutting down units. The earlier limit was 100 workers. Besides, the state’s laws now mandates that a worker can raise an objection about wrongful termination only within three years. There was no deadline earlier.

The Economic Survey classified 14 states including Punjab, Haryana, Gujarat, Rajasthan, Uttar Pradesh, Odisha and Maharashtra as those with flexible labour laws and seven states including West Bengal, Assam, Jharkhand, Kerala and Bihar as inflexible.

“Studies have found that on an average, plants in labour-intensive industries and in states that have transited towards more flexible labour markets, such as Uttar Pradesh or Gujarat, are 25.4% more productive than their counterparts in states like West Bengal or Chhattisgarh that continue to have labour rigidities," the Economic Survey said.

Former NITI Aayog chairman and economist Arvind Panagariya had praised Rajasthan for its labour reforms that paved way for ease of doing business.


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