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.

The Factories Act, which regulates labour in factories, should be amended to increase a work-week to 60 hours from the present 48 hours. The survey has also suggested increasing daily limit to 12 hours to meet seasonal demand through overtime. While the labour ministry is already working on a proposal to amend the Act, it is not immediately known what the proposed amendments are.

Even as the survey makes its suggestions, about 45 million are estimated to be added to the labour force in the Eleventh Plan period. The number of jobs that are estimated to be created towards the end of the Plan period is 58 million. Since agriculture sector may not contribute anything towards job creation, said the survey, there will be a movement of surplus labour in agriculture sector to higher wage and more gainful employment in the non-agriculture sector.

“The Eleventh Five-Year Plan has especially identified labour intensive manufacturing and services sectors with employment potential like food processing, leather products, footwear, textiles, wood and bamboo products, gems and jewellery, handicrafts, handlooms, tourism and construction, for this purpose,” the survey said.