Paradigm Shift in India’s Labour Reforms

The draft National Labour and Employment Policy – Shram Shakti Niti 2025, released by the Ministry of Labour and Employment, marks a radical shift in India’s labour governance. The proposed policy is a departure from the current role of the Labour Ministry as a regulator and watchdog on compliance of labour laws to that of a national employment facilitator. The repositioning of this role comes with the challenge of the delicate balancing of the compliance of labour laws and the ease of doing business for employers. Rapid technological changes marked by automation, digitalisation and the integration of artificial intelligence in the industrial landscape have brought new challenges of labour governance, and the formulation of a national policy is a timely and necessary response. Compared to the traditional labour governance ecosystem in India, in which concepts of permanent and temporary workers working in a fixed factory environment dominated, the emergence of platform-based industrial growth has given rise to new labour roles and ecosystems, such as gig workers and remote employment. The labour laws meant for the traditional regulatory framework are disconnected from the new realities and new labour ecosystem. Imparting skills to facilitate upward mobility of modern-day workers in gig economies and unorganised sectors has become more important to enhance their employability and facilitate equitable participation in the workforce. The emphasis in the draft policy on the creation of a National Career Service as Digital Public Infrastructure for Employment indicates the emergence of a new labour ecosystem in which employers, job seekers and skilling institutions will be able to interact seamlessly across digital platforms, which also highlights the Ministry’s future role as an employment facilitator. A single-entry point for registration, licensing, self-certification, and inspections through risk-based algorithms to reduce paperwork, duplication, and human interface while improving transparency is aimed at facilitating ease of doing business and reducing bureaucratic red tape. Self-certification, however, remains a grey area without a robust monitoring mechanism to detect any manipulation and wrongdoing and calls for more clarity in the final policy document. Care must be taken to ensure that while evolving into the new role of an employment facilitator, the Labour Ministry’s critical role for safeguarding the interest of workers, including gig and informal workers, remains undiluted.  The policy proposes real-time dashboards at national and state levels to track key indicators such as employment generation, social security enrolment, grievance redressal, and workplace safety compliance, flagging areas that need attention. Addressing the issues of the digital divide and linguistic exclusion in the digital data-driven monitoring system will be crucial to ensure that those off-grid are not deprived of placement, social security enrolment and workplace protection. The policy proposal to reimagine the role of local governments as the frontline delivery agents of labour reforms is forward-looking and pragmatically grounded in the grassroots. Panchayati Raj Institutions and Urban Local Bodies facilitating worker registration, monitoring implementation of welfare schemes, and coordinating skilling and employment programmes, as proposed, will fill a critical gap by providing the interface between employer and workers. It has correctly envisioned that capacity-building and digital governance support will enable local bodies to manage labour data effectively, ensuring that policy outcomes reach the community level through participatory and accountable governance. Large-scale migration of workers from rural areas to urban growth centres is indicative of an increase in the informal workforce in the country, but due to a lack of registration of migrating workers, they remain outside the social security nets guaranteed by labour codes. Empowering the local governments to register workers will bridge this gap. With the interstate migration of workers being a new reality of India’s growth story, the unified One Nation Integrated Workforce Architecture mentioned in the draft policy document will be beneficial for the workers. The proposed architecture will link databases across ministries and states, enabling policy coherence, portability of benefits, and accurate measurement of employment outcomes. The introduction of the One Nation One Ration Card system, which allows migrating workers to avail the benefits at their workplace while their family members continue to avail benefits back home, exemplifies the importance of a unified architecture with portability for the labour welfare in an economy that grows on mobile labour. The rationale behind the proposed introduction of a Labour and Employment Policy Evaluation Index to benchmark states and union territories on inclusiveness, efficiency, and innovation with key indicators such as social security coverage, reduction in accidents and grievances, women’s labour force participation, formalisation levels, and innovation in delivery is fostering competitive and cooperative federalism, motivating states to improve administration and replicate best practices. The real challenge for the labour ministry and labour departments of the states and UTs is to ensure that workers’ interests are not overshadowed by the dominance of a tech-heavy ecosystem. Wider consultation on these issues – particularly with the key stakeholders such as workers and job seekers – will be essential to make the policy more comprehensive and pragmatic.