Jobs overhaul boosts Modi's reform credentials

Swiggy

27/11/2025 02:24

The author is a Reuters Breakingviews columnist.  The opinions expressed are her own.

By Shritama Bose

MUMBAI, Nov 27 (Reuters Breakingviews) - There's nothing like a crisis to stir New Delhi into action. Washington's imposition of a 50% tariff on India's U.S. exports has prompted Prime Minister Narendra Modi to tackle domestic hurdles preventing the South Asian country from growing at its full potential. In its most significant reform in years, the government has overhauled its labour laws, including making it easier to fire workers. That's welcome.

    The changes last week won lawmakers' approval five years ago, but Modi's administration held them back after opposition from unions. By framing them now as executive orders, he is forcing their adoption by all of India's 28 states.
     Four new labour codes will replace 29 outdated laws, tripling the threshold for layoffs requiring prior official approval to 300 workers.

That should make it easier for small firms to scale up without worrying about changes in business cycles. At the same time, mandating protections including social security benefits for gig workers on platforms like Eternal's  ETEA.NS Zomato and Prosus-backed Swiggy SWIG.NS promises gains in financial inclusion and credit growth over time, even as they raise near-term costs for employers.

The current trade uncertainty means any benefits may flow through slowly. For a start, companies aren't spending much money: capital expenditure in India grew 5% year-on-year at the top 200 listed companies during the six months ended September 30, only a quarter of the pace through the five years to 2024, note Axis Capital analysts led by Neelkanth Mishra. Meanwhile, foreign direct investment remains negative on a net basis.

    And there is still plenty of other red tape for businesses to grapple with.
    The new worker rules halve the number of forms companies must fill, but there are still
    73
     of them. Unlike Modi's other big reforms in tax and bankruptcy, e
    nforcing labour laws relies on a high level of cooperation at the state level – a
    nd a maze of approvals needed to start and wind up a company leaves businesses at the mercy of officials and ample scope for corruption.

Still, Modi's reform mojo has been missing since his party was forced into a coalition government in last year's national elections. The labour law overhaul is a welcome sign that the prime minister's animal spirits are back.

Follow Shritama Bose on LinkedIn and X.

CONTEXT NEWS

India on November 21 implemented four new labour codes to replace 29 old laws. The new rules allow longer factory shifts and night work for women, and raise the threshold for companies requiring prior approval for layoffs from 100 to 300 workers.

The codes define gig and platform work for the first time and mandate social security provisions for them. They will also introduce a floor for wages to reduce pay disparity across regions, though the amount was not announced.

Small Indian factories are numerous and unproductive https://www.reuters.com/graphics/BRV-BRV/mopabqmlava/chart.png

(Editing by Una Galani; Production by Ujjaini Dutta)

((For previous columns by the author, Reuters customers can click on BOSE/shritama.bose@thomsonreuters.com))