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June 28, 2017

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India business awaits changes to Raj-era labor laws

DHARUHERA, India--With steel machines hissing and whirring and staff studiously manning production lines, Sunder Rajan's factory about two hours southwest of New Delhi is prospering.

But Rajan's plant, one of seven spread across four states that churns out car steering systems, faces an uphill battle complying with India's myriad of archaic, complex and often bewildering labor laws.

"There are a huge number of laws, with individual inspectors for individual laws in individual states," said Rajan, CEO of Sona Koyo Steering Systems.

"It's a nightmare," he said, adding that he has numerous staff working full-time on compliance issues.

Businesses argue that conforming to India's 44 national and more than 150 state labor laws is not only costly and time-consuming, it has deterred foreign investors, and hobbled manufacturing in a country struggling through the worst slowdown in two decades.

Prime Minister Narendra Modi, who took office in May, has pledged to overhaul the laws, one of the major reforms his right-wing government says is vital to revive the economy.

In his Independence Day speech on Friday, Modi underlined his desire for India to become a manufacturing hub, and invited the world's industries to set up shop in the South Asian country.

He also urged the country's youth to set up their own manufacturing businesses, questioning why India was forced to "import even the smallest of things."

Rajan welcomed Modi's speech as "a sign of good intentions" but said his government now needed to "create the right conditions."

"We still need for example better labor laws, infrastructure and faster environmental clearances for this to happen," he told AFP.

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