Q. Evaluate the implications of the four labour codes on India’s informal workforce and economic growth.

 Q. Evaluate the implications of the four labour codes on India’s informal workforce and economic growth.

(GS Paper III / 10 marks / 150 words)

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Introduction

The Indian government has codified 29 labour laws into four labour codes:

1. Code on Wages,

2. Industrial Relations Code,

3. Social Security Code, and

4. Occupational Safety, Health and Working Conditions Code.

These aim to improve ease of doing business while ensuring worker welfare.

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Implications for Informal Workforce

• Positive Outcomes:

  • The Social Security Code proposes to include gig and platform workers.

  • Universal minimum wage under the Wage Code may uplift informal sector earnings.

• Challenges:

  • Lack of clarity on mechanisms for implementation and funding.

  • Weak enforcement could exclude many from actual benefits.

  • High thresholds for compliance may leave small firms unregulated, pushing informality further.

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Implications for Economic Growth

• Pros:

  • Simplifies compliance → boosts investor confidence.

  • Reduces legal complexity for businesses.

• Cons:

  • Diluted labour rights may cause worker unrest and low productivity.

  • Rising contractualisation may reduce long-term demand and stability.

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Conclusion

While the labour codes promise labour market efficiency, without strong implementation and social safeguards, they risk widening informal sector vulnerabilities, undermining inclusive economic growth.