New Labour Codes to Generate More Jobs, Boost Consumption

 Mumbai: India’s new Labour Codes could generate employment for 77 lakh people and boost consumption by Rs 75,000 crore, according to a research report released by SBI. The government notified the implementation of the four codes--Code on Wages, the Industrial Relations Code, the Code on Social Security and the Occupational Safety, Health and Working Conditions Code on November 21. The Codes are designed to replace 29 older laws. According to the report, the implementation of the new Labour Codes will boost the share of formalization in Labour force by atleast 15 per cent, social sector coverage to 85 per cent, boost employment by 77 lakh and boost consumption by Rs 75,000 crore over the medium term. The report models three scenarios based on the current unemployment rate of 3. 2 per cent and finds that unemployment could fall by 0. 3 to 1. 3 percentage points, depending on how quickly firms and states adjust to the new norms. “In India, approximately 44 crore people are working in unorganized sector. Out of which around 31 crore unorganized workers are registered under the e-shram portal. By assuming 20 per cent will shift from informal pay-roll to formal payroll, it will benefit around 10 crore beneficiaries. With this we expect, India’s social security coverage may reach 80-85 per cent in the next 2/3 years,” said the report from SBI’s Economics Research Department titled Implementation of new Labour Codes will boost the share of formalisation in Labour Force by at least 15 per cent. According to the PLFS dataset, the share of formal workers in India is estimated to be 60. 4 per cent. The study estimates 15. 1 increase in the formalisation rate post the implementation of four labour codes pushing labour market formalisation to 75. 5 per cent. “India’s new Labour Codes after a short transition phase could reduce unemployment by upto 1. 3 per cent over the medium term, depending on reform implementation, firm-level adjustment costs, and complementary state-level rules. This would imply additional employment generation of 77 lakh people based on current labour force participation rate (15 yrs +) at 60. 1 per cent and average working age population at 70. 7 per cent across rural and urban workforce. ” The report also highlighted the potential impact on domestic consumption. With a savings rate of roughly 30 per cent, the reforms could result in an average rise of Rs 66 per person per day in consumption. This could lead to an approx. consumption boost of Rs 75,000 crore providing a substantial stimulus to economic growth.