Opinion Express View on Tamil Nadu labour laws: Be mindful of workers’ concerns

In February, the Karnataka state assembly passed amendments to The Factories Act of 1948 to bring flexibility in the labour regime for industry. The changes carried out, ostensibly aimed to facilitate greater investments by Apple’s vendors such as Foxconn, permit firms to extend the working hours, increase overtime, and allow women to work during night shifts. Subsequently, in April, its neighbouring state, Tamil Nadu also passed similar amendments aimed at providing greater flexibility to industry in its production activities. However, following protests by political parties and labour unions, the state government has now unfortunately put the bill on hold. While the government had previously sought to assuage their concerns and Chief Minister M K Stalin has now said that worries of the unions will be taken into consideration, this entire episode only underlines the challenge facing governments — how to ease labour law restrictions to provide greater flexibility to industry while being mindful of the welfare of labour.

The attempts by these two states to ease certain contentious provisions of labour laws come at a time when multinational firms are looking to move their production out of China as part of their China plus one strategy in order to reduce their risks. India faces stiff competition in this regard from countries like Vietnam, Indonesia and Bangladesh. As the country steps up its efforts to attract foreign investments, not only the Union government, but state governments too need to take decisive steps. Since state governments exercise control over vexing issues like land and labour, they need to be equally motivated to undertake the necessary regulatory and administrative changes to attract investment. In this regard, the competition between these two states to attract foreign investment is welcome. Perhaps on seeing the benefits that flow from higher investment, others will be nudged into following suit.

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However, this episode underlines the tricky terrain of labour reform. While lower wages and flexibility in labour laws improve the attractiveness of India as an investment destination, in societies where labour has little negotiating power, there is a concern of workers being exploited. Governments would do well to engage in conversations with all stakeholders. Fears of workers need to be assuaged. But there can be no debate that both central and state governments need to facilitate the flow of investments in the economy to create jobs for the millions entering the labour force each year.