On the day the provisional results of the sixth economic census were released, the Union cabinet approved amendments to three critical labour laws — the Factories Act, 1948, the Apprenticeship Act, 1961, and the Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by Certain Establishments) Act, 1988. In stark contrast to the findings of the NSS 68th round (2011-12), which found annual employment growth to be 1.5 per cent, the economic census estimates the rate of job growth per annum as being 4 per cent between 2005 and 2014 — a two decade high.
The total number of establishments grew 41.7 per cent in the period between the fifth and sixth census. While this is all welcome news, the numbers just aren’t good enough. India adds 12 million people to its working-age population every year, but the total number of jobs only increased by 27 million over the latest census period (eight years). Further, the average number of employees per establishment is a measly 2.2, down from 2.4. While 20 per cent of establishments don’t have fixed premises, 38 per cent operate from residences. So though there is significant job growth (not taking into account employment intensity, which is probably why the NSSO data looks so different), it is mostly in the informal sector.
It is no secret that a large reason for the informalisation of employment — of the 59 million enterprises in India, only 1.1 million are registered companies — is the restrictive and cumbersome labour legislation that drains entrepreneurial energy. In this context, the fact that the government is re-examining the wisdom of existing labour laws, a politically sensitive undertaking, sends a reassuring signal.
The proposed changes will improve the business environment — for instance, the amendment to the Factories Act seeks to raise the overtime work limit and the changes to the Labour Laws Act aim to reduce the record-keeping obligations of small firms. The Factories Act is also sought to be amended to ease norms for employing women on night shifts, a move that may help improve their workforce participation numbers. Similarly, under the approved changes to the Apprenticeship Act, 500 new trades will be brought under its purview and the draconian provisions by which violators could be arrested are sought to be scrapped. This will prove a fillip to the government’s skilling mission.
But in the face of the magnitude of the problem, the changes approved by the cabinet simply don’t go far enough. They are a first step at best.