Labour Codes: Policy vs execution

India’s new labour Codes — four sweeping laws meant to replace 29 fusty statutes — promise to simplify compliance, broaden social security, and grant firms the flexibility to hire, fire, and grow.

- DEBASHIS BASU

But then, India has a habit of announcing reforms that look splendid but get bungled on execution. Will the new Codes join this tradition? The country’s recent economic reforms have followed this predictable arc: Ambitious legislation drafted in New Delhi, halting implementation in the states, and an eventual outcome far removed from the intent.

The Insolvency and Bankruptcy Code (IBC), for instance, was intended to be a swift and fearsome mechanism for disciplining errant borrowers. It soon became bogged down in court delays, procedural squabbles, and corruption. Delays and gaming the system look common. The Real Estate (Regulation and Development) Act (Rera), designed to protect homebuyers, dissolved into a patchwork of diluted state-level regulations. Even goods and services tax (GST), the most dramatic fiscal reform in decades, continues to be a work in progress with complex rules and uneven enforcement.

The first obstacle is India’s federalism. Though the Codes are central legislation, labour sits on the Concurrent List of the Constitution, meaning the states must craft their own rules and do the actual enforcing. In similar other cases, some have been diligent; many have not. Most of them are interested in political theatre rather than regulatory housekeeping. A worker in one state might enjoy benefits unavailable in another; a factory might be regulated differently across state lines. The new Codes promise to smooth these wrinkles. But if states drag their feet or carve out bespoke interpretations, the Codes will fall short of their intent.