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Prime Minister Narendra Modi
Photographer: Dhiraj Singh/Bloomberg
Photographer: Dhiraj Singh/Bloomberg
India’s latest parliament session ended in 10 days but it was one of the most productive in Prime Minister Narendra Modi’s six year stint, as his administration managed to push through a stalled reform agenda to try and reverse the worst economic downturn in decades.
The legislative reforms, including overhauling labor laws to farm regulation and finance, were pushed through by a voice vote with very little discussion or debate. Angry opposition lawmakers protested vociferously and eight were even suspended for “unruly behavior” amid angry scenes in both houses.
As the pandemic gripped the world’s fifth largest economy, India has been announcing reform measures since May — opening up its space facilities, defense manufacturing, mineral blocks and power distribution to private companies — to kick start activity and retain investor interest. The economy’s 23.9% contraction last quarter was the worst on record and the most of all the major economies tracked by Bloomberg.
Members in the lower house of parliament worked overtime, 145% of the alloted time, while upper house functioned 99%, according to PRS Legislative Research, a New Delhi-based think-tank. About 25 bills were passed by parliament in the session that ended this week.
But the recent steps — involving changes to how India’s powerful farmers bloc sells its produce and the the hiring and firing practices of companies — carry some political risk for Modi in the long-term. The farm laws have alienated a longstanding ally.
Why Modi’s Laws to Liberalize Farming Worry Farmers: QuickTake
However, the acrimony won’t impact the government as Modi’s popularity remains high. Here are the legislative reforms enacted:
Labor
The labor reforms attempt to scrap archaic laws and untangle complex federal and local regulations that used to prompt companies to either remain small or use capital-intensive methods of production. It includes three bills.
- The Industrial Relations Code will allow companies with as many as 300 workers to fire them or shut plants without seeking prior government approval, a three-fold jump from the current threshold. The code also restricts worker from going on a strike without a stipulated notice period and discourages multiple employee unions in a single business establishment. It allows for fixed term employment provided such employees get the same benefits as permanent workers.
- The Code on Social Security provides social security for both organized and informal workers. It empowers the federal government to formulate welfare measures such as retirement and pension funds and gratuity and maternity benefits.
Agriculture
The new legislation will completely change how farm produce is cultivated and sold and impacts about 800 million of India’s 1.3 billion people who depend on agriculture directly or indirectly for their livelihood. For decades, farmers sold their output mostly through state-run wholesale markets. Now companies can buy directly from farmers outside the state-run markets that charge fees.
- The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill will give farmers freedom to sell their produce anywhere in the country, such as farm gates, factory premises, warehouses and cold storages. Currently, the produce is sold at a designated regional market where levies are collected by provincial governments and middlemen who facilitate trades. The bill prohibits states from levying any market fee. It also provides for sales on electronic trading platforms. Farmers fear the new law may end state-sponsored guaranteed price for some crops while states are protesting loss of revenues.
- The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill creates a framework for contract farming. Farmers can sign sale contracts with processors, wholesalers, retailers and exporters at mutually agreed prices.
- The Essential Commodities (Amendment) Bill empowers the federal government to control the production, supply, distribution, storage, and trade of certain essential commodities. It allows the government to regulate the stock of an essential commodity that a producer can hold.
Finance
- The Companies (Amendment) Bill aims to make life easier for businesses by removing certain penalties, including imprisonment, for some offenses and reduces the amount of fine payable for others.
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