Skip to main content

What Do India’s New Labor Codes Mean?

NEW DELHI – Three new labor codes were pushed through parliament here near the end of last month, leaving the industry to decipher the implications for factories and production units across India.

The labor codes have both invigorated and disturbed the garment and textile industry, being received with a mix of anger at the speed with which they were rushed through parliament, gratitude by manufacturers that there is some simplification to the complex web of laws, and flat-out protest by some trade unions that they don’t do enough to support labor.

This is the latest wrinkle set upon an industry beleaguered by the pandemic-related flurry of cancellations of more than 80 percent of orders in April and May.

Big picture, Rahul Mehta, chief mentor and past president of the Clothing Manufacturers Association of India (CMAI), noted that, “the revised codes have benefits for all the stakeholders, the biggest positives being in the simplification and clarification of various terms, acts and definitions.”

“These simplify several aspects–the biggest being the reduction of the plethora of Acts into four codes. Complexity of regulations has always been highlighted as one of the greatest banes of industry all these years,” he said.

However, voices from the worker’s perspective are concerned at seeing their rights diminish even further.

The new labor codes highlight some important issues. Units employing less than 300 workers no longer need prior permission of the government for layoffs, retrenchment and closure. What’s more, unions will be recognized by management for collective bargaining only if they have 75 percent of the workforce as members. In order to organize a strike, participants must give 14-day notice and the definition of “right to strike” has been broadened to include “mass casual leave.”

The new codes also introduced contracts with fixed end dates, meaning factories no longer have to lay off workers when the time come to part ways. Safety standards are not defined in the OSH code, but have been left to notifications that need to be issued by the government, potentially putting the safety of workers at risk.

 “Garment workers will now face these regulations, among other several other issues. And since most of the workforce in garment factories are women, and usually non-unionized, the effects will be exacerbated,” said Apoorva Kaiwar, regional secretary – South Asia, IndustriALL global Union, referring to the implications of the labor law reforms.

“NGOs are saying the new labor code is bad for labor, and unfair, and pushed through too hastily,” added Anjani Singhania, director, J.J. Expo-Impo, a mid-sized garment manufacturer in Noida, in the New Delhi region.

“On a humanitarian ground, I completely understand what they are saying. It is not good for the labor. But honestly, even when we sit on an aircraft, the first announcement is that in case of trouble first put on your own face mask, then try and help someone else out.

“So the survival of the industry is the most important thing, and it is going to help the labor. If we don’t help and the industry itself perishes, then we will be in a very bad situation,” he said.

As India’s gross domestic product crashed to negative 23.9 percent in the first quarter of the new financial year (April to June), from growth of 5 percent to 8 percent for the last decade, the government has been looking at ways to support business and rev up markets.

“Right now, the future for the industry is not very bright. But one should be practical and understand we need to get the GDP back on the growth track and that is only possible if we get the industry rolling and get the confidence back. Right now, the confidence is just not there,” Singhania added.

Singhania also noted it is hard to say how much the new labor code would even help because of the lack of clarity in terms of actual implementation, as well as the confusion that often happens between the central and state governments.

“On paper they do sound positive. But one can only comment on them after they get implemented,” he said. “They are a glimmer of hope, for sure.”