One of India’s most anticipated reforms may finally be nearing completion. The Union government is reportedly preparing to notify the rules under the four new labour codes before Parliament’s winter session on November 25. If this happens, it would conclude one of the country’s longest-running reform efforts. The Codes — on Wages, Industrial Relations, Social Security, and Occupational Safety, Health and Working Conditions — were enacted between 2019 and 2020, consolidating 29 central labour laws into a unified framework. They promised to simplify compliance for employers and expand protections for workers. Yet, five years later, they remain unimplemented.
Labour is a subject on the Concurrent List, requiring both the Centre and states to finalise their rules before the laws can take effect. Most states have published drafts, but differences over definitions, inspection powers, and procedural thresholds have stalled progress. Some opposition-ruled states view the codes as a centralising drift, undermining their legislative space. Trade unions, meanwhile, see the reforms as eroding collective bargaining and job security. The result is a policy stalemate — a reform trapped between legislative intent and administrative inertia.
READ | India’s clean industry transition needs a policy push
Economic costs of delay
The delay carries a measurable economic cost. India’s manufacturing sector, which employs barely 11% of the workforce, remains constrained by complex compliance and inflexible hiring norms. India’s rigid labour regulations have historically discouraged formal employment, especially among small and medium enterprises. The ILO estimates that less than 20% of India’s 500 million workers have formal job contracts.
The new codes were meant to change that — by offering firms greater flexibility in hiring while providing workers basic protections. Every year of delay keeps employers bound to legacy laws, discouraging expansion, while millions of workers remain outside the social security net.
The missing floor wage promise
The Code on Wages, 2019 was supposed to end one of the most glaring inequities — the lack of a uniform national floor wage. Expert committees since the 1990s have argued that a wage floor could prevent a race to the bottom among states.
But the final version diluted that ambition, allowing regional floor wages instead. The current floor wage — last revised in 2017 at ₹176 a day — has lost about one-third of its real value due to inflation. In 2020, the daily minimum wage ranged from ₹55 in Puducherry to ₹596 in Delhi, according to the Labour Bureau.
This variation deepens inequality and leaves millions of informal workers vulnerable. Without a central notification of the wage floor, the reform’s moral promise — fairness and dignity for every worker — remains unrealised.
Gig economy and the new workforce
The codes also miss the opportunity to engage meaningfully with India’s emerging gig and platform workforce. The NITI Aayog estimates there are 7.7 million gig workers today, projected to reach 23.5 million by 2030.
The Social Security Code, 2020 includes provisions for their welfare, but lacks clarity on financing. Should aggregators contribute a share of revenues, or should the state co-fund welfare schemes? This ambiguity has stalled implementation.
The broader challenge is conceptual: India’s labour laws were designed for factory floors, not digital platforms. Unless the codes adapt to this changing reality, a growing segment of the workforce will remain outside formal protections — with implications for both equity and productivity.
The federal tussle
The Centre seeks uniformity to attract investment and improve the ease of doing business. States, on the other hand, demand flexibility to tailor regulations to their industrial conditions and political contexts.
Some governments resist the Industrial Relations Code’s provisions on layoffs and union recognition, fearing unrest. Others are wary of the Social Security Code’s fiscal burden. Extending benefits to unorganised and gig workers requires sustained state funding, but no clear fiscal roadmap has been presented.
This tension mirrors a larger pattern in Indian policymaking — ambitious central laws that depend on hesitant states for execution.
Administrative readiness and state capacity
The challenge is not only legislative but institutional. Many states lack the capacity to enforce modern labour standards. The inspectorate system is weak, and digital databases for workers are incomplete.
A successful rollout will require a Labour Management Information System (LMIS) to track workers, link social security contributions, and monitor compliance. The absence of such infrastructure makes even well-intentioned reform hollow.
A similar problem persists in safety oversight. The Occupational Safety, Health and Working Conditions Code mandates regular inspections and health checks, but enforcement remains patchy. For millions in the informal economy, the law exists only on paper.
Lessons from Asia
India’s hesitation contrasts with its Asian peers. Vietnam and Indonesia have overhauled their labour laws in recent years to align with global supply-chain investors. Vietnam’s Labour Code 2019 introduced flexible contracts and modernised wage structures, helping it attract manufacturers relocating from China.
Similarly, Indonesia’s Omnibus Law on Job Creation (2020) simplified compliance and introduced a unified wage formula. Both countries have since seen stronger export growth and rising FDI inflows.
India’s credibility as a manufacturing hub depends on whether it can implement similar reforms — not just legislate them.
Social dialogue and the way forward
Labour reform cannot succeed by decree alone. It requires tripartite dialogue among the Centre, states, and trade unions. Implementation must be phased, with safeguards for vulnerable workers during transition.
A useful starting point would be to link the codes with existing welfare databases such as e-Shram, which has already registered over 29 crore unorganised workers. Integrating these systems could accelerate inclusion and monitoring.
At the same time, public communication matters. Without trust and transparency, workers see reform as dilution, and employers see it as uncertainty.
Labour codes: Reform and credibility
The political consensus that once enabled the codes in 2019 has frayed. Inflation has eroded wages, and economic shocks have exposed the fragility of informal employment. The government’s credibility on structural reform depends on whether it can bridge this gap between law on paper and law in practice.
The coming months offer an opportunity to do so. A clear implementation timeline, transparent wage fixation, and enforceable social security can still turn this reform into a success story.
If managed well, the labour codes can redefine the balance between flexibility and fairness — creating a labour market that rewards enterprise while protecting dignity.