In the Union Budget of 2021, the finance minister had announced that the new labour laws would come into effect from April 1, 2021. These are the four labour codes, which will replace 29 existing labour laws, considerably improving the status of the labour market in the country. It constitutes a major economic reform by the Modi government. The four codes as individual bills have already been passed by Parliament and go into effect once the rules are framed by the Labour Ministry, and by respective State governments, since labour is a concurrent subject. But rules have not yet been notified by the Union government. One reason could be the upcoming elections to the five State assemblies. Labour reforms can be tough even at the best of times, but why risk political capital at a time of close electoral contests? One impact of the new codes is that take home pay of employees might decrease since high contributions to pensions are mandated. The employers’ share also might have to go up. Another reform is that firms with less than 300 employees do not need government permission for layoffs. Yet another feature is a new category of fixed term employment, which relieves the burden from employers to make workers “permanent”. Since each such reform creates a constituency which will be adversely affected, leading to noise from these quarters, status quo is to be maintained at least till the elections are over.The repeal of the three farm laws too was perhaps necessitated with an eye on the elections. Of course, this is not to deny that the year-long agitation led by farmers was the biggest major factor. The farm unrest over the three reform laws was most manifest from Punjab and Western Uttar Pradesh, where elections are due to be held. So, poll prospects surely affected the final decision to repeal.
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