This information is derived from the State Department's Office of Investment Affairs' Investment Climate Statement. Any questions on the ICS can be directed to EB-ICS-DL@state.gov
Last Published: 8/2/2017

Although there are more than 20 million unionized workers in India, unions still represent less than 5% of the total work force. Most of these unions are linked to political parties. According to provisional figures from the Ministry of Labor and Employment (MOLE), over 2.9 million workdays were lost to strikes and lockouts in 2015, as opposed to 11 million workdays lost in 2014.

Labor unrest occurs throughout India, though the reasons and affected sectors vary widely. A majority of the labor problems are the result of workplace disagreements over pay, working conditions, and union representation. According to government statistics, in 2015 the state of Kerala had the most strikes, followed by Tamil Nadu and Assam.

India’s labor regulations are very stringent and complex, and over time have limited the growth of the formal manufacturing sector. The rules governing the payment of wages and salaries are set forth in the Payment of Wages Act, 1936, and the Minimum Wages Act, 1948. Minimum industrial wages vary by state, ranging from about $2.80 per day for unskilled laborers to over $7.70 per day for skilled production workers. Retrenchment, closure, and layoffs are governed by the Industrial Disputes Act of 1947, which requires prior government permission to lay off workers or close businesses employing more than 100 people. Foreign banks also require RBI approval to close branches. Permission is generally difficult to obtain, which has resulted in the increasing use of contract workers (i.e. non-permanent employees) to circumvent the law. Private firms successfully downsize through voluntary retirement schemes.

Since the current government assumed office in 2014, much of the movement on labor laws has taken place at the state level, particularly in Rajasthan, where the government has passed major amendments to allow for quicker hiring, firing, laying off, and shutting down of businesses. The Ministry of Labor and Employment launched a web portal in 2014 to assist companies in filing a single online report on compliance with 16 labor-related laws. In 2015, the Ministry also tabled legislation to amend India’s Factories Act that would encourage voluntary compliance of occupational safety and health standards and reduce government inspections. India’s major labor unions have opposed the labor reforms, arguing that they compromise workers’ safety and job security.

On September 2, major trade unions led country-wide protests against the government’s attempt to reform labor laws. The strike evoked mixed response as major cities like Delhi and Mumbai did not see any disruptions and the affect was restricted to states like Kerala, which is ruled by the Left parties and Karnataka, because the Congress party also supported the strike.

In August, the Child Labor Act was amended establishing a minimum age of 14 years for work and 18 years as the minimum age for hazardous work. In December, the government promulgated legislation enabling employers to pay worker salaries through checks or e-payment in addition to the prevailing practice of cash payment.

There are no reliable unemployment statistics for India due to the informal nature of most employment. The government nonetheless acknowledges a shortage of skilled labor in high-growth sectors of the economy, including information technology and manufacturing. The current government has established a Ministry of Skill Development, and has embarked on a national program to increase skilled labor.

 

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India Economic Development and Investment Law