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India – Need to encourage more contract employment

16 September 2013

India needs to encourage contract employment, with adequate safeguards including social security measures, to generate formal employment in the manufacturing sector, says a study on Comparison of Labour Laws: Select Countries by Export-Import Bank of India, reports the Hindu Business Line.

Presenting the study, T.C.A. Ranganathan, Chairman and Managing Director of Exim Bank, said considering the young workforce: “We need to align our policies to match with those of our competitors so that the implications of FTAs (Free Trade Agreements) and PTAs (Preferential Trade Agreements) would be favourable to our business.”

Quoting from the study he added: “Industrially active countries around the world over are encouraging contract employment to retain talent. In developed countries, contract employment is the preferred course for employers and employees.”

“The Indian Trade Union Act was enacted in the colonial period, during which focus on industrial development was different from what is being propagated now. India needs to modify its regulations to match with its requirements, and with what peer group countries have done. The study says outdated labour laws are principal reasons for declining employment elasticity in India.”

While the labour regulations in India are made with the objective of protecting the interests of employees, they are perceived as neglecting employers’ interest, reports the Hindu Business Line. An inflexible labour market is one of the factors that hinder large-scale investments, technology absorption, productivity enhancement and high employment growth in the country.

The study undertook a comparative analysis of labour laws in 20 countries under 15 broad parameters. The countries analysed include; France, Germany, Russia, UK, Brazil, US, Kenya, South Africa, Bangladesh, China, India, Indonesia, Malaysia, Pakistan, Sri Lanka, Thailand, and Vietnam. The parameters included regulations on collective bargaining and settlement of industrial disputes, conditions of employment contract, employment security with focus on termination, comparisons on conditions of work hours and leave.

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