Labour laws and their impact on Indian manufacturing industry
Student name: Ms Bhawna Mangla
Guide: Prof Badal Mokhopadhyay
Year of completion: 2013
Host Organisation: TERI University
Abstract: This paper aims to establish a relationship between labour regulation in India and
performance of Indian manufacturing industry using a pooled cross section analysis across 20
states of India for the years 2005 and 2009. Labour laws were established in the Indian
constitution to safeguard the interests of working class people employed in manufacturing
sector of India. However, this fortification has proved to become an obstruction in the growth
process of Indian industries. States with strict labour laws have been shown to produce
negative effects on both industrial output and employment. Also, the interference of
government in decisions regarding retrenchment and deployment of labour force has
provided enterprises with reasons to depend more on contract/casual labourers in order to
escape such interference. Thus labour laws reduce both quality and quantity of employment
generation in industrial sector completely disturbing the interests of working population
which they aimed at the first place. Additionally, some industrial disputes have cropped up in
Indian history where labour laws were wholly incapable of protecting the job security and
source of income generation of workforce. We do not recommend complete elimination of
labour laws but instead their design should not hamper industrial productivity and the welfare
of labour force.
