India’s manufacturing sector needs to grow at 12 per cent for India to sustain its economic momentum but is being held back by an immobile workforce, Planning Commission deputy chairman Montek Singh Ahluwalia said on Wednesday.
Speaking at a special session on India at the World Economic Forum’s annual summit — in which policy-makers and business leaders meet every year — Ahluwalia said inflexible labour laws were coming in the way of supplying workers to industry.
More labour benefiits and entitlements could be a tradeoff for a less rigid legislative framework, he said.
The onus lay on Indian industry, which is acquiring assets abroad, to convince trade unions that their constituency could expand if they settled for a better deal for workers, he said.
Ahluwalia admitted that a lack of infrastructure was also contributing to industrial growth being consistently below potential, but felt this was an easier nut to crack.
Labour market reforms were considerably more challenging politically, and the country’s top planner felt they could be tackled after loose ends were tied up in other areas.
The government’s approach to inclusive growth came in for criticism by Raghuraman Rajan, former chief economist of the International Monetary Fund.
Populist income redistribution could not replace fundamental investments in India’s burgeoning labour force that would make the process sustainable, he felt.