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October 17, 2014

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Outdated labor laws simplified in India

INDIA will simplify employment rules and ease the way for people changing jobs to move social security funds, Prime Minister Narendra Modi said yesterday.

India’s outdated labor laws strictly limit hiring and firing, while an onerous ‘inspector raj’ deluges employers with paperwork, discouraging them from expanding and adding staff.

“Fifty types of departments chase them, 50 types of forms have to be filled in.

“The world has changed,” Modi said, adding that companies would now only need to fill a single form online.

In 2009, 84 percent of India’s manufacturing workers were employed by firms with fewer than 50 staff. Just 8 percent of Indian workers have formal jobs with any security and benefits, such as the Provident Fund, while the vast majority work in the informal sector, experts say.

Even though the World Bank says India has one of the world’s most rigid labor markets, fears of a trade union backlash and partisan politics have deterred governments from reform.

Modi also promised easier movement of accounts in India’s Provident Fund scheme by using a universal account number.

The payroll-funded programme has 80 million members.

Because transfers are so difficult, more than 270 billion rupees (US$4.4 billion) lie idle in such accounts.

Meanwhile, US-based economist Arvind Subramanian became chief economic adviser to the Indian government yesterday, an appointment that puts a long-time ally of Reserve Bank of India Governor Raghuram Rajan at the heart of economic policy making.




 

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