The extremely ineffective enforcement of labour laws in India can pose substantial reputational and operational risks to foreign companies, says Maplecroft.
According to the risk management company, Indian labour laws rank among the most complex in the world. Regulations on workplace standards and employment relations are contained in a multitude of national and regional acts. Responsibility for their implementation and enforcement is attributed to the state level, and is significantly undermined by an extremely weak labour inspectorate that is unable to monitor legal compliance.
As a result of the complexity of labour laws, more than 93% of India’s close to 500 million workers are engaged in the informal economy, where they effectively fall outside the reach of labour law protections.
Maplecroft notes that national labour laws fall short of internationally-recognised labour protections in several respects, especially regarding child labour and basic trade union rights. Exacerbating factors include high levels of poverty, especially in rural areas, the widespread use of contract labour and institutionally-entrenched discrimination against vulnerable groups.
Companies therefore face a considerable risk of unwitting complicity in violations of national laws and international labour standards in their commercial activities, which can result in breaches of internal company standards and international best practice guidelines.