Modi kicks off overhaul of creaky labour rules

Monday, 20 October 2014 00:00 - - {{hitsCtrl.values.hits}}

Reuters: India will simplify employment rules and ease the way for people changing jobs to move social security funds, Prime Minister Narendra Modi said on Thursday, unveiling steps to reform the labour sector long sought by investors. India’s outdated labour laws strictly limit hiring and firing, while an onerous ‘inspector raj’ deluges employers with paperwork, discouraging them from expanding and adding staff.

“Fifty types of departments chase them, 50 types of forms have to be filled in. The world has changed,” Modi said, adding that companies would now only need to fill a single form online. The change would benefit chiefly firms that employ just a few people, he said. In 2009, 84 percent of India’s manufacturing workers were employed by firms with fewer than 50 staff, research by the Asian Development Bank shows. Just 8% of Indian workers have formal jobs with any security and benefits, such as the Provident Fund, while the vast majority work in the informal sector, experts say. Even though the World Bank says India has one of the world’s most rigid labour markets, fears of a trade union backlash and partisan politics have deterred governments from reform. Business leaders have high hopes for Modi, an advocate of smaller government and private enterprise, to change that. Industry groups said Thursday’s measures would warm business sentiment and help boost the slowing economy. “These reforms will further help create a more conducive manufacturing environment,” Ajay Singha, Executive Director of the American Chamber of Commerce in India, said in a statement. On Thursday, the Hindu nationalist leader also promised easier movement of accounts in India’s Provident Fund scheme by using a universal account number. The payroll-funded program has 80 million members. Because transfers are so difficult, more than 270 billion rupees ($4.4 billion) lie idle in such accounts. “I need to return this money to the poor,” the Prime Minister said. “The world asks, ‘What is Modi’s vision?’ They will see it in this effort.” Inspection of businesses will be made more transparent, with a computer lottery being used to pick the enterprises to be inspected and officials required to upload a report within 72 hours, Modi said. A new website, managed by the Labour Ministry, will allow companies to fill forms online and raise their grievances.

India ends diesel controls, raises gas prices

Reuters: India’s government on Saturday lifted diesel price controls and raised the cost of natural gas, giving market forces greater sway as it seeks to attract energy investment, boost competition and cut subsidy costs. The decisions marked an acceleration in reform measures by Prime Minister Narendra Modi, who won a landslide general election victory in May and was buoyed by a strong showing in two state elections this week. Lower prices of diesel and a smaller-than-expected rise in local gas rates will help Modi fulfill an election pledge to curb inflation and pull India’s economy out of its longest slowdown since the 1980s. “Henceforth, like petrol, pricing of diesel will be market determined,” Finance Minister Arun Jaitley told a news conference after Modi chaired a cabinet meeting. A litre of diesel will cost about 5.7%, or 3.37 rupees ($0.05), less for consumers from Sunday, while prices of locally produced gas will go up by a third from next month. The first cut in diesel prices across the country in more than five years, triggered by falling global oil prices, will help further ease inflation that is already tracking lower. Diesel makes up nearly half of India’s fuel demand and its usage is set to rise as Modi wants to boost the employment-generating manufacturing sector to generate growth and jobs. India imports more than 70% of its oil needs and every $10 a barrel fall in prices lowers retail inflation by 0.2 of a percentage point and wholesale inflation by half a point, experts estimate.