For Make in India, Modi kicks off labour reforms

  • HT Correspondent, Hindustan Times, New Delhi
  • Updated: Oct 17, 2014 10:57 IST

Prime Minister Narendra Modi Thursday unveiled a string of labour reforms that will make inspection of businesses transparent and also ease rules so that employees can smoothly move their social security funds when they change jobs.

Rather than the onerous task of filling 16 forms related to central labour laws, employers now will have to fill a single form that would be available online

A new website, managed by the labour ministry, will allow companies to fill forms online and raise their grievances.

"These facilities are what I call minimum government, maximum governance. I have been hearing about inspector raj since childhood," Modi said

The “inspector raj” the prime minister spoke about is believed to be a major hurdle in smooth functioning of businesses. To make inspectors’ role transparent, a computer lottery will pick both the enterprise to be inspected and the inspector who will inspect.

The inspector will have to upload his report on the same website within 72 hours.

The reforms do away with inspectors’ discretionary power and any decision on inspection reports will be taken only after a proposed central analysis and intelligence unit scrutinises the compliance reports submitted by the employers.

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The reform schemes named Deen Dayal Upadhyay Shrameva Jayate also include a Universal Account Number (UAN) facility for Employees Provident Fund Organisation (EPFO) subscribers.

Through UAN, employees will no longer have to apply for the transfer of provident fund while switching job anywhere in the country, thus reducing time in funds transfer.

The EPFO has 80 million members. Because transfers are so difficult, more than 270 billion rupees ($4.4 billion) lie idle in such accounts.

"I need to return this money to the poor," the prime minister said. "The world asks, 'What is Modi's vision?' They will see it in this effort."

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The change would chiefly benefit firms that employ just a few employees, he said. In 2009, 84% of the country’s manufacturing workers were employed by firms with fewer than 50 workers, research by the Asian Development Bank shows.

It is difficult to estimate the size of this workforce, but just 8% of the workers have formal jobs with any security and benefits, such as the Provident Fund, while most are employed in the informal sector, experts say.

Industrialists often cite India’s complex labour rules as one of the major hurdles that have kept away large-scale private investments in what should otherwise count as a massive, attractive market.

Besides, business leaders argue that more than 40 central laws and over 150 state labour laws are time-consuming, costly and archaic.

Watch: Modi unveils 'Shramev Jayate Yojana' to boast labour reforms, end inspector raj

According to World Bank India has one of the world's most rigid labour markets, but successive governments have failed to undertaking reforms measures fearing backlash from the trade unions.

For 64-year-old Modi, however, at stake is a key election promise to lift the lowest living standards among emerging markets by creating jobs for about 100 million young Indians who will enter the workforce over the next decade or so.

During 2005-12, India added only 15 million jobs, a quarter of the figure added in the previous six years.

Industry leaders welcomed the initiatives.

“Simplification of procedures has been a long standing concern for industry,” said Chandrajit Banerjee, director general of Confederation of Indian Industry (CII).

India also faces a daunting challenge to enhance skills of those joining the workforce every year to make them ready for employment.

Although India’s higher education system contributes about 350,000 engineers and 2.5 million university graduates annually to our workforce, at any given time, an estimated 5 million graduates remain unemployed.

Laying emphasis on skill development in Apprenticeship Protsahan Yojana that he launched, Modi said that the country has huge potential to provide manpower to the world, which will require this by 2020.

Presently there are 2.82 lakh apprentices undergoing training against 4.9 lakh seats.

An initiative to revamp the apprenticeship scheme has been undertaken and the particular scheme will support 1 lakh apprentices during the period up to March 2017.

At the event organised by the labour ministry, the PM also reached out to 4.2 lakh ITI (industrial training institute) graduates via SMS, greeting them with degrees in various fields.

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