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Doing business in India: why labour reforms should concern British companies

November 13, 2015

Yesterday more than £9billion in commercial deals between India and the UK were announced, coinciding with the visit of the Indian Prime Minister Narendra Modi to the UK this week. But as deals are celebrated with speeches and handshakes, British companies need to be aware of important labour reforms taking place in India.

Companies are increasingly concerned with the risks of being involved in forced labour and labour trafficking through their supply chains. Involvement in these activities is not only a punishable criminal offence, but it is also a serious threat to a business’ brand value – allegations of modern slavery can destroy a corporation’s image quickly, and the effects are often felt for years. Under the new UK Modern Slavery Act, UK companies are now also required to report on what steps they are taking to address modern slavery in their supply chains, causing them to further reflect on their potential exposure.

As part of his signature ‘Make in India’ policy, Prime Minister Modi has promised widespread reform of Indian labour laws to help improve the ‘investment climate’ and eliminate ‘compliance burdens’. While some reforms to reduce red tape and labour bureaucracy could be beneficial, the reality of the proposed reforms is increased risk of labour exploitation in a country already plagued by labour rights abuses. Companies therefore need to be aware of the legal framework in India, how these laws are changing, and join others in advocating for the protection of labour standards.

As FLEX’s Labour Exploitation Accountability Hub demonstrates, India has in place a labour protection framework that is expansive but under-enforced, which has allowed forced labour and human trafficking for labour exploitation to remain persistent problems. The proposed changes risk making matters worse: the reforms put forward by the Indian government would exempt a large percentage of businesses, including factories and producers, from applying key labour laws protecting basic workers’ rights. In addition, labour law violations would move from criminal law to civil law, turning these offences into simple civil disputes between workers and employers. Another proposal involves replacing labour inspection with self-certification of key aspects such as minimum wages, health and safety, working hours and working conditions. Without labour inspection, exploited workers will go unidentified, and their rights will continue to be abused with no enforcement or support from the Government.

Human rights are not a barrier to economic growth and development, just like making profits does not prevent businesses from being fair employers. Companies need to stay informed about changes to labour laws, to ensure that doing business in India is not just “easy”, but also safe and productive both for companies and for the workers driving their business forward.