Transition to Labor Law Reform : State-Level Initiatives & Informal Sector Labor Relations

The 1991 economic reforms in India quadrupled growth, but kept good quality jobs stagnant. About 93 percent of the workforce is employed in the informal sector, holding back India's growth potential. If India is to realize its full growth potential, reforming the heavily regulated labor market is indispensable. However, resistance from vested interests in an inflexible market and lack of political capital in New Delhi has contributed to more than six decades of impasse. This paper accounts for interests of all stakeholders in addressing this issue. The paper identifies best practices that individual states have undertaken to simplify labor laws to ease doing business and address the lack of skilled labor. It also identifies smaller reforms to extend security coverage to informal workers.