India needs to relax labour laws to push growth: OECD

NEW DELHI: India needs to reconsider its overly stringent labour regulations to return to higher growth trajectory while globally the world needs to boost productivity and lower trade barriers to avoid a new era of slow growth and stubbornly high unemployment, the Organisation of Economic Cooperation and Development (OECD) warned on Friday.

In its 2014 study on "Going for Growth", OECD said momentum on reforms had slowed in the aftermath of the global financial crisis, with much of it now piecemeal and incremental.

"The widespread deceleration in productivity since the crisis could presage the beginning of a new low-growth era," warned Pier Carlo Padoan, deputy secretary-general and chief economist at the Paris-based OECD.

"These concerns, already prevalent among advanced OECD countries for some time, now encompass emerging-market economies and are fuelled also by high unemployment and falling labour force participation in many countries." Commenting on India, the report said India needs to address its infrastructure shortfalls, pervasive state control in business activities and unequal access to quality education.

"India is experiencing a slowdown in economic growth since 2012. In order to maintain robust growth, it needs to reconsider overly stringent labour regulations which hinder job creation in the formal sector and leave most workers with no formal labour contract and social coverage," it said.

According to OECD, a more inclusive education system would help reducing severe poverty and inequality, while labour market reform would help reduce informality in India. India's GDP growth stood at 9% in the 11th plan (2007-12). It fell to 4.5% in 2012-13 and is estimated to be only slightly better in the current fiscal at 4.9%.

However, the target for the entire 12th five year plan period (2012-17) is 8%. OECD has been recommending India on issues related to sectors like education, labour, trade infrastructure and finance.

Some of these include, increasing the efficiency of education services, increase formal employment in labour market, reducing barriers to foreign trade and investment, promoting more effective infrastructure-related regulation and undertaking wide-ranging financial sector reforms such as easing bank portfolio restriction and allowing greater participation of foreign investors in financial services sector.

"However, the notable reforms in the country in the past two years include addressing the infrastructure bottlenecks, the reform of the land acquisition law and the relaxation of FDI restrictions in various sectors, including in multi-brand retail and civil aviation," it said.

Source: http://articles.economictimes.indiatimes.com/2014-02-22/news/47581783_1_oecd-pier-carlo-padoan-labour