Economic Survey highlights need for flexible labour laws to promote growth

The Union government in the Economic Survey 2024-25 has argued against the cap on working hours in the factories. According to the government, India's working hour regulations prevent manufacturers from meeting demand surges and participating in global markets.

"There are instances where labour regulations designed to protect workers' rights perhaps inadvertently hinder the growth of firms, especially small and medium enterprises, by restricting their ability to expand operations when needed compared to global peers. In doing so, it dampens employment generation as well", the Economic Survey mentioned.

Notably, labour laws in other countries allow manufacturers to average working hour limits across weeks and sometimes months. The International Labour Organisation (ILO) recommends allowing manufacturers the freedom to average working hour limits across 3 weeks. However, India’s working hour limits may increase the cost, time, and risk of manufacturing, the government mentioned in the Economic Survey.

From a global perspective, India, the United Kingdom, Vietnam, and Germany's weekly working hour limit stands at 48 hours currently. And according to Section 65(3)(iv) of the Factories Act, "No worker shall be allowed to work overtime for more than seven consecutive days, and the total number of overtime hours in any quarter shall not exceed seventy-five".

However, the Economic Survey underscored that the law limits the number of overtime hours workers can perform and the overtime wages they can earn.

Working hour restrictions are introduced to protect workers' health and prevent overwork. But the various limits on working hours—per day, week, quarter, and year—often conflict, reducing workers' earning potential, the survey added.

Under the new Labour Laws, seven states (Maharashtra, Haryana, HP, Odisha, Punjab, Karnataka, and Uttar Pradesh) have increased the ceiling of overtime hours from 75 up to 144 hours in any quarter.

The government said that the new Labour Laws represent a step in the right direction. With the introduction of flexible regulations and their effective implementation. "These laws could lead to growth for firms, creating more employment opportunities. They also safeguard labour rights and allow workers to increase their earnings," it said.

The government's statement has come at a time when India's leading IT companies are debating on the working hours with corporate doyens like NR Narayana Murthy backing the 70-hour work week and L&T chairman SN Subrahmanyan 90-hour work week. However, industrialists like Anand Mahindra, Harsh Goenka, and Rajiv Bajaj have stressed on employees well being and the significance of work-life balance.