Rajasthan Labour Reforms

The labour reforms initiated by the government of Rajasthan have spurred growth in Rajasthan’s MSME sector.

What were the Reforms?

In 2014-15 the government of Rajasthan amended four labour laws:

  • The Industrial Disputes Act, 1947.
  • The Contract Labour (Regulation & Abolition) Act, 1970.
  • The Factories Act, 1948.
  • The Apprentices Act (1961).
Changes brought in by the amended act
  • Under the amended Industrial Disputes Act, employers could retrench up to 300 employees without permission of the government. This was capped at 100 employees earlier.
  • A worker could raise an objection regarding discharge, dismissal, retrenchment or termination within three years while there was no time limit earlier.
  • The trade union can be formed only if it gets 30 per cent of the total workers as members, up from 15 per cent earlier.
  • The complaints against the employer about a violation of the Factories Act do not receive cognisance by a court without prior written permission from the state government.
  • The Contract Labour (Regulation and Abolition) Act, 1970 was made applicable only to companies that employed more than 50 workers, up from 20 workers earlier.
  • Under The Apprentices Act, the stipend for apprentices was “no less than the minimum wage.

Spurring Growth of MSME

The latest Economic Survey of 2019 has praised Rajasthan for holding it up as a role model for the rest of the country.

The survey compared the change in Compound Annual Growth Rates (CAGR) two years before and two years after the law change. The Survey notes that “It can be clearly seen that, for all variables, CAGR post labour reforms in Rajasthan has increased significantly vis-à vis the Rest of India”.

Also, the number of firms with 100 employees or more has increased at a significantly higher rate in Rajasthan than in the rest of India.


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