Labour codes fail to win support amid economic woes, lack of consultation

The four consolidated labour codes, officially notified on 21 November 2025 after Parliament passed them in 2019-20, were hailed by the government as historic reforms aimed at modernising India’s ‘archaic’ labour laws. Yet, despite cautious acquisitions from industry and some commentators, there is widespread scepticism and discontent among both employers and workers. The abrupt timing, exclusions, and lack of stakeholder involvement have cast a shadow over the promise held out by the codes.

After being on hold for five years, the labour codes took the industry and trade unions by surprise, who scrambled to understand the implications. Questions arose over the timing—why were they announced now and not before the 2024 Lok Sabha elections? Some suggest the landslide NDA win in Bihar energized a previously stalled government, while others see it as a distraction from faltering economic indicators.

Prime Minister Narendra Modi had promised that the labour reforms would be based on wider tripartite consultations. However, the Indian Labour Conference (ILC), historically the highest tripartite forum—which met 46 times between 1940 and 2015—has not met since 2015. This absence of dialogue has fuelled mistrust, prompting central trade unions to launch protests starting 26 November 2025.

The timing of the notification is also suspect coming as it does at a time amid a weak economic backdrop—the rupee set to breach ₹90 against the dollar, benefiting some sectors like IT and pharma but hurting exporters; punitive tariffs, especially from the US, have suppressed exports; capital markets have seen $21 billion withdrawn by foreign institutional investors, and foreign direct investment (FDI) inflows are low. Attempts to revive consumption via GST cuts have had limited effect, private investment remains sluggish and manufacturing is stagnant.

Yet, the government would like people to believe that the labour codes are the magic mantra to transform the economy and boost the manufacturing sector by facilitating the ‘ease of business’, which has been the Modi government’s mission statement since 2014. In these years the government has spent enormous amounts of money on building infrastructure and allowed huge tax cuts to corporate bodies and industry.  

Foreign manufacturing has been courted by offering production-linked incentives. Industry and business were offered easier credit resulting in record profits for Indian companies in the last few years. However, they invested little or nothing, squeezed wages, laid off employees and kept the wages stagnant.

The rushed introduction of the codes without circulating the Bills or adequate consultations have added to the distrust. Opposition parties walked out in protest during the brief Lok Sabha and Rajya Sabha debates before the Bills were passed by voice vote. Trade unions have criticised the exclusion of large worker groups like agricultural labourers, domestic help, child labourers, sex workers and many government-contracted frontline workers (ASHA, anganwadi staff, shiksha mitras, auxiliary nurses, midday meal cooks). This omission leaves millions without legal protections.

Some provisions, such as mandatory appointment letters and mandated annual health checks, are positive on paper but have historically suffered from lax enforcement. Employers often sideline laws by designating workers as ‘volunteers’ or ‘partners,’ reducing accountability—exemplified by past cases like the Sahara Group declaring its chairman a ‘Managing Worker’ rather than ‘Managing Director’.

Employers generally welcome the ‘decriminalization of business’ via fines replacing imprisonment for violations but do not appear too happy over new gratuity provisions that reduce qualifying service from five years to one and extend gratuity to contract and fixed-term employees.

Trade unions argue the codes favour employers—limiting collective bargaining rights, allowing denial of union registration, and easing compliances for employers while tightening control over workers.

The absence of meaningful dialogue with stakeholders, especially trade unions, is a critical flaw. The workplace is undergoing profound change due to technology, AI, global trade shifts, climate challenges and geopolitics. Managing this demands transparent, nuanced policymaking rather than hasty legislation.

While the labour codes attempt to modernise and simplify labour law, their approach alienates key constituencies and ignores wide swaths of the workforce. Without inclusive reforms and genuine consultation, these codes risk perpetuating distrust and undermining their own objectives of fairness and growth.