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Thursday, August 18, 2022

Let’s track the small bangs

Labour law reform isn’t only about amending Chapter VB of the Industrial Disputes Act. Smaller changes are underway, even in the states where you would least expect them

Written by Bibek Debroy
August 20, 2015 12:20:39 am
Labour law reform, Labour law, Industrial Disputes Act, department of industrial policy and promotion, DIPP, DIPP (Accenture), Ficci (Bain), CII (KPMG), Planning Commission (Deloitte), World Bank, indian express columns In addition to the 285 questions, there are 98 recommendations for state governments. (Illustration by C R Sasikumar)

By now, most people have a reasonably good idea about the ease of doing business initiative pushed by the department of industrial policy and promotion (DIPP). There is an antecedent that goes back to May 2014 and there have been several studies on the issue — by the DIPP (Accenture), Ficci (Bain), CII (KPMG) and the erstwhile Planning Commission (Deloitte). There are also the doing business indicators of the World Bank, based on questions in 10 (or, depending on how you count, 11) areas. In 2015, in the World Bank rankings, India came 142nd out of 189 countries. It is not that the World Bank’s methodology is beyond reproach and in 2015, it seems to be more tentative about its methodology than used to be the case earlier.

More importantly, unless we focus on defence, railways, highways, major ports and other such sectors, no one does business in India. Business is done in India’s states. Therefore, one needs to know how they perform. Last year, in 2014, the DIPP/ Accenture report identified six (seven) best practices — management of indirect taxes in Karnataka, labour management in Maharashtra, single-window clearance in Maharashtra, land interventions in Gujarat, e-governance in Gujarat and single-window clearances in Rajasthan and Punjab.

If you ask around, without doing proper sample surveys, about which states are business-friendly, you will probably be told: Gujarat, Tamil Nadu and Maharashtra. If you ask about states that have improved or done well in labour law reform, you will probably hear the names of Rajasthan, Madhya Pradesh, Uttar Pradesh and Chhattisgarh. The DIPP’s doing business initiative also focuses on simplifications that the Union government has carried out. Let’s ignore those and focus on the states. For doing business purposes, there are eight heads: One, setting up a business; two, allotment of land and obtaining a construction permit; three, complying with environment procedures; four, complying with labour regulations; five, obtaining infrastructure-related utilities; six, registering and complying with tax procedures; seven, carrying out inspections; and eight, enforcing contracts.

Straddling these eight heads, there are now 285 questions to be answered by state governments. The answers are binary: Yes or no. Have you done this, or not? To give an example, a state government should “publish a comprehensive checklist for all requirements for no objection certificates, licences, registrations, environment clearances and land- and building-related approvals and certificates”. Either a state government has complied, or it hasn’t. Though it is a step in the same direction, this isn’t what the DIPP (Accenture) did in 2014, or what the World Bank seeks to do. Right now, state governments respond to specific questions. This isn’t the same as respondents (read recipients) reacting to business climate in a state, for better or worse. Such responses require administration of questionnaires to those selected for a survey, and surveys are resource- and time-intensive. Stated differently, when undertaken, surveys will validate or reject what state governments proclaim. They supplement what the DIPP is attempting now and both have utility.

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In addition to the 285 questions, there are 98 recommendations for state governments. The quote I cited is one such recommendation. For setting up a business, there are 12 things that should be done (deadlines between January 31 and March 31). The remaining 86 out of the 98 are spread across the other seven heads, with set timelines for each. You will find details on the DIPP website.

What I find interesting is the pressure this has led to. Let’s take labour compliance as an example. (Labour reform doesn’t only mean Chapter VB of the Industrial Disputes Act.) By June 30, state governments should have developed an online portal for labour law compliance, registration and renewal of licences; established labour arbitration courts in select industry clusters; synchronised multiple inspections under labour laws; and consolidated and rationalised all state-specific labour laws. Let’s pick a state one doesn’t usually associate with labour law reform: West Bengal. On June 18, the West Bengal labour department issued five separate notifications, all providing for self-certification under different statutes. Each of these notifications stated: “Whereas ‘ease of doing business’ is a priority of the state government; and whereas there is a need for simplification of procedures for enabling facter [the typo exists in the original, should be ‘faster’] clearances under various statutes and rules; and whereas there is scope for hassle-free statutory clearances for creating a conducive environment for rapid industrialisation…” Those arguments have always existed. I don’t think these notifications would have materialised but for the prospect of being measured and rated.

There were notifications before June 18, too. On June 15, the labour department issued a notification on simplification and rationalisation of inspections across a range of labour statutes. An order from May 21 ended unauthorised “surprise” inspections. An earlier circular (March 3) tightened the window for submitting inspection reports. For labour laws, an order from October 30, 2014 introduced a single-window system. Labour law reform isn’t only about statutes on industrial relations, more specifically, the Industrial Disputes Act. People incessantly clamour about the lack of “big bangs” on labour law reform, alluding to Chapter VB of the Industrial Disputes Act and the fact that it hasn’t been amended by Parliament. However, there is quite a bit happening outside the ambit of industrial relations, even in the states where you would least expect it. I personally think pressure from the DIPP has worked and has contributed to these changes, apart from the obvious point about competing to attract investments. If one gives up the single-minded obsession with the Industrial Disputes Act, I don’t think life is that dismal. This is also true of the other factor, land. But that’s a different story.

The writer is member, Niti Aayog. Views are personal

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First published on: 20-08-2015 at 12:20:39 am
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