To what extent the Chapter V-B of the industrial disputes act is responsible for anomalies in the manufacturing sector in India. Discuss.

Chapter VB is the most controversial part of Industrial Disputes Act (1947). It states that an industrial establishment with more than 50 employees needs to give 90 days’ notice, before closing the industry; citing reasons of closure, to the appropriate government before the closure of the industry. If the industrial establishment employs more than 300 people, it must take prior approval of the appropriate government for layoffs, retrenchment and closure. This limit was lowered to 100 in 1982. These provisions simply say that you cannot simply hire and fire at will because even if you want to fire a single employee, you need to seek the permission of the labour commissioner (in case of factories employing more than 100 workers). Further, since the subject is under concurrent list, the states have further made stringent conditions so that lay off, retrenchment and closure becomes even more difficult. This section says that if you are modifying the wages and other allowances, hours of work rest intervals and leave of a laborer, you need to give him / her at least a 21 days’ notice prior. This creates rigidity in the labour market.All these stringent laws are anomalies in the manufacturing sector in India resulting into lower productivity, lower output, lower investment and overall performance of the sector, therefore there is rampant usage of contract labourers through outsourcing and a decline in permanent employees to company.

Topics: GS-III: Changes in Industrial Policy and Their Effects On Industrial Growth