Article

Studying ‘Make in India’ from Management and Labour Studies

42(1) 1–19
the Lens of Labour Reforms © 2017 XLRI Jamshedpur, School of
Business Management
& Human Resources
SAGE Publications
sagepub.in/home.nav
DOI: 10.1177/0258042X17690842
http://mls.sagepub.com
Kinjal Shukla1
Maitreyi Purohit2
Shubhra P. Gaur1

Abstract
The contribution of the manufacturing sector in gross domestic product (GDP) has been a cause of
concern, as India contributes only 16 per cent to the GDP in comparison to other rapidly developing
economies, for example, the manufacturing sector of Thailand contributes 34 per cent to the GDP,
China 32 per cent and South Korea 31 per cent. Currently, India stands at 134th position out of 189
economies under Doing Business Index. Its rank has also declined in the Global Manufacturing Index in
comparison to the previous year.
The Government of India in the year 2014 initiated a campaign titled Make in India to foster the
growth of the manufacturing sector. In the initial phase of the campaign, the primary focus was on
three key tactics namely reviving domestic investment, ensuring the ease of doing business and attract-
ing foreign investors to invest in the manufacturing sector. The government later on realized that
first there is a need to bring reforms in the decades old labour laws. This has urged the government
to consider reforms in labour laws which will make Indian labour market more competitive in inter-
national market. The government has initiated these reforms by proposing certain amendments in the
Factories Act 1948 and by including few provisions in the Labour Laws Amendment Act, 2011, and the
Apprenticeship (Amendment) Act, 2014.
The article attempts to analyze the impact of these reforms on success of Make in India campaign
by studying the overall impact of these labour law reforms from employees and employers’ perspec-
tive and contribution of labour reforms in Make in India campaign by using the theory of structural
change, fundamentals and growth given by Rodrik (2013b, Harvard Business Review). It also analyzes the
impact of these reforms on two key aspects of the campaign, that is, focusing on job creation and skill
enhancement.

Keywords
Make in India, labour laws, reforms in labour laws, Factories Act 1948, structural and fundamental
changes, job creation and skill enhancement

1
MICA—The School of Idea, Shela, Ahmedabad, Gujarat, India.
2
CEB, Cessna Business Park, Bengaluru, Karnataka, India.

Corresponding author:
Kinjal Shukla, Research Assistant, MICA—The School of Idea, Shela, Ahmedabad 380058, Gujarat, India.
E-mail: shuklakinjal91@gmail.com
2 Management and Labour Studies 42(1)

Indian Economic Scenario

2014 was an important year for India and while most people would consider Indian General Elections to
be the reason for it, we believe that there was yet another landmark for India—India sending Mangalyaan
to the Mars. Mentioning Mangalyaan is pertinent here because it actually captures the whole essence of
Make in India. The cost of Mangalyaan was 4.5 billion1 and one of the most important reasons for the
low cost was attributed to the easy availability of resources and other factors of productions at lower cost
(Amos, 2014).
While building our own Mars Rover was an achievement, and it was speculated that the growth story
of India would change within a few quarters of Indian Elections, the growth rate remained on the same
lines as before. Arun Jaitley, the Finance Minister of India, in his Budget speech of 2014–2015 had
mentioned that Indian Economy had grown at less than 5 per cent between 2012 and 2014 (Ministry of
Finance, 2015); Table A1 (refer to Appendix A) represents that the gross domestic product (GDP) growth
rate of India has remained the same.
Table A1 (refer to Appendix A) represents how much the government is relying on Make in India for
the growth of Indian Economy. The Foreign Direct Investments (FDI) inflows are a double-digit figure
of 15 per cent. India has gone up by four ranks in Ease of Doing Business 2015, ranking to 130. India’s
macroeconomic risk score has reduced from 40 to 35 as calculated by The Economist Intelligence Unit.
Currently, India stands at the seventh position in the world by nominal GDP. It is the third largest nation
by purchasing power parity (PPP) (International Monetary Fund, 2014). The economy of India has also
topped with a noticeable growth of 7.3 per cent in the year 2014–2015 and estimation indicates that it
further have the growth rate between the brackets of 7.5–8.3 per cent in the year 2015–2016 (Schneider,
2015). Indian economy is considered as the world’s fastest growing economy from the last quarter of the
year 2014. The country’s economy has a potential to be world’s third largest economy by the end of next
decade (The Economic Times, 2015) and one of the largest economies by the mid-century (Fensom,
2015). According to the IMF, Indian economy is the ‘bright spot’ in the global market (International
Monetary Fund, 2014). India had captured the eyes of the rest of the world during y2k, while India still
charms foreign investors because of the cheap factors of production; other countries such as Vietnam,
Romania, Brazil, Thailand, Philippines and South Korea have also come up as investor-friendly
destinations. ‘The objective is as laudable as the challenges it faces are daunting because, Indian
manufacturing has been stagnant at low levels, especially when compared with the East Asian successes’
(Ministry of Finance, 2015). Never before has India faced such tough competition from the other
countries; Considering the same, it did not sound astounding when Narendra Modi, on 15th August
2014, re-marketed India as ‘The’ Manufacturing hub.

Manufacturing Sector in India

Manufacturing industry refers to

the branch of manufacture and trade based on the fabrication, processing, or preparation of products from raw
materials and commodities. This includes all foods, chemicals, textiles, machines, and equipment. Further it
also includes all refined metals and minerals derived from extracted ores, all lumber, wood, and pulp products.
(Sustainable Development Indicator Group, 1996)
Shukla et al. 3

Over a period of time, manufacturing sector in India has passed through different phases of development.
The duration starting from 1950s to early 1960s was the phase of building industrial foundation; the
period from 1965 to 1980, was the phase where one had to get license permits for various set-ups. This
phase was followed by the phase of competitiveness in 1990s which is also known as the time when
liberalization started in India. It is interesting to note that the growth in industrial sector between 1979
and 2014 remained constant at 25 per cent (Ministry of Finance, 2014).
Currently, the manufacturing sector in India contributes around 16 per cent to GDP of the nation; it
gives employment to 12 per cent of the country’s workforce. India is a labour-surplus country with the
unemployed population of 47 million people below 24 years of age; while this is a threat in itself for
India; the unemployed population also represents a large installed talent pool ready to work for an
industry at a market rate. Labour policies favourable for investors are not only expected to increase FDI
but are also expected to reduce unemployment rate, leading towards overall growth (FICCI, 2014).
However, it is predicted that in the long term, growth of the Indian economy is fairly positive because of
its young population, corresponding low dependency ratio, sound savings and investment rates and
increasing integration into global economy (Central Intelligence Agency, 2015).

Make in India: What and Why?

Indian textbooks mentioned two aspects to help Indian manufacturing sector grow: (i) export promotion
and (ii) import substitution. Make in India is a leaf taken out from the old textbooks, marketed in a better
way. The industrial sector is considered as an important contributor in country’s economic development.
The sector along with facilitating domestic demand also facilitates decrease in the import dependence
and provides employment opportunity to the people. In the financial year 2013–2014, growth of this
sector was registered as −0.1 per cent. However, there has been a noticeable rise of 3.3 per cent during
the first quarter of the financial year 2014–2015 (Progress Harmony Development, 2014). Even then the
manufacturing sector of India has been a cause of concern when compared with other Asian countries.
The manufacturing sector of these nations is contributing to the GDP in a major way; the data on the
same are presented in Table B1 (refer to Appendix B).
According to the Doing Business Index 2014 by World Bank and IFC, India has been ranked at the
134th position out of 189 economies/countries (Progress Harmony Development, 2014). According to
the Global Manufacturing Competitive Index, India’s ranking has gone down from second position
(Deloitte India, 2010) to fourth position (Deloitte India, 2013). However, a projection for the year 2017–
2018 indicates that India is expected to register an index of 8.49 and reach at the second position after
China. Table C1 (refer to Appendix C) presents the top 10 ranked countries under the Global
competitiveness Index for years 2010 and 2013 and projected rank and index score for the year 2017–
2018 (Progress Harmony Development, 2014).
To improve India’s ranking and bolster manufacturing sector, the Government of India announced
Make in India campaign. The campaign, as described in the budget, would lead to structural transfor-
mation in the manufacturing sector. The characteristics which are identified as a part of structural
transformation are (i) high productivity levels; (ii) rapid rate of growth of productivity in relation to
global and national frontier; (iii) a strong ability of the dynamic sector to attract resources; (iv) alignment
of the dynamic sector with country’s underlying resources; and (v) tradability of the sector, that is,
possibility of exports and imports, positive terms of trade (Ministry of Finance, 2015).
4 Management and Labour Studies 42(1)

Make in India is an initiative by the Government of India to encourage multinational and domestic
companies to manufacture their products in India. The campaign was launched by the Prime Minister of
India Mr Narendra Modi on 25th September 2014 (Choudhury, 2014). The campaign was designed by a
famous advertising agency Wieden+Kennedy, an MNC having their office in Delhi (Gargi, 2014). The
campaign focuses on job creation2 and skill enhancement3 in 25 sectors of the economy. These sectors
are automobiles, chemicals, IT, pharmaceuticals, textiles, ports, aviation, leather, tourism and hospitality,
wellness, railways, design manufacturing, renewable energy, mining, biotechnology and electronics
(Business Standard, 2014). The campaign expects to attract capital as well as technological investment
in India (Business Standard, 2014).
From the time of its launch till August 2015, the government has received proposals worth US$17
billion from the companies interested to invest in the manufacturing sector of India (The Huffington
Post, 2015). According to the data presented in Financial Times data service, India has emerged as a top
destination for FDIs by surpassing China and the USA (The Times of India, 2015). India has attracted an
investment of approximately US$3 million more than China and US$4 million more than the USA
(The Times of India, 2015).

Labour Laws in India

Before getting into the details of Indian labour laws, it becomes mandatory to understand the difference
between two important terms, that is, the employees who are workmen and the employees who are not.
‘The employees working mainly in managerial or administrative capacity do not fall under the definition
of employees who are workmen.’ Thus, employees under this category are normally governed by the
terms and conditions of their contract. While on the other hand, employees who fall under the category
of the employee who are workmen ‘are the ones who ordinarily get a greater degree of legal protection
and benefits under the Indian labour and industrial laws.’ Therefore, the term workman includes ‘only
persons (including an apprentice) employed in any industry to do any manual, unskilled, skilled,
technical, operational or clerical work, or persons who are employed to do supervisory work’ (Amarchand
& Mangaldas & Suresh A. Shroff & Co., 2009).
Labour laws also known as employment law are the body of laws that deals with the legal rights of,
and restrictions on, working people and the organization. It arbitrates relationship among employers,
employees and trade unions. In simple terms, labour laws can be described as ‘the rights and obligations
for the workers, employers and union members at the workplace.’ The need for introducing labour laws
arises due to demands raised by workers for better working conditions on the one hand and demands by
the employer to limit the powers (authority) workers get in an organization and to keep low labour cost
on the other hand. The International Labour Organization (ILO) was the first agency which was set-up
to deal with labour issues (Ministry of Labour and Employment, 2000).
The roots of the labour law in India can be interwoven with the British colonialism (Cyber Advocate,
2015). The Constitution of India introduced industrial laws to provide legal basis to the laws for
employment and labour in India. Labour legislation was formed after the Independence of India with an
objective to handle various problems related to working conditions, industrial safety, hygiene and
welfare, wages, trade unionism, social security, etc. The Indian labour market can be broadly divided
into three categories: (i) organized sector; (ii) urban informal (i.e., unorganized) sector; and (iii) rural
labour (i.e., labour engaged mostly in agriculture). The existing list of constitution mentions labour
welfare laws, trade union, industrial and labour disputes and Factories Act as important statutes of the
constitution for the labour. These laws were also enacted to meet special needs of specific industries and
Shukla et al. 5

commercial established such as mines, plantation, factories, shops and establishments to name a few.
During the time of national emergency in the year 1975, the ministry introduced few anti-inflationary
acts such as Payment of Bonus Act, 1975, Equal Remuneration Ordinance, 1975 for restructuring labour
laws in the country.
In the year 1991, a major reform in the economic policy was undertaken by the Government of India,
that is, introduction of liberalization. This led to a need for the reforms which resulted into more
competitive environment and set new challenges for Indian labour laws.

Need for Reforms in Labour Laws

In today’s time, the service sector contributes around 55 per cent to the nation’s GDP in comparison to
the manufacturing sector which contributes around 16 per cent (FICCI, 2014). As a result, there is a need
to address these emerging needs of the service sector as well as the technology-driven manufacturing
sector (FICCI, 2014). This has urged the government to consider reforms in labour laws. Thus, there is a
need for reforms in the direction of making Indian labour market flexible and competitive in international
market. The government with the help of other experts is putting in efforts to shift Indian labour market
from being protectionist to competitive and open (Amarchand & Mangaldas & Suresh A. Shroff & Co.,
2009).
In the initial stage of the Make in India campaign, the primary focus was on three key tactics namely
reviving domestic investment, ensuring ease of doing business and attracting foreign investors for
fostering the manufacturing sector (Sahoo, 2015). However, the government later on realized that it is
difficult to achieve with these decades-old labour laws of the country. The investors find Indian labour
laws not so friendly and flexible as compared to the labour laws of other competitor economies such as
China (Sahoo, 2015). A study conducted by KPMG-CII tried to list down the factors which act as a
hindrance in starting business in India. The study listed down 11 approvals comprising of approvals
related to environmental policies, clearances, land procurement, construction permits, industrial safety
permits and power connections. These approvals were considered as top five obstacles faced while
setting up a business (Confederation of Indian Industry and KPMG, 2014). Issues which came up were
skill and education of workers, need for reforms in labour laws, customs and trade regulations and access
to land (Confederation of Indian Industry and KPMG, 2014). Forty-seven per cent of the respondents to
the survey agreed that they face moderate to major level of difficulty in abiding with all the labour laws
(Confederation of Indian Industry and KPMG, 2014). Thus, such issues and stringent labour laws in
India roused the need to bring reforms in the labour laws of India.
Currently, the labour laws in India comprise 44 laws under the purview of central government and
100 laws under the purview of state government. However, these large numbers of labour laws cover
hardly 7–8 per cent of the workforce which falls under the category of formalized (organized) work
sector. However, the remaining 92–93 per cent comprises the informal (unorganized) work sector; hence,
they do not fall under the purview of these labour laws (FICCI, 2014). The government has come up with
amendments which are not only ‘business friendly’ but also takes care of workforce in the informal
(unorganized) sector. As a part of the Make in India campaign, the government has initiated with
amendments in three major acts that govern labour market. These acts are the Factories Act 1948, Labour
Laws and Apprentices Act 1961 (Sahoo, 2015).
Factories Act was introduced with the objective ‘to ensure adequate safety measures and to promote
the health and welfare of the workers employed in the factories; and to prevent haphazard growth of
6 Management and Labour Studies 42(1)

factories through the provisions related to the approval of plans before the creation of a factory’. The act
covers important provisions namely facilities and conveniences, welfare, facilities in case of large
factories, safety, working hours, overtime wages, employment of wages, night shift for women, record
of workmen, leave, wages for overtime and leave salary, child employment, display on notice board,
notice of accidents and diseases, and obligations regarding hazardous process and substances (Ministry
of Labour and Employment, 2000).
The Apprentices Act was introduced in the year 1961, with a motive to enhance the programme of
industrial training with on-the-job training and to regulate the training arrangements in the industry. The
purpose behind introducing this act was to impose legislative obligations on all the employers in the
notified industries to engage apprentices in the ratio prescribed for designated trades. An apprentice is
defined as ‘a person who is undergoing apprenticeship training in pursuance of a contract of apprenticeship’
(Ministry of Labour and Employment, 1961).
As mentioned above, the laws pertaining to labour market in themselves are a huge field and under
Make in India campaign the government has initiated amendments under several acts. Thus, the available
information on the amendments in labour laws is very limited; so the present study attempts to list down
the amendments suggested under the Factories Act, 1948 (Draft), Labour Laws (Amendment) Act, 2011
and Apprenticeship (Amendment) Act, 2014. The next section of the article studies the overall impact of
these labour law reforms from employees and employers’ perspective. The article also studies contribution
of Labour reforms in Make in India campaign by using the theory of structural change, fundamentals and
growth given by Rodrik (2013b). The latter part analyzes impact of these reforms on two key aspects of
the campaign, that is, focusing on job creation and skill enhancement. Hence, this article attempts to
analyze amendment from a holistic point of view.

Proposed Amendments in Factories Act, 1948 (Draft)

The objective behind the need for amendment in Factories Act, 1948 is that the current act is very old.
Hence, it becomes necessary to change this act to keep it in pace with the changing global scenario in
term of reforms in global economy, technological reforms, integration of the global economy through
trade, investment, financial engineering, multilocation value chain, growth of information technology
(Ministry of Labour and Employment, 2014).
The Factories Amendment Bill, 2014 was drafted after considering suggestions and opinions from
trade unions, Organizations, and Individuals. The suggestions were collected by conducting a press
conference. The committee has considered views of the major trade unions of India, that is, CITU,
AITUC, BMS and HMS in a meeting held on 4th December, 2014 (Ministry of Labour and Employment,
2014).
These proposed amendments under the Factories Amendment Bill focuses on resolving key issues of
concern such as (i) improving workers’ safety, (ii) implementation of technology for transparent and
quick inspection, (iii) increasing the provision of overtime, (iv) increase in the penalty for breach of the
act, (v) relaxation in norms for women to work in night shifts, (vi) decreasing the number of days an
employee is required to work before being eligible for benefits like paid leave and (vii) other changes
(Mathew, Nanda, & Raj, 2014). The following section discusses in detail the amendments under Factories
Act, 1948.
Shukla et al. 7

Provisions for Workers Safety

The provision for health and safety measures take care of the health and safety standards prescribed
under Factories Act, 1948. It is mandatory for the factories to follow these measures. However, Factories
Amendment Bill suggests certain reforms under the act. These reforms proposed that a separate
committee comprising a chairman and two members shall be constituted to examine the health and safety
measures in the factory. This committee is required to follow the guidelines mentioned for the regulator
under the Occupational Safety and Health Board of India (OSHBI). These guidelines clearly mention the
role of a regulator in catering to the health and safety of workers at the workplace. The regulator is
required to frame the regulations regarding the general working conditions for the workers employed in
the factory. Also, the formulation of regulatory content and practice, standard setting, monitoring and
data management, follow-up and feedback, licensing of competent persons and inspection scheme to
ensure safety of the workplace falls under the purview of responsibilities of the regulator. Besides this,
schedule I (roles and responsibilities of the regulator) and schedule II (power of the regulator to make
changes through regulations) mention various important duties that a regulator needs to perform to
provide safe workplace to the workers. The act mentions that the regulator will follow the standards
mentioned under the act for the hazardous process, dangerous operations, and measures for basic health
and safety (Ministry of Labour and Employment, 2015b).

Inspection and Compliance Scheme

Another important provision for the safety of workers is the inspection and compliance scheme. As an
amendment to the law, the government has mentioned the qualifications required for acting as an
inspector for the factory. The roles and responsibilities of the Chief Inspector Office (CIF) are mentioned
in the draft. The government has announced to make the labour inspections and compliance scheme
transparent with an aim to promote occupational safety. To make the process transparent, a computerized
system is launched wherein risk-based criteria are preferred over arbitrary inspections based on discretion.
The mandatory inspection list is drafted which covers all the serious matters that shall be considered
under the process of inspection. Labour inspector needs to upload these reports of inspection within
72 hours. From the date of its launch till January 2015, the computerized system has generated 21,552
inspections out of which 18,149 inspections have been conducted and the reports of the same are already
uploaded on the portal. Appendix 4 reflects the progress of ‘Shram Suvidha’ portal (Ministry of Labour
and Employment, 2015b).

Provision of Working Hours for Overtime

One of the major changes that have been proposed under Factories Act is an increase in the total number
of working hours for overtime. The Factories Amendment Bill provides that the total number of hours a
worker should work including overtime shall not exceed 60 in any week and 75 in any quarter. However,
the enunciating amendment suggests an increase in the overtime from 75 to 100 hours per quarter
(Ministry of Labour and Employment, 2015b).

Increase in the Penalty for Breach of the Act

This amendment has come as a part of general modification in Factories Act. The fine and penalty
amount for the breach of the act in the Factories Act, 1948 was kept constant; currently, the proposed
8 Management and Labour Studies 42(1)

amendment has increased all the amounts by six times and have price-indexed it. The government, by
price-indexing all the amounts, has made future amendments simpler (Ministry of Labour and
Employment, 2015b).

Relaxation in Norms for Women to Work in Night Shifts

The government has finally moved in the direction of inclusive workforce. The provision mentions
certain conditions which an employer should follow to allow the women workers to work in a night shift.
These conditions are the employer shall be responsible to provide for night crèches, protection of dignity
and honour, protection from sexual harassment and will be considered responsible for the safety within
the factory premises and transit should be provided from workplace to home. The employer will be
encouraged to provide benefit of paid maternity leave for the period of 16 months of which 8 weeks shall
be before the expected childbirth and for additional period as recommended by the consulting doctor.
The period of leave has been increased from 12 to 16 weeks in the proposed draft (Ministry of Labour
and Employment, 2015b).

Decreasing the Number of Days an Employee Is Required to Work before Being Eligible for
Benefits Like Paid Leave
The current act mentions that a worker has to work for 240 days and then and only then the worker can
avail the benefit of paid leaves. However, the amendment proposes to reduce these numbers of days from
240 to 90 days. Thus, a worker who has worked for 90 days can avail the benefit of paid leaves (Ministry
of Labour and Employment, 2015b).

Other Changes
Apart from these six major changes that have been proposed, the draft also includes few other changes
such as the inclusion of ‘transgender’ in the act. Few modifications have also been made under the
Section 111 ‘Obligations of workers’ which states that the employer cannot impose penalty or cannot
take any actions against worker directly. The employer has to conduct counselling rounds and give
warning subsequently for introducing discipline at workplace. It falls under the purview of the rights of
the worker to obtain information relating to their health and safety, get training within the factory and
represent directly to the inspector in case of breach of the provisions on safety and health measures by
the employer. It is the duty of an employer to conduct mentoring sessions at regular intervals to impart
skills to their workers (Ministry of Labour and Employment, 2015b).

Amendments in Labour Laws (Amendment) Act, 2011

The Labour Law Amendment Act, 2011 is an attempt to expand the horizon of the Labour Law
Amendment and Miscellaneous Provision Act, 1988 (principal act). The Labour Law Amendment Act,
Shukla et al. 9

2011 proposed exemption from furnishing returns and maintaining registers by certain establishment.
These certain establishments, which can avail this exemption, are clearly defined in the act. The Principal
Act defines ‘small establishments’ as any place which employs between 10 and 19 people on any day of
the preceding 12 months. A ‘very small establishment’ is a place that employs nine or less than nine
people. However, the Bill seeks to amend the definition of ‘small establishment’ to cover establishments
that employ 10–40 people. The Principal Act states that these ‘small establishments’ and ‘very small
establishments’ are not required to furnish returns and maintain records under certain laws such as the
Payment of Wages Act, 1936; the Weekly Holidays Act, 1942; the Minimum Wages Act, 1948; the
Factories Act, 1948; and the Plantations Labour Act, 1951. Instead, they are required to furnish returns
and maintain registers in a specified format. However, the Amendment Act suggests to include seven
more legislations such as the Motor Transport Workers Act, 1961; the Payment of Bonus Act, 1965; the
Beedi and Cigar Workers (Conditions of Employment) Act, 1966; the Inter-State Migrant Workmen
(Regulation of Employment and Conditions of Service) Act, 1979; the Dock Workers (Safety, Health and
Welfare) Act, 1986; the Child Labour (Prohibition and Regulation) Act, 1986; and the Building and
Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996. These
establishments are required to only maintain common forms of returns or registers specified in the Act.
In addition to these records, the Principal Act mentions that it is compulsory for the employer to file
returns and maintain records in a specified format. They have to issue wage slip, amount of work done
slips and returns related to accidents. However, the Amendment Act facilitates computerized maintenance
of these records. The employer has to provide printouts of these records as and when demanded by the
inspector during inspections (Reger, 2015).

Amendments in Apprenticeship (Amendment) Act, 2014

The Apprenticeship (Amendment) Act proposes changes under the Apprentices Act, 1961 (Apprentices
Act). The amendments were proposed with an objective to make the act more responsive to youth and
industry. The Apprenticeship (Amendment) Act modifies few important measures such as (i) modification
of certain definitions from the Apprentices Act, such as the definition of the appropriate government
‘whereby the appropriate government in case of an establishment operating in four or more states would
be the central government’; (ii) the Apprentices Act recommended that the minimum age for getting
engaged in any trades (irrespective of such trade being hazardous or not) as an apprentice was 14 years.
The Apprenticeship Amendment Act has increased the minimum age limit for the trades related to
hazardous process to 18 years. The Apprenticeship (Amendment) Act further removes Advisor’s approval
for Apprenticeship training programme. In addition to this, the Act now limits the requirement of
approval of the syllabus and equipment for practical training by the central government only in case
of hazardous industries. The Amendment Act eliminates the rule of deciding weekly and daily hours of
work and leave entitlement of an apprentice; the decision now is taken by the employer of the apprentice.
The act has further eliminated the provision of imprisonment in case of violation of the Apprentices Act
(Reger, 2015).
The above section simply describes all the amendments that have been proposed under Factories Act,
1948 (Draft), the Labour Laws (Amendment) Act, 2011 (passed on 28 November 2014) and the
Apprenticeship (Amendment) Act, 2014 (passed on 26 November 2014). However, the next section of
the article analyzes these amendments from the employees and employers perspective. The article also
studies contribution of Labour reforms in Make in India campaign by using the theory of structural
10 Management and Labour Studies 42(1)

change, fundamental and growth given by Rodrik (2013b). The article concludes with an analysis of the
contribution of labour reforms in the success of Make in India campaign by studying the impact of these
reforms on ‘job creation’ and ‘skill enhancement’ which are the two major focuses of the campaign
(Business Standard, 2014).

What’s in It for the Employers and the Employees?

It is mentioned in the Preamble of Indian Constitution that we are a Sovereign Socialist Secular
Democratic Republic state. The ideology of Indian constitution adheres to that of Indian freedom fighters
during pre-independence scenario and so the basis of it is to protect the interest of Indian citizens.
Factories Act, 1948 was introduced with an aim to protect the right of the workers; however, Indian
economy has changed in a major way since then, and amendment to the act was a necessary move. From
an employee’s perspective, the recent amendments have brought in a lot of good news; creating bodies
like OSHBI help in creating the transparency in the systems. The overall inspection policy helps in
monitoring the general factory scenario. The Chief Inspector of Factory checks on industrial effluents,
ventilations, latrine and other hygiene facilities. While the possibility of corruption always exists in all
social systems, a sense of security can be felt by the employees with the periodic inspection mechanism.
The inspection would see to it that no sub-standard facilities are provided to the employees. The
government has made it mandatory for the inspectors to upload the inspection report within 72 hours of
inspection.
To make the inspection scheme transparent and speedy, the Ministry of Labour and Employment has
launched an online portal named ‘Shram Suvidha Portal’; the portal covers four major organizations
namely Office of Chief Labour Commissioner (Central); Directorate General of Mines Safety;
Employees’ Provident Fund Organization; and Employees’ State Insurance Corporation. The main
features of this portal are (i) a unique labour identification number (LIN) which is allotted to the units to
facilitate online registration, (ii) filing of self-certified, simplified single online return by industry,
wherein the units will file single consolidated return instead of separate returns and (iii) Transparent
Labour Inspection scheme. These actions will prove to be beneficial to the employees as this will give
workers a sense of security and assurance that their complaints are heard. Till date, ten states have shown
interest for implementation of this online practice (Ministry of Labour and Employment, 2015b).
It needs to be seen if the Factories Act has done enough for the employees or has it been harsh to the
employees in order to make it employer-friendly environment. The actual Factories Act, 1948 discusses
in detail about the Health and Welfare Standards, while the Factory Amendment Bill has covered all the
aspects but fails to mention explicitly the details about the government-mandated standards. In chapter
III of Health of Industrial Factories Act, 1948, the standards of cleanliness have been found to be well-
defined, capturing the notions of cleanliness such as proper drainage system, cleaning floors and painting
rooms; the standards of other parameters are also well mentioned in the draft; however, the amendment
draft mentions

regulations shall cover all or any of the matters, namely: Cleanliness; Disposal of wastes and effluents; ventilation
and temperature; dust and fume; Lighting; Drinking water; Latrines and urinals; Spittoons, etc., or any additional
matter the regulator may deem it fit for promoting and protecting health of the workers

Though there is penalty for not maintaining the health standards, they are not mentioned in the Factory
Amendment Bill; this amendment is likely to create a structure of loopholes in Indian economic systems.
Shukla et al. 11

The government might have overlooked the health standards, but this time it has not overlooked
women employees. The title of Section 66 in the previous Factories Act was ‘Further restrictions on
employment of women’; this has been replaced with ‘Employment of women’. As per the Indian Right
to Equality giving Indians an equal opportunity to be employed, the prohibition of Women working after
7 pm has been lifted. Any company which fulfils the mandatory requirement of assuring female safety
by providing transport during night shift and safe work environment is permitted to employ female
workers in a night shift. This amendment is expected to benefit those working in Special Economic
Zones (SEZs), textiles, garments, handicrafts, leather and IT sector (especially call centres). Garment
units already employ 60 per cent of women workforce and with growth in this industry the number is
expected to rise; the bill transcends the barrier set by Indian society on Women to go out at night. This
bill has also formally introduced the concept of paid maternity leave in India giving the expectant
mothers more leaves by proposing an increase in the duration of leave from 12 to 16 weeks. The bill
mentions the phrase ‘While the occupier would be encouraged to provide paid maternity leave’; this
surely is a disincentive for expectant mothers and favours the employers; the maternity laws in European
nations and other developed countries extensively describe the overall parental leave; the time given for
breast feeding; the percentage share of employers in giving the salary to expectant mothers; and the
terms and conditions of leave in terms of miscarriage, more than one delivery, weak health of child or
mother; while the women have made a rightful place in the Indian Labour Laws, the acts need to see to
it that there is no scope of discrimination towards women by the employer. Thus, the amendment though
is an appreciated effort of the government lacks the motive promoting inclusive workforce.
The government has considered the rule of availing paid leaves after working for certain duration for
modification. The present act states that the worker has to compulsorily work for 240 days to avail the
benefit of paid leave. However, the amendment indicates considerable decrease in this number of days
to 90 days. This decrease in number of days is definitely pro employee move. But this change can
contribute positively to an employer as well. This will result into a motivating tool for the employees to
work dedicatedly for the organization, and on the other side this can also increase employees’ sense of
belongingness towards the organization. Thus, all these changes are likely to result into an increase in
employees’ productivity and high performance of the organization.
It is well said that, ‘As a modern employer you have to treat people well’—James Dyson. The draft
also tries to follow such practice. The good thing of this draft is that it tries to develop partnership
relationship with one of the important stakeholders of the business, that is, employees (workers). The
Factories Amendment Bill depicts efforts of the government towards making inclusive work environment.
It includes a clause for ‘transgender’. The draft mentions ‘transgender’ as a part of workforce in the
factory. Besides this, the draft also defines the role of an employer clearly. The bill mentions that the role
of the employer is not limited to hiring and firing an employee. It has more responsibilities attached to
title ‘employer’. These responsibilities include mentoring employees, scheduling and providing training
to the employees in the factory. This will promote worker’s participation in the management, and will
also improve the working conditions at the shop floor. Besides this, the employee can directly complain
on breach of the provisions mentioned in health and safety measures. This will act as a compulsion for
employers to follow the measures for health and safety in the organization.
The flexibility in furnishing records on the one hand will reduce the burden of an employer to follow
all the guidelines and maintain physical documentation to a great extent. While on the other hand, the
amendment also takes care to provide security to the workers by making it mandatory for these small
establishments to maintain records in a specified format and present the same to the inspector during an
inspection. The computerized maintenance of these records can result into favourable move for both
12 Management and Labour Studies 42(1)

employer and employee as they can easily access the required record. This move can prove to be
favourable to both the employer and employee.
The Apprenticeship Amendment Act defines ‘appropriate government’; this modification can act as a
benefit to both the employer and apprentice of a big enterprise having its presence at more than four
locations in the nation. The employer in such cases has to follow the guidelines mentioned by the central
government and the issues for the same will be redressed following the regulations mentioned by the
central government. This helps an employer as they can follow the standard norms and regulations
prescribed by the central government for all the locations against different norms mentioned by the state
government. The Apprenticeship Amendment Act gives liberty to the employer to take a call on deciding
the weekly leaves and working hours for an apprentice as per the discretion or policy. Elimination of
imprisonment as a provision can be considered as not so favourable move by the government as this may
result into more violation of the act and exploitation of the apprentice. This step of the government may
result into liberty to the employer and encourages capitalist system in an organization.

Contribution of Labour Reforms in Make in India Campaign: An Analysis

The theory of structural change, fundamentals and growth given by Rodrik seems relevant in the context
of India. It posits that an economy can be given a boost by structural and fundamental changes.
‘Fundamental capabilities are multidimensional which have high set-up costs, and exhibit
complementarities.’ Thus, investment in fundamental capabilities is generally considered for the long
run; the growth pay-offs experienced by an economy due to fundamentals are cumulative over a period
of time and not instantaneous. Growth based on the accumulation of fundamental capabilities is a slow,
drawn-out affair. Structural transformation in an economy is usually thought to encompass three
processes: (i) changes in sectoral composition of output; (ii) changes in sectoral composition of
employment; and (iii) changes in the rural–urban composition of output and employment. Our focus in
this article is on the first two processes only. Rodrik (2013a) has discussed various economies to explicitly
explain the difference between fundamental processes and structural process. He elaborated on the case
of Latin American countries which improved significantly on government policies and other
macroeconomic fundamentals but scored poorly on structural parts (McMillan and Rodrik, 2011). Rodrik
(2013a) summarized the implications for growth using a matrix as mentioned in Appendix 5. Structural
transformation can fuel rapid growth on its own, but if it is not backed up by fundamentals, growth peters
out and remains episodic. The accumulation of fundamentals, on the other hand, requires costly, time–
consuming, and complementary investments across the entire economy. Make in India campaign can be
analysed using this framework.
India has adapted to Globalization in a better way than others. India has historically been an agricultural
economy with abundance in unskilled labour force; as per the comparative-cost advantage theory by
David Ricardo, the growth of India would lie in the agricultural sector; as per the structural change
definition, change in sectoral employment would lead to structural transformation. As suggested by
Rodrik (2013b), the sectoral movement of employment would occur as per the skill set encompassed by
the labour force, that is, a farmer can more easily transform herself into a production worker in a garment
factory than a BPO. Ahsan and Mitra (2013) noted that during the period between 1960 and 2012,
agriculture’s share of employment fell only by 22.5 percentage points (from 71.5 to 49 per cent) and
manufacturing’s share rose a meagre 10.2 percentage points (from 9.8 to 20 per cent) (Central Intelligence
Agency, 2012). Structural change contributed positively in Indian growth story after the 1990s, especially
Shukla et al. 13

after the liberalization of Indian economy. But the biggest part of the positive growth was the service
sector and not the manufacturing sector. The manufacturing sector actually shrunk during this time and
made a negative contribution during 2000–2004. Information technology (IT) and business process
outsourcing services (BPO) on which India’s recent growth has relied are no doubt high–productivity
activities with convergence dynamics that may be even stronger than in manufacturing. But these are
also highly skill–intensive sectors, unable to absorb the vast majority of the Indian workforce that
remains poorly educated.

Conclusion
While India has had a favourable growth story due to structural changes, the growth could not be realized
due to several impairments. India ranks 183rd in dealing with construction permits as per Ease on Doing
Business Index; and 178th in enforcing contracts (Confederation of Indian Industry and KPMG, 2014);
these two are typically the features that define fundamental capabilities of any economy. While various
summits and ample tax benefits given by the government have leveraged Indian growth, the overall
growth or the sustainable growth could only be achieved if fundamental capabilities, such as education,
infrastructure and governance, are realized in the economy as a whole.
The major focus of Make in India campaign revolves around job creation and skill enhancement. The
reforms in these acts if implemented considering its benefits to all the stakeholders will result into more
job creation and availability of skilled pool of labour. The amendments in Factories Act with reference
to transgenders and women have increased the scope of job creation for both. Moreover, the Factories
Act, 1948 (Draft) has highlighted the importance of counselling, that is, an employer shall act as a
counsellor for the workers; such counselling rounds will help recognizing problems of stress and its
impact on overall productivity. The government has initiated this reinvention by introducing amendments
in certain labour laws. One such positive step is in the direction of developing skilled labour in the
market by inclusion of provision in the Apprenticeship Amendment Act in which the authority has been
transferred from the hands of government to the employer. It becomes employer’s duty to develop
required skills in their apprentice. The government can motivate ‘skill enhancement’ by incentivizing
these employers. The government can incentivize employers by introducing awards or rewards for the
employers who mentor their apprentice as per the needs of their employees. A committee/supervisor
shall be appointed to supervise the same. The proposed amendments in the Factories Act, 1948 (Draft)
describes a provision on the rights of the workers. The provision covers certain aspects such as the
worker should be trained under the factory premise for the health and safety measures. The employer
shall be held responsible to conduct mentoring sessions for the workers (Ministry of Labour and
Employment, 2015b). Such practices if implemented would result in skill enhancement and better
performance.
However, if we look into the current trends in job creation, the employment survey conducted by the
Ministry of Labour indicates decline in the first quarter of the financial year 2015–2016. As per the
survey, there has been a decline of net 43,000 jobs in different sectors (refer Appendix 6 for sector-wise
data on job creation) in the first quarter of the financial year 2014–2015. The first quarter of the financial
year 2015–2016 showed a decrease of 17,000 jobs in the textile sector; 18,000 jobs in automobile
industry; 5,000 jobs in the IT/BPO sector; 6,000 jobs in handloom jobs; 3,000 jobs in gems and jewellery;
and 2,000 jobs in the transport sector. The facts have been quite surprising as the employment of the
leading sectors in previous year, that is, textile and IT/BPO sectors, has faced a noticeable decline in the
14 Management and Labour Studies 42(1)

current year. These figures may act as shells to labour unions that are criticizing labour reforms proposed
by the NDA government. The survey further revealed that the major reason behind the decline in the
number of jobs is the fall in the number of temporary workers and not permanent employees. While on
the one hand permanent employment has noticed an increase of 30,000 jobs, on the other hand, contract
employment has noticed a decline of 73,000 jobs in the first quarter of the financial year 2015–2016
(Nanda, 2015).
An important move by the Government of India in the direction of skill enhancement is the introduction
of Kaushal Bharat Scheme (Skill India campaign). The campaign was introduced with the aim of skill
development among youth of the nation. At present, India’s record for formally skilled labour is as low
as 5 per cent of its total workforce in comparison to other developed nations having formally skilled
workforce comprising 60–90 per cent of their total workforce. The campaign aims to fulfil four major
objectives, that is, to (i) ensure that youth emerging from formal education are employable with job or
self-employment-oriented skills, (ii) ensure that people stuck in low income jobs and in the unorganized
segments can access growth opportunities through up-skilling/re-skilling and Recognition of Prior
Learning (RPL), (iii) improve supply and quality of the workforce for industry, contributing to increased
productivity and (iv) make skilling aspirational for youth. Hence, the objectives of the campaign are
more or less in sync with the amendments proposed under Apprenticeship Act and Factories Act (Ministry
of Skill Development and Entrepreneurship, 2015). Hence, on the basis of the amendments proposed
under Labour Laws and the campaign launched by the government for skill enhancement, it can be said
that if planned and implemented properly, the campaign can help nation achieve target of providing
400.2 million trained workforce available in the nation by 2022 (Ministry of Skill Development and
Entrepreneurship and Press Information Bureau, 2015).
Though the amendments under these three acts may look lucrative and ‘business friendly’ at first
glance, the fact is that the government needs to think for long-term implications of these reforms. It also
needs to analyze if the amendments will actually result into more business in India by attracting investors
from across the globe and in the nation. Looking at the current situation of the campaign, the government
needs to first take steps to convince people how these reforms will impact the development of India’s
economy. The government needs to put in efforts to spread awareness among its target audience (i.e., the
employer, employees, unions and other stakeholders) about the benefits each party can derive from these
reforms as well as from the various campaigns (such as Make in India, Skill India) which will help India
in its overall development. The government can look forward to the development of the nation with the
support of all the stakeholders.
Considering the overall statistics, these steps towards reforms in labour laws will have a positive
impact on the economic development of India. These reforms if implemented will not only attract
investors from across the globe to invest in India but also encourage current businesses in India to
diversify and expand, and this will also encourage the establishment of start-ups in India. Thus, such
increase in investment and business in India will increase India’s overall ranking as an emerging nation
on the path of economic and overall development.
Amendments in Labour Laws are a small step taken in the direction towards Indian Economic
Development. While two amendments have been passed by the parliament, and one draft is yet to be
passed, it remains to be seen if Indian growth story is that of endogenous growth, with employer,
employee and government working together to act as workforce; or is it another fragmented story of
employer–employee divide. The challenge lies in effective implementation of well-intentioned plans.
Shukla et al. 15

Appendices
Appendix A:  GDP Growth Rate of India
Table A1.  GDP Growth Rate of India for the Financial Years 2013–2014 and 2014–2015

S. No Parameters FY14 FY15

1 Real GDP growth rate 4.7% 5.5%1
2 WPI inflation 6% 4.2%2
3 CPI inflation 9.50% 7.4%2
4 Industry growth (–)0.1% 1.9%2
5 Exports 4% 4.7%2
6 Fiscal deficit as % of GDP 84.4%3 89.6%3
7 CAD as % of GDP 1.7% 1.9%4
8 FDI inflows 8% 15%
9 Exchange rate 60.50 59.75
Source: Progress Harmony Development (2014).
Notes: 1. Real GDP growth is average of Q1 and Q2 (2014–2015).
2. Data pertains to April–October 2014–2015.
3. Data pertains to percentage of actuals to budget estimates for the month of October in the respective years.
4. Figure is average of the current account deficit of Q1 and Q2 of year 2014–2015.
5. Data pertains to Q2 2014–2015.

Appendix B:  Manufacturing Sector’s Contribution in the GDP

Table B1.  Manufacturing Sector’s Contribution in the GDP of their Respective Countries

S. No. Country Share in GDP (in %)

1 Thailand 34
2 China 32
3 South Korea 31
4 Indonesia 24
5 Germany 22
6 India 16
Source: Progress Harmony Development (2014).

Appendix C:  Global Competitive Index

Table C1.  Global Competitive Index

2009–2010 2012–2013 Estimated 2017–2018

Rank Country Index Score Rank Country Index Score Rank Country Index Score
10 = High, 10 = High, 10 = High,
1 = Low 1 = Low 1 = Low
1 China 10 1 China 10 1 China 10
2 India 8.15 2 Germany 7.98 2 India 8.49
3 South Korea 6.79 3 USA 7.84 3 Brazil 7.89
4 USA 5.84 4 India 7.65 4 Germany 7.82
5 Brazil 5.41 5 South Korea 7.59 5 USA 7.69
(Table C1 continued)
16 Management and Labour Studies 42(1)

(Table C1 continued)

2009–2010 2012–2013 Estimated 2017–2018

Rank Country Index Score Rank Country Index Score Rank Country Index Score
10 = High, 10 = High, 10 = High,
1 = Low 1 = Low 1 = Low
6 Japan 5.11 6 Taiwan 7.57 6 South Korea 7.63
7 Mexico 4.84 7 Canada 7.24 7 Taiwan 7.18
8 Germany 4.8 8 Brazil 7.13 8 Canada 6.99
9 Singapore 4.69 9 Singapore 6.64 9 Singapore 6.64
10 Poland 4.49 10 Japan 6.6 10 Vietnam 6.5
Source: Deloitte India (2010, 2013).

Appendix D.  Labour Inspection Scheme Progress

Source: Ministry of Labour and Employment (2015a).

Appendix E.  Growth Patterns and Outcomes

Source: Rodrik (2013b).
Shukla et al. 17

Appendix F.  Outcome of 26th Quarterly Employment Survey

Source: Nanda (2015).

Notes
1. PM Modi in his speech quoted that India’s real-life Martian adventure was actually lesser than the Hollywood
film gravity. India’s Mars Mission hit the headlines of all the Global Newspapers and India’s cost-effectiveness
got the Industry’s attention.
2. The term ‘Job Creation’ can be defined as ‘the job that is created without displacing any other economic activity’.
While it is easy enough to measure whether a new job has been created at the macroeconomic scale by looking at
aggregate data from the Bureau of Labour Statistics, it is very difficult to determine if (i) the jobs created did not
merely displace jobs in other locations or sectors, and (ii) if the jobs were created because of a specific policy. In
reality, it is very difficult to measure job creation (Cary, Nguyen, Pranka, Schildt, Sheu, & Whitcomb, 2011).
3. ‘Skill enhancement provides the opportunity and knowledge for a client to develop and strengthen the necessary
skills to gain, maintain, and advance in a chosen area.’ Skill enhancement programmes are generally a well
blend of training comprising best practices from education, psychology, social work, career counselling, sports
and technology training. Such training enhances person’s skills and overall performance in their area of interest
which result in improvement in the quality of life (Psychologist Anytime Anywhere, 2005).

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