Mumbai: The full implementation of India’s four new labour codes is expected to deliver a significant structural shift in the country’s jobs market, potentially generating up to 7.7 million additional jobs and reducing the unemployment rate by as much as 1.3 percentage points, according to a research note released by State Bank of India on Tuesday.
The landmark reforms, which consolidated 29 archaic labour laws into four comprehensive codes and came into effect on 21 November, are projected to raise the share of formal-sector workers from an estimated 60.4 per cent to 75.5 per cent of the total workforce — an increase of at least 15 percentage points.
SBI economists estimate that social-security coverage could expand to 85 per cent of the labour force within the next two to three years, up from current levels that leave large sections of the 440 million-strong informal workforce unprotected.
The bank highlighted the potential macroeconomic spillover effects. With household savings rates running at around 30 per cent, higher formal wages and greater job security are expected to translate into an additional ₹75,000 crore ($8.9bn) boost to private consumption over the medium term, providing fresh impetus to domestic demand at a time when export growth remains subdued.
“Of the roughly 440 million workers currently in the unorganised sector, nearly 310 million are already registered on the e-Shram portal,” the report noted. “The new codes will accelerate the ongoing formalisation trend and create a more protected, productive and future-ready workforce.”
The four codes — the Code on Wages 2019, the Code on Social Security 2020, the Occupational Safety, Health and Working Conditions Code 2020, and the Industrial Relations Code 2020 — aim to simplify compliance, enhance worker protections and provide employers with greater flexibility in hiring and industrial relations.
Economists have long argued that India’s rigid and overlapping labour regulations have deterred formal job creation and kept productivity low. The SBI report suggests the new framework could mark a turning point in addressing those structural constraints.
While the codes have faced criticism from some trade unions over provisions seen as tilting the balance towards employers, the government and industry bodies have welcomed the changes as essential for raising India’s global competitiveness and supporting the ambition of becoming a $5tn economy.
