India has the right to expect not a series of recommendations framed in the light of the existing crisis, but a considered programme for development of labour policy. Thus spoke the Royal Commission of Labour in India in 1931.
The piety was waylaid since independence. India got commissions, recommendations, and many laws—over 100 state and 40 central laws—for protecting workers’ interests. The irony is embedded in data. Only 50 crore of the over 80 crore in the 15-64 age cohort are in the labour force, with barely one in 10 employed in the formal sector.
This week, the government took a significant step, unveiling four new codes for labour by rationalising 29 central laws. It cuts the number of rules from 1,436 to 351, filing of returns from 31 to one, and eases the pain of compliance. Much depends on the quality of the rules’ framing, which is expected in the next 45 days for the system to be operational by April 2026.
The journey of the reform merits attention. In the 2017 Budget, Arun Jaitley announced, “Legislative reforms will be undertaken to simplify, rationalise, and amalgamate the existing labour laws into four codes.” Although the amalgamation was completed by 2020, adoption by states was stranded between the babudom in Delhi and in state capitals, and electoral considerations over five years.
The fact that a coalition with a majority in parliament for over 10 years and in power in 15-odd states struggled to push reforms illuminates the strong consensus for weak reforms across political parties. The push—catalysed by the Trump tariff tantrum—arrives at a critical intersection. Foreign direct investment into India has been tepid. Private investment is poor—corporates prefer to be in cash, maybe because of uncertainty, maybe pessimism. Worse, despite billion-dollar IPOs, capital formation has not picked up.
As global disruptions threaten business models and job creation, structural flexibility is critical. Fixed-term contracts (with benefits) afford options of costs and tenure for employers and employees. What is seen as a fixed cost by companies can well be a variable cost. The promise of funds for skilling, work-from-home provisions, provisions for women and gig workers should boost formalisation.
There are gaps. The new template promises a universal minimum wage for organised and unorganised sectors and a national floor below which no state can fix wages. India has had a sketchy record on fixing a national floor wage. Since 2018, there have been three committees, including one which recommended Rs 375 as the minimum daily wage, and the government is appointing one more now.
The quest for investment-led growth demands that momentum and motivation for reforms must be leveraged. India’s power sector is a mess of multiple tariffs, cross-subsidies, and inefficiencies. The state power distribution companies do not collect dues on a sixth of the power generated—do the math for 16 percent of 1,693 billion units. The revenue gap is Rs 3 lakh crore and accumulated losses are now at Rs 7.04 lakh crore. Thanks to unfunded free power to farmers and households, discoms charge higher from those who pay. The tariff—which is higher than, say, Vietnam or Indonesia—hurts India’s investment prospects.
A new bailout is on the anvil strapped to the New Electricity Bill of 2025. The 2001 bailout cost the government Rs 35,000 crore. In 2012, Rs 1.5 lakh crore owed by discoms to banks was shifted to states. In 2015, under the Uday scheme, debt of Rs 4.3 lakh crore was parcelled to the Centre and states. The 2025 bailout bill starts at Rs 1.1 lakh crore. It promises all that was promised in the previous bailouts too—cost-reflective tariff, open distribution, and transparency on subsidies. Real change requires shifting to a system of prepaid coupons or direct benefit payments for farmers and households. Let the states show it in their books.
Yes, India is the fastest-growing economy, but speed must be accompanied by quality of life. An urban India gasping for breath in winter, wading through water in monsoon, and commuting for hours through bad roads reflects systemic apathy. It is estimated that over 50 crore Indians live in India’s littered and poorly-managed cities. For over three decades, the promise of the 74th constitutional amendment—transfer of funds and functions to urban bodies—has been hijacked by politics. Fixing the mess is both a human and an economic imperative—urbanisation is a proven growth multiplier.
Investors domestic and global expect timely justice. They are haunted by delays in the judicial system to get contracts enforced. There are over 5.4 crore cases pending across courts—4.77 core cases in the lower courts, 63.78 lakh cases in high courts, and 90,225 cases in the Supreme Court. The pendency is aggravated by unfilled posts for judges and court capacity. Fixing this mayhem would be a major reform.
India needs to redo its regulatory plumbing clogged by a plethora of registrations and compliances. It needs a common identity readable across levels of government for regulators to access underlying compliances. Do a flowchart of clearances by department and geography, and shrink the permission raj and the attendant corruption.
India’s 146-crore consumers’ domestic market and a young workforce are definite draws for global investors. Reforms pushed in recent months—the GST rate restructuring, the revocation of quality control orders, the new labour codes—have the world’s attention. That said, in Robert Frost’s words, there are miles to go and much left to be done.
Read all columns by Shankkar Aiyar
SHANKKAR AIYAR
Author of The Gated Republic, Aadhaar: A Biometric History of India’s 12 Digital Revolution, and Accidental India.
(shankkar.aiyar@gmail.com)
