No time like now to clean up India’s labour laws
In most parts of the world where they operate, banks do not employ thuggish individuals to encourage credit card defaulters to settle their outstanding balances. In India they do. This creates situations that can go easily out of hand. Should a credit-card defaulter claim that he attacked the ‘debt collection executive’ in self defence it would be believable. Should the thug claim that he returned the compliment, again in self-defence, that would ring true too. In such circumstances, pinning down the guilty party becomes a rather tough task. But as long as India’s legal framework does not provide an efficient avenue for recovering credit, banks will be forced to use measures that should ideally have no place in civilised society.
So is it with labour laws. That is why it is unfortunate that after the recent riots at the Honda motorcycle factory in Gurgaon, an unedifying and certainly unrepresentative example of India’s labour relations, some analysts predict that India’s much awaited labour reforms are likely to be stalled, yet again. That would be a grave mistake. If anything, the Gurgaon incident is a wake-up call to the Indian government to speed up labour reform. The existing maze of labour legislation only encourages bureaucratic rent-seeking and cynical trade-unionism and comes at the cost of greater employment and economic growth. And it also ends up creating the conditions for that occasional riot to break out.
More than a decade ago, as finance minister, Dr Manmohan Singh used another moment of adversity to unshackle the Indian economy. Now, as prime minister, he has an opportunity to do the same with employment. Instead of reacting like yet another cynical Congress party leader, Sonia Gandhi would do well to emulate the example of Dr Singh’s former boss, P V Narasimha Rao, and provide political cover as the good economist gets on with his job.