Prime Minister Narendra Modi has set in motion the first major revamp in decades of India's archaic labor laws, part of a plan to revive the flagging economy, boost manufacturing and create millions of jobs.
Successive governments have agreed labor reform is critical to absorb 200 million Indians reaching working age over the next two decades, but fears of an ugly union-led backlash and partisan politics have prevented changes to free up labor markets.
Now, with the benefit of a single party majority in the lower house of parliament for the first time in 30 years, laws that date back to just after the end of British rule are set for an overhaul. Officials at the labor ministry say this is a top priority in the government's first 100 days in office.
India has a forest of labor laws, including anachronisms such as providing spittoons in the work place, and are so complex that most firms choose to stay small. In 2009, 84 percent of India's manufacturers employed fewer than 50 workers, compared to 25 percent in China, according to a study this year by consultancy firm McKinsey & Co.
The World Bank said in a 2014 report that India has one of the most rigid labor markets in the world and "although the regulations are meant to enhance the welfare of workers, they often have the opposite effect by encouraging firms to stay small and thus circumvent labor laws".
Business leaders hope Modi, who advocates smaller government and private enterprise, will be a liberalizer in the mold of Margaret Thatcher or Ronald Reagan. Perhaps the most important change, they say, is to rules making it hard to dismiss workers.
First up, though, to win public support, his Bharatiya Janata Party (BJP) government is looking to make changes that benefit workers, three senior officials at the labor ministry said. Among the changes: making more workers eligible for minimum wages, increasing overtime hours and allowing women to do night shifts.
"We are trying to provide a hassle free environment that helps both workers and industry," a senior labor ministry official involved in the deliberations said. "It is a priority for us."
Next on the reform agenda will be the most sensitive issue of loosening strict hire and fire rules. Officials said they have begun preliminary talks with concerned groups about slowly implementing the changes.
"There is a definite push ... you will see more measures," said another official at the ministry who is privy to the discussions within the government.
Reforms key to manufacturing jobs
India's 20-year streak of fast economic expansion is often derided as "jobless growth" since the service sector-led model has been capital rather than labor intensive.
India does not produce reliable, regular jobless data, but long-term surveys by the statistics department show the country only created 5 million manufacturing jobs between 2004/5 and 2011/12. In the same period some 33 million people left farms looking for better paid work. The majority were absorbed into low productivity and irregular work on construction sites.