July 10, 2022

No Minister, you are Wrong on Labour & Employment Statistics

R Karumalaiyan

CENTRAL labour minister, Bhupender Yadav has written an article in The Hindu’s ‘Bussines Line’ on June 23, 2022, under the title - Labour reforms and the rise of jobs. He has argued that “India’s labour regulatory framework has been rigid and hindered the growth of output, investment and employment expansion”. He buttressed his arguments with the reports of four employer associations- Assocham, CII, FICCI and PHDCCI along with a study by V V Giri National Labour Institute.

Before getting into the debate on labour reform viz-a-viz the growth stories that have repeatedly been dished out since the 1990s when the neoliberal policies were first rolled out in India, it would be relevant to recollect the current unemployment scenario in the countries as our minister did portray a rosy picture on the same, whereas the current realities are being more visibly alarming otherwise.

Thirty-one years after that watershed moment in India’s socio-economic history, the country is battling an acute unemployment rate and job losses. In a 2019 report, data analysts at India Spend fou­nd that India had not created adequate jobs since liberalisation ever and 92 per cent of whatever jobs created were in the informal sector!

Thus, alarming figures of unemployment have been recurrent even before the huge dislocation unleashed by the unplanned lockdowns imposed in 2020-21 in the wake of the Covid-19 pandemic. Much before the pandemic, the National Sample Survey Office (NSSO) reported a 6.1 per cent  unemployment rate in 2017-18, the worst in over four decades. The picture has proved more dismal in the ensuing months since April-May of 2020.

For instance, in December 2021, the Centre for Monitoring Indian Economy (CMIE) estimated that nearly 53 million Indians were unemployed, a large proportion of whom were women. The unemployment rate was hovering at 7.91 per cent in December 2021.

The recent anger and the ongoing widespread agitations of our youth that are raging across the country against the Agnipath scheme is nothing but evidently a vindication of the gravity of the alarming unemployment situation. Preceding this virtual revolt by our youth, we have seen so many reports of massive spontaneous protests and agitations by job applicants. Recently in one instance, Railway Recruitment Board has received 1.25 crore applications for mere 35,000 posts.


In total contradiction with our minister’s claims, the V V Giri National Labour Institute Study (Number 122/2017) led by Sanjay Upadhyaya and Pankaj Kumar  did not find any evidence that previous labour law reforms initiated in Rajasthan and other states had succeeded in attracting investment and boosting investment leave alone growth of employment. Rather it had concluded, “So far as expected outcome/impact is concerned from the effected amendments in these statesthe strains on labour are already clearly visible which warrant attention to ameliorate and to offset the resultant hardships and uncertainty faced by the workers at least in the interim period.” We are at loss to understand which study of V V Giri Institute does our minister cite to drive home his point that “the deregulation of labour markets have had a positive impact on the overall growth and employment”?

As the minister is showcasing the Rajasthan laboratory experiments in labour law deregulations as the most ideal one, we would like tobring to his notice one of the more recent research projects on this aspect. The Azim Premji University’s Centre for Sustainable Employment has done an exclusive study on Rajasthan experiments under the title “Labour Reforms in the Indian State of Rajasthan; a boon or a bane” by Diti Goswami and Sourabh Paul, published in January 2021.

In this paper, to quote from the conclusion that the authors arrived at, “Our empirical analysis shows the reforms to have an unintended consequence of the decline in labour use.  The implications regarding employment are similar to those presented by D’Souza (2010);  Kapoor (2014);  Chandru(2014); Chatterjee and Kanbur (2015);  Deakin and Haldar (2015);  Roychowdhury (2019a);  Roy,  Dubey,  and Ramaiah  (2020)  in the sense that higher flexibility (of labour laws)   is associated with weaker employment growth.  Also,  worryingly,   the increased flexibility results in a disproportionate reduction in the directly employed workers.”

According to the “Ease of Doing Business” study published by the World Bank in 2014, only a little over one-tenth of the respondent firms in India had perceived the labour regulations as a major constraint. Research by Kucera (2002) argued that core labour standards of the ILO produce better human capital (that is, the elimination of child and bonded workers), greater efficiency through the labour cost-productivity nexus, and more social and political stability via freedom of association and collective bargaining. Freeman and Medoff (1991) have argued that trade unions contribute to the productive efficiency of a firm through voice channels and also contribute to equitable outcomes in them.

Hence, to accelerate the growth and to provide jobs to all aspirants in the labour market in order to reap the huge demographic dividend of the young and energetic workforce of our country, you must get rid of this pro-corporate, both domestic and foreign, biased policies. Economic growth, as well as employment, have nothing to do with labour reform but are more specifically related to the demand constraints of the market which entails more redistributive measures. Thus, the implementation of the labour codes and rules has no potential to accelerate India’s journey to lead the world’s strongest economies as our minister claims; rather, it would lead to the enslavement of our workers, besides aggravating the situation of depression of consumption to the level of destitution, further contributing to increased depression in job-market as well as employment-generating investment. We would like to remind our minister that India has achieved a higher rate of growth before 2014 without any such drastic labour deregulation in the name of Labour Law Codification as rolled out by the Modi regime in congruence with the interest of big capital at the cost of our Srishti Kartas of our GDP.