The brunt of the economic slowdown is being borne by the manufacturing sector. The sector lost almost five lakh jobs in just the October-December quarter of 2008 and there are no greenshoots of recovery yet. But, the Economic Survey has boldly called for big-ticket labour reforms, a hire-and-fire policy and allowing contract labour.

At present, companies need to take prior permission for the government before they can retrench or lay-off workers. “This (Chapter 5 of the Industrial Disputes Act) needs to be removed with simultaneous increase in compensation from the present 15 days’ wages for every year of service,” the survey said.

Initial reactions of the labour ministry indicate that there is little scope to bring an amendment to the current legislation.

The proposed hire-and-fire policy has evoked much debate in the country with the manufacturing industry still being quite labour intensive.

“We have put forth our professional views where a distinction has been made between the employment element of manufacturing and manufacturing itself. The problem is limited flexibility in labour laws which cannot lead to fast growth of labour intensive mass manufacturing. However, semi-skilled labour manufacturing can go on if education is improved,” chief economic advisor Arvind Virmani told The Indian Express.

As a policy response to problems arising due to contractual nature of employment, the survey has also recommended amendments to the Contract Law to allow use of contract labour in non-core activities. “Labour laws should be applicable to the contract labour providing company that pays their wages,” it said.

... contd.