An Insight into Industrial & Labor Laws in India | RBI Grade-B Exam

Industrial Policy refers to a framework set by the government to regulate the manufacturing sector. It controls the industrial undertakings of the country. Through industrial policies, the government tries to influence the ownership & structure of industries, along with their performance.

This is an important topic under the Economic Reforms in India section of the Economic & Social Issues paper for RBI Grade-B Main Exam. Questions, especially from the objectives of the industrial policy, developments in industrial policy over the years, new industrial policy and labor laws, are asked. Let’s have a brief overview of each of these topics.

Objectives of the Industrial Policy in India

The objectives of the Industrial Policy in India are:

  1. Maintaining a sustained growth in productivity
  2. Enhancing employment in industries
  3. Achieving optimum utilization of human resources
  4. Attaining international competitiveness
  5. Transforming India into a leader in the global arena

Development of Industrial Policy Since Independence

The first Industrial Policy Resolution was announced on April 8, 1948. It stipulated the model of the Indian economic system to be a Mixed Economy. Since then, different policy resolutions & statements (Industrial Policy Resolution 1956, Indian Policy Statement 1969, 1973, 1977, 1980, 1985 and 1986) have been passed to revise and rectify their forerunner.

However, soon, the government realized that all these policies had one major loophole, which was the dependence on often costlier foreign capital. This made it very difficult for India to service the external borrowings. Moreover, external events, like the Gulf War, etc., added to the situation.

To rectify the situation, a New Economic Policy was adopted as a part of Economic reforms in India.

The Government took measures to change the very nature of Industrial Policies, which led to the formulation of the New Industrial Policy, 1991.

New Industrial Policy, 1991

After the LPG reforms, the new-age liberalized Industrial Policy was announced in 1991. Since it came into being in the middle of huge economic instability, its primary objective was to foster economic growth by enhancing the efficiency of industries. Some of the features of the New Industrial Policy included:

  1. De-reservation of the Public Sector
  2. De-licensing
  3. Disinvestment of the Public Sector
  4. Liberalization of Foreign Investment
  5. Foreign Technology Agreement

The New Industrial Policy, 1991 served as a paradigm shift in the functioning of the industrial sector. Several reforms have been introduced since then to rectify issues & drawbacks and make it even more efficient.

Another important aspect of the industrial sectors is laborers. Now, let us look at how the labor laws in India were developed.

Labor Laws in India

Since the onset of industrialization, there has been a constant struggle between capital and labor. Capital has been exploiting the labor market to generate maximum profits. They are able to do so because they have an economic footing and power.

Hence, it becomes imperative for the Government to enact and implement adequate labor laws that can help in providing support to the laborers. After the independence of India, when economic discontent grew, the Government of India took considerable measures to ensure labor welfare.

In doing so, it enacted several laws, took a number of measures to ensure a better quality of life for laborers. Some of these acts are listed below:

  1. The Factories Act, 1948
  2. The Payment of Wages Act, 1936
  3. The Industrial Employment Act (Standing Orders), 1946
  4. The Workmen’s Compensation Act, 1923
  5. The Trade Union Act, 1926
  6. The Minimum Wages Act, 1948
  7. The Employees State Insurance Act, 1948
  8. The Employees Provident Fund, Family Pension Fund, and Deposit-linked Insurance Fund Act, 1952. 

The objective of all these acts is to provide reasonable wages and optimum working conditions for the worker at the workplace. Further, facilities such as skill development, recreation, medical and social security should also be covered by the employer. However, due to illiteracy and lack of awareness, the mere implementation of these acts was not effective in improving the conditions of the labor force.

Contemporary Labor Welfare Schemes in India

The Government of India then shifted its focus on providing social security and healthcare facilities to ensure labor welfare. There have been a lot of rectifications in the labor laws in India to ensure optimum labor welfare. Some of the contemporary Labor Welfare Schemes in India include:

  1. Pradhan Mantri Shram Yogi Maan-dhan Yojana
  2. Aam Aadmi Beema Yojana
  3. Rural Employment Generation Programme (REGP)
  4. Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY)
  5. Deendayal Antyodaya Yojana - National Urban Livelihoods Mission (DAY-NULM)
  6. Labour Welfare Fund
  7. Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS)
  8. Rehabilitation of Bonded Labourers

This is an important topic for the RBI Grade-B Main Exam. Carefully go through each of these policies, especially the New Industrial Policy. You should also keep yourself informed about the recent developments in the industrial policy, which could be asked in current affairs.

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