India’s Modi Relaxes Labor Inspections, Reduces Compliance

The conservative prime minister makes it easier for businesses to comply with rigid and numerous labor laws.

Prime Minister Narendra Modi of India meets Republican House speaker John Boehner in Washington DC, September 30
Prime Minister Narendra Modi of India meets Republican House speaker John Boehner in Washington DC, September 30 (Caleb Smith)

India’s conservative prime minister, Narendra Modi, introduced a new system for labor inspections on Thursday that he said would be the first step in liberalizing the country’s notoriously inflexible jobs market.

Under the new regime, a computerized system will randomly select companies for inspections. Labor monitors will no longer be allowed to check on businesses at their own discretion, a procedure that is vulnerable to favoritism and abuse.

Inspectors, moreover, will have to upload their reports within three days and will not longer be able to modify their findings thereafter.

Companies should also soon be able to submit a single compliance form for sixteen separate labor laws — online.

“Let’s start with trust,” said Modi in New Delhi where he unveiled the measures. “Ease of business is the first and foremost requirement if ‘Make in India’ has to be made successful.”

With ten million Indians joining the jobs market every year, the country can ill afford to stifle business growth.

High compliance costs also deter small companies from formally employing workers. Estimates are just 8 percent of India’s workers have a formal job with benefits and security. The vast majority is employed informally.

Modi, a Hindu nationalist, was elected in May on promises to restore high growth rates and liberalize the world’s tenth largest economy.