India’s New Labour Codes Ignite Debate Over Reform and Workers’ Rights

India has introduced one of its most sweeping economic reforms in years by merging 29 separate labour laws into four simplified codes. This consolidation reduces more than a thousand rules down to roughly 350, and cuts the number of required forms from 180 to just over 70. For businesses, this marks a dramatic easing of compliance and paperwork. The reforms were approved years ago, but struggled through political delays and negotiations before finally being prepared for uniform implementation across all states. Many companies, especially those in manufacturing, have welcomed the move, seeing it as a sign that the government wants to strengthen investment opportunities and attract global supply chains facing pressure from shifting trade policies abroad.

Industry Welcomes the Changes

For years, industry leaders have argued that India’s rigid labour system held back manufacturing growth and discouraged large-scale investments. Financial firms interpret the reform as part of a broader push to boost competitiveness, especially as global trade tensions create openings for new production hubs. Supporters believe simplified laws, more consistent definitions, and fewer inspections could make it easier for businesses to scale up operations. Economists who favour reform say a flexible labour market can help India replicate the manufacturing growth seen in other Asian economies that benefited from global demand and technological partnerships.

Workers Fear a Loss of Protection

Trade unions, however, see the reforms very differently. They argue that the new codes represent a significant rollback of rights earned over decades. Demonstrations have taken place across several cities, drawing protesters worried that the new rules favour companies at the expense of workers. Many workers say they fear wages will stagnate, grievance systems will weaken, and layoffs will become easier. Some are especially concerned that the changes come at a time when inflation is affecting households and jobs already feel precarious. They question why the government is expanding employer flexibility without simultaneously strengthening enforcement mechanisms for workers’ rights.

Balancing Modernisation with Worker Security

The government insists the purpose of the reform is to modernise outdated laws while ensuring fair protection. Several provisions appear aimed at supporting workers, including mandatory appointment letters, uniform minimum wages, free annual health check-ups for older workers, and gender neutral pay standards. The codes also formally recognise gig workers for the first time, expanding social security to people who were previously excluded. Experts say these updates could help bring more workers into formal systems and reduce loopholes that allowed inconsistent treatment across sectors.

The Most Controversial Clauses

Despite the positive measures, two main clauses have triggered strong backlash. The first raises the threshold for government approval before layoffs from 100 employees to 300. Critics say this change will leave many workers without safeguards. The second requires a 14-day notice before a strike, a rule that previously applied mainly to public sector organisations. Union leaders argue this weakens collective bargaining and makes it harder for workers to organise effectively. Supporters of the reforms counter that the earlier rules hindered factory expansion and made India less attractive for large investors compared to its regional competitors.

Economic Concerns Beyond Regulation

Not all economists agree that labour flexibility is the key to fixing India’s manufacturing challenges. Some argue that limited consumer demand plays a bigger role in slowing investment. They point out that low wages weaken purchasing power, reducing overall demand for goods and discouraging companies from expanding production. They warn that reducing worker protections at a time of rising automation and job insecurity could further str, ,ain households already struggling with unemployment and slow income growth. They believe reforms should also address wage levels, training and long-term job creation rather than focusing primarily on compliance changes.

What Comes Next for Businesses and Workers

Experts broadly acknowledge that the older system had become too complicated and inconsistent, often leading to disputes and misuse of regulations. The new codes aim to streamline this environment but will take time to settle. Employers will need to adjust wage structures, HR systems and compliance processes as the transition continues. Because labour regulation is shared between states and the central government, some companies may temporarily face two overlapping sets of rules. Unions are expected to continue voicing their resistance, leaving the government to balance reform with reassurance. The long-term impact on manufacturing, investment, and workers’ livelihoods will become clearer as the new system unfolds.