Swarajya Logo
Swarajya Logo
Politics States Economy Society Business Culture Infra Defence World Books Ideas Science Technology Heritage Archives Legal Movies Sports
  • Our Views
    Politics States Economy Society Business Culture Infra Defence World Books Ideas Science Technology Heritage Archives Legal Movies Sports
  • Magazine
  • Store

About Swarajya

Swarajya is a publication by Kovai Media Private Limited.

Swarajya - a big tent for liberal right of centre discourse that reaches out, engages and caters to the new India.

editor@swarajyamag.com

Useful Links

  • About Us
  • Subscriptions Support
  • Editorial Philosophy
  • Press Kit
  • Privacy Policy
  • Terms of Use
  • Code of Conduct
  • Plagiarism Policy
  • Refund & Cancellation Policy

Useful Links

  • About Us
  • Subscriptions Support
  • Editorial Philosophy
  • Press Kit
  • Privacy Policy
  • Terms of Use
  • Code of Conduct
  • Plagiarism Policy
  • Refund & Cancellation Policy

Participate

  • Contact Us
  • Write for us
  • Style Guide
  • Jobs

Stay Connected

  • Artboard 2 Copy 6Created with Sketch.
    Artboard 2 Copy 10Created with Sketch.
    Artboard 2 Copy 7Created with Sketch.
    Artboard 2 Copy 9Created with Sketch.
  • Andriod Logo
  • IOS Logo

Ideas

Labour Reforms With A Subsidy Smokescreen: A Case Of Signal Left Turn Right 

Shreyas BharadwajThursday, June 23, 2016 5:57 pm IST
AFP/ Getty Images
AFP/ Getty Images
AFP/ Getty Images
  • The Cabinet has approved a ‘new package’, aimed at the Textile and Apparel sector
  • Along with this package, labour reforms are also being introduced. These moves may pave the way for changes in other areas like the food processing and steel sectors
  • Yesterday, the Cabinet approved a ‘special package’, which is aimed at increasing employment generation and exports from the Textiles and Apparel sector. As with any government package, the usual subsidies are being offered:

    One, an additional 10 percent Technology Upgradation Funds Scheme subsidy for garment factories, which is above the already existing 15 percent subsidy.

    Two, an additional 3.67 percent EPF’s employer contribution (over and above the government 8.33 percent, already in place).

    Subsidy outflow from the package
    Subsidy outflow from the package
    Subsidy outflow from the package

    Every new administration thinks putting more taxpayer money into the textile sector will be a good way to generate employment and encourage more investment. The Narendra Modi government is no different. However, these subsidies are NOT the most important part of the textile package. ‘Labour reforms’ is a part that has mostly gone unnoticed by the media, except by the Financial Express.

    With an eye on the elections in Uttar Pradesh and keeping in mind the fact that the BJP doesn’t have the numbers in the Rajya Sabha yet, a GoM headed by Arun Jaitley had asked the Bandaru Dattatreya-led Labour and Employment Ministry to put a brake on reforms. These changes would have enabled employers to retrench upto 300 workers (in the case of an emergency), women to work in night shifts, shops to open round the clock and much more. By stalling it, the government seems to be going through an indirect route wherein they introduce labour reforms to targeted sectors, while clubbing it with a subsidy boondoggle.

    The special package also includes the following:

    One, overtime hours for workers now allowed to upto 128 hours per quarter. Earlier, the limit was 50 hours per quarter. This is a 156 percent increase.

    Two, introduction of Fixed Term Employment- along with parity between fixed-term and permanent workers.

    Three, employee’s contribution to EPF will be optional if they are earning less than Rs 15,000 per month.

    T N Ninan points out in The Turn of a Tortoise: The Challenge and Promise of India’s Future:

    ‘…India’s labour laws come in the way of flexible manning. Nor does the law allow freedom to operate longer shifts (as an exporter explained, workers are more productive towards the end of the day than in the first hour or two). Whatever the reason, buyers surveyed by McKinsey, the consulting firm, said that while the majority were planning to shift some of their sourcing away from China, they favoured Bangladesh, Vietnam, Indonesia and Cambodia as new destinations. India did not figure in the list.’

    Increasing the overtime limit by 156 percent will certainly help increase the productivity of labour in the textile sector. The change, along with the introduction of Fixed-Term Employment, will contribute to bringing in flexibility in manning decisions and will go a huge way in increasing employment in this sector. The lack of flexibility in manning decisions is one of the important reasons that textile units stay small.

    As the Chief Economic Adviser Arvind Subramanian and Rashmi Verma point out: ‘...an estimated 78 per cent of firms in India employ less than 50 workers with 10 per cent employing more than 500 workers. In China, the comparable numbers are about 15 and 28, per cent respectively.’

    Source-  Financial Express article by the CEA and Rashmi Varma
    Source-  Financial Express article by the CEA and Rashmi Varma
    Source- Financial Express article by the CEA and Rashmi Varma

    Large textile units are more productive and efficient than the smaller ones. Indian labour market regulation forces companies to stay small so as to escape the onerous regulations they will have to follow, if they become significant. These actions impact our competitiveness in international markets. As of now, much smaller countries like Bangladesh and Vietnam contribute a much larger share than India. One should think about how effective government subsidies for this sector have been over the years.

    The third part of the labour reform is yet to make the employee’s share of EPF contribution optional for workers earning less than Rs 15,000, will primarily help the unskilled textile workers. They will now have the option of taking home a greater pay (e.g., women in families migrating from villages to cities). Given all the above, employers will now have an incentive to ramp up the size of their operations by increased investment. The ratio of jobs to investment in the textile and apparels industry is the highest among all Indian industries, at 31.1 jobs per million investment. It is rational to expect a strong employment growth in this industry. This helps to increase the competitiveness of the industry at a time when we will soon face relative tariff disadvantages in key export markets.

    

Source- Financial Express article by the CEA and Rashmi Varma
    

Source- Financial Express article by the CEA and Rashmi Varma
    Source- Financial Express article by the CEA and Rashmi Varma
    

Source- Financial Express article by the CEA and Rashmi Varma
    

Source- Financial Express article by the CEA and Rashmi Varma
    Source- Financial Express article by the CEA and Rashmi Varma

    Finally, the most significant aspect of yesterday’s decision is that the Union Government has succeeded in pushing a right amount of labour reforms through special packages for targeted sectors, without much opposition. We will most probably see more such reforms, aimed at other areas like food processing and steel.

    It is pertinent to note that NDA states other than Rajasthan, Gujarat and Madhya Pradesh, like Haryana and Jharkhand, have taken up the fight concerning labour reforms. Gujarat also allows relatively relaxed labour regulation in National Manufacturing and Investment Zones. As @centerofright points out, they can also allow relaxed rules in Coastal Economic Zones. The government seems to be interested in labour reforms but doesn’t want to say it openly.

    Tags
    labour laws
    labour regulations
    Textile Industry

    Comments ↓

    An Appeal...


     

    Dear Reader,

     

    As you are no doubt aware, Swarajya is a media product that is directly dependent on support from its readers in the form of subscriptions. We do not have the muscle and backing of a large media conglomerate nor are we playing for the large advertisement sweep-stake.

     

    Our business model is you and your subscription.  And in challenging times like these, we need your support now more than ever.

     

    We deliver over 10 - 15 high quality articles with expert insights and views. From 7AM in the morning to 10PM late night we operate to ensure you, the reader, get to see what is just right.

     

    Becoming a Patron or a subscriber for as little as Rs 1200/year is the best way you can support our efforts.

    Get Swarajya in your inbox.


    Magazine


    Swarajya Magazine Cover Image
    Merchandise

    Merchandise


      Politics

      Not Like The Old Times: BJP's Feeble Victory In Rajasthan (Part II)

      Not Like The Old Times: BJP's Feeble Victory In Rajasthan (Part II)

      Venu Gopal Narayanan
      44m

      'Cash For Query' Row: Mahua Moitra Expelled From Lok Sabha As Lower House Accepts Ethics Panel's Recommendation

      Swarajya Staff
      7h

      Shinde Government's Push For Maratha Quota Triggers Resignations In Maharashtra State Backward Class Commission

      Swarajya Staff
      8h

      Economy

      Enough Of Big Bang Reforms? No Major Announcements In Next Budget, "Wait Till July 2024", Says Nirmala Sitharaman

      Enough Of Big Bang Reforms? No Major Announcements In Next Budget, "Wait Till July 2024", Says Nirmala Sitharaman

      Nishtha Anushree
      1d

      ₹58,378 Crores! Govt Set To Open Taps On Additional Welfare Spending With 2024 In Mind

      Swarajya News Staff
      2d

      India Anticipated To Be Fastest Growing In Next Three Years, Set to Become Third Largest Economy By 2030: S&P

      Nishtha Anushree
      3d

      Defence

      On This Day, In 1971, Indian Military Keeps Up Pressure: With Intense Armour Clashes In Western Pakistan, While Second Naval Raid On Karachi Looms

      On This Day, In 1971, Indian Military Keeps Up Pressure: With Intense Armour Clashes In Western Pakistan, While Second Naval Raid On Karachi Looms

      Ujjwal Shrotryia
      5h

      Indian Army Sets Sight On Future: Developing AI And Cybersecurity Tech; Can Now Interpret Enemy's Electronic Order Of Battle

      Swarajya Staff
      11h

      Indian Air Force's C-17 Globemaster-III Transport Aircraft Successfully Drops DRDO-Developed Heavy Airdrop Platform

      Swarajya Staff
      12h

      World

      After Becoming Longest-Serving President, Putin Announces Running For Election In Russia Again

      After Becoming Longest-Serving President, Putin Announces Running For Election In Russia Again

      Nishtha Anushree
      4h

      Maldives Skips Key Indian Ocean Security Meet With India And Other Neighbours, Opts For Chinese Forum Amidst Growing Tilt

      Swarajya Staff
      9h

      Azerbaijan President Accuses India And France Of Fuelling Armenia's Fire Of 'Revenge' For Loss In Nagorno-Karabakh War

      Swarajya Staff
      9h

      Culture

      From Jodhpur To Ayodhya On Bulls, Preserved Through Herbs: The Story Of Ghee To Be Used For Ram Lalla's First Aarti

      From Jodhpur To Ayodhya On Bulls, Preserved Through Herbs: The Story Of Ghee To Be Used For Ram Lalla's First Aarti

      Nishtha Anushree
      4h

      ‘Garba Of Gujarat’ Declared As Intangible Heritage By UNESCO

      Arun Kumar Das
      2d

      Gujarat's Garba Is Now In List Of UNESCO Intangible Cultural Heritage of Humanity

      Swarajya News Staff
      2d
      States

      infrastructure


      Amit Mishra
      1

      Gurugram: Haryana Government To Incorporate 'New Company' For Millennium City Metro Corridor

      2 Mins Read
      Amit Mishra
      2

      Ayodhya Airport To Be Ready By December End, Says Jyotiraditya Scindia

      2 Mins Read
      Amit Mishra
      3

      Kochi Metro Phase II: 11.2 Km Network To Be Ready By November 2026, AIIB Loan Approval Awaited

      2 Mins Read
      Arun Kumar Das
      4

      Make-In-India Initiatives Are Driving Growth In Manufacturing Sector, Says Ashwini Vaishnaw

      3 Mins Read