Modi’s labour reform push may remove hurdle for investors

Bloomberg

Prime minister Narendra Modi is finally attempting to overhaul India’s most controversial labour laws to attract investment and make it easier to do business in a country where changing archaic rules is a challenge for any government.
After a long struggle, his government will push a crucial industrial relations bill allowing companies to hire workers on fixed-term contracts of any duration. The legislation, to be tabled in parliament’s current winter session, does not seek to change stringent laws on hiring and firing, but allows the government the flexibility to relax the conditions through an executive order.
Unlike his last term in power, when Modi decided against bringing this labour reform bill to parliament, this time around he knows he has the numbers needed. The current changes are part of a process to streamline 44 different federal labour laws into four codes, another step to formalise the $2.7 trillion economy.
It comes on the back of several recent reforms announced by Modi’s government to boost investment, including aggressive cuts in corporate taxes, relaxation of foreign investor rules and the biggest privatisation drive in more than a decade.
“It’s a positive signal of reforms agenda as well as a step towards making India attractive, in the context of the golden opportunity of manufacturing shift from China,” said Gautam Chhaochharia, a strategist at UBS Group AG in Mumbai.

Asia Push
With the US-China trade dispute disrupting global supply chains, governments in the region are trying to lure investors with more business-friendly policies. In Indonesia, president Joko Widodo has promised to make changes to his country’s difficult hire and fire laws by the end of the year. The amendments to the labour law would be limited to new hires in order to defuse opposition from the unions.
Modi’s cabinet approved the Industrial Relations Code bill, which empowers the government to change the ceiling on employee count for a company to retrench workers without government approval.
While the current upper threshold limit of 100 workers has not been changed, the bill allows the government to amend this number without seeking Parliament’s approval.