India’s Labour Law Overhaul Sparks Fierce Debate

Published: 28 November 2025 Friday. The English Chronicle Desk. The English Chronicle Online

India is facing one of its most intense national debates in years after the government moved to implement what many are calling the country’s biggest labour reform since independence. By consolidating 29 federal labour laws into four simplified codes, the government has dramatically reshaped the rules that govern the country’s vast workforce. Supporters say the reforms modernise outdated regulations and make India more globally competitive, while critics insist they strip away vital worker protections and pave the way for large-scale exploitation.

The reforms slash the number of labour-related rules from around 1,400 to approximately 350 and reduce the number of required forms from 180 to 73. Business groups, who have long argued that India’s restrictive labour system held back manufacturing growth, have praised the move as a long-overdue step toward economic transformation. Analysts say the reform aligns with the government’s broader push to accelerate economic changes, especially after the shock of the new US tariff regime introduced under President Trump.

“This is part of a broader trend by the government to hasten reforms and signal its commitment to easing business, attracting FDI, and integrating into global value chains,” brokerage firm Nomura said.

But the reaction from India’s major trade unions has been swift and fierce. They have labelled the overhaul the most sweeping rollback of worker rights since independence. Demonstrations have erupted across the country, including organised protests in Delhi, where hundreds gathered to voice their opposition. Left-leaning unions, many not aligned with the ruling Bharatiya Janata Party, led the demonstrations.

For workers like 33-year-old Akashdeep Singh, employed at an international beverage company on Delhi’s outskirts, the reforms offer no comfort. “These laws will help employers, not workers like us,” he said at the protest site, echoing the fears of many others.

The government, however, insists that the reforms are designed to modernise an outdated system, create a more uniform regulatory structure, and extend protections to India’s growing gig economy. For the first time, gig and platform workers will be recognised as part of the labour force, granting them access to certain social security benefits. Other new provisions include mandatory appointment letters, uniform minimum wages, annual health check-ups for workers over 40, and gender-neutral pay.

Economists argue that many of these steps could help formalise India’s largely informal labour market, where the majority of workers lack contracts, security, or benefits. The reforms also eliminate conflicting definitions and overlapping rules that experts say made compliance almost impossible. As economist Arvind Panagariya notes, “You could not implement 100% of India’s labour laws without violating 20% of them.”

But two provisions have proven especially controversial: rules that make it easier for companies to fire workers and stricter rules governing strikes. Previously, firms with 100 or more employees needed government approval to lay off workers; the new threshold has been raised to 300. Workers will also now be required to give a 14-day notice before striking—a rule that previously applied only to public-sector workers.

“Why is the government trying to exclude a massive section of the workforce?” asked Sudeep Dutta of the CITU, arguing that the new codes reduce access to legal recourse even as millions of grievances remain unresolved. He says the notice period for strikes further weakens workers’ already fragile bargaining power.

Supporters of the reform, including Prof Panagariya, argue that earlier restrictions severely undermined India’s competitiveness. They point out that other manufacturing-heavy economies such as Bangladesh, Vietnam, and China have far more flexible labour markets. Nomura analysts say the higher threshold for layoffs could encourage companies to build larger factories, ultimately boosting employment and manufacturing output.

But not all economists are convinced. Professor Arun Kumar argues that India’s core economic challenge is not rigid labour laws but weak domestic demand. Low wages, he says, have kept mass consumption suppressed, undermining incentives for private investment. “The new labour code will not address these issues,” he cautioned, warning that further weakening workers’ rights at a time of technological disruption could prove harmful in the long run.

Despite ideological differences, most experts agree that the previous system of overlapping and contradictory rules was failing. With more than half of India’s working-age population outside the labour force and nearly 60% self-employed, the older laws neither protected workers nor encouraged large-scale manufacturing.

The transition to the new codes, however, will not be smooth. Staffing agency BDO India warns that companies will need to overhaul wage structures, HR systems, social-security planning, and compliance frameworks. And because labour is regulated jointly by state and central governments, firms may temporarily face dual compliance requirements as states update their systems.

As unions continue to resist and businesses race to adapt, India stands at a crossroads. Supporters see the reforms as a necessary step toward economic modernisation, while critics fear they mark the beginning of a deeper erosion of worker rights. The true impact of the overhaul—on investment, employment, and social protections—may take years to fully unfold.