Labor-Market Reforms in India

Abstract

Foreign direct investment in China is almost ten times that in India. Rather than looking at the cause of this huge gap, the Indian government is now pushing labor reforms to make this country a more attractive destination for foreign investment. The Indian Ministry of Labor supports strongly the China model as one of the ‘doable options’ for making the labor market more flexible and attractive. The purpose is to turn India into a ‘preferred FDI destination.’ The so-called experts say India needs its prohibitive labor policies, which are designed to protect the weakest members of the society against unrestricted exploitation by the private-sector employers. These experts, taking their lead from the World Bank, is saying that India is lacking is an ‘exit policy’ that makes it easier for unprofitable ventures to sack workers.