Economic Survey: Despite growth, formal sector job shrinks

India needs to improve labour laws to create better, safe and well-paying jobs, says the Economic Survey 2015-16

GN Bureau | February 26, 2016


#Arun Jaitely   #Budget Session   #Economic Survey  


The Economic Survey 2015-16 has highlighted the need to create enough good jobs that are safe and pay well, and encourage firms and workers to improve skills and productivity.

Expressing concern on the lack of job growth, the report has pointed out that jobs in formal sector have gone down “possibly due to increased use of contract labour.” The survey also stressed that the challenge of creating good jobs of India should be seen as a challenge of creating more formal sector jobs that can guarantee workers’ protection.

According to the survey while 42 lakh new establishments were set up between 1989 and 2010, only 1.05 crore new jobs were created during the period, of which 37 lakh or just 35 percent were in the formal sector.

Hinting at the possible reason for the growth in contract labour, the survey highlighted that medium sized formal sector manufacturing firms have reported labour regulations to be a significant barrier to growth, specifically the dismissal norm under the Industrial Disputes Act and the cumbersome nature of compliance with labour regulations.

The survey further reports that the number of contract workers has increased from 12 percent of all registered manufacturing workers in 1999 to over 25 percent 2010 on account of firms’ attitude to negotiate with labour regulations just to boost their production without facing any kind of labour unrest.

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