Why new labour codes may dent India’s dream of Viksit Bharat 2047

On the face of it, Fixed-Term Employment (FTE) doesn’t make much difference given the widespread use of contractual jobs across the board. But by threatening to replace ‘permanent’ jobs over time, it may dash the hopes of those few who aspire for Viksit Bharat@2047 in their lifetime – high living standards comparable to a “developed nation”.

FTE is a potent tool to replace permanent jobs because it comes with written contract and pay, allowances and social security parity with permanent employee/worker. A good and like-to-like substitute for permanent job, one may say.

Also Read: Draft labour rules not only weaken worker protections but also hurt economy

Here is a catch.

It also comes without any provision for making FTEs permanent and without a minimum period of contract. These two omissions will allow employers to hire on FTE for any period without legal consequences: for (i) a week or a month (ii) three months (as seen in the Delhi University faculty positions, for example) (iii) 11 months (as seen in industrial units in the Delhi-NCR, for example) and (iv) 12 months or more (across sectors).

It can be argued that since FTE is meant for industrial establishments (addition to job categories listed in the “Standing Orders”), the threat is limited. That is true. It threatens the top 10 per cent of workforce.

Quality jobs limited at top 10 per cent

The Periodic Labour Force Survey (PLFS) of 2023-24 shows, only 21.7 per cent of total workforce are quality jobs, called “regular wage/salaried”. But even within those quality jobs, 53.4 per cent had no social security and 58 per cent no written contract – leaving aside 10 per cent of total workforce to qualify as formal sector or quality jobs.

The following graph maps those quality jobs as percentage of total workforce since 2017-18.

Source: PLFS reports

According to the Ministry of Labour & Employment, India’s total workforce stood at “64.33 crore” (643.3 million) in 2023-24. FTE will impact 10 per cent of those.

How many of those 10 per cent are permanent jobs? There are no assessments but here are some clues.

Contract jobs replacing permanent jobs

The Department of Public Enterprises data on workers show “regular” employees (read “permanent”) are rapidly shrinking and “casual and contractual” employees equally rapidly rising in 475 central sector enterprises (CPSEs). These CPSEs exclude banking and insurance companies. Note, “regular” employees include “managerial/executives”.

The graph below shows the rapid shifts since FY19.

If only workers are considered (excluding managerial/supervisory employees), the number of contractual workers could be alarmingly high.

For example, in the “maharatna” National Thermal Power Corporation (NTPC), contract workers constituted 96.6 per cent of total workers in FY25. The following graph maps the trend since FY21.

In organised manufacturing, the number of permanent jobs is not known but that of contractual jobs is. As per the Annual Survey of Industries (ASI), contractual workers went up to 42 per cent in 2023-24. The survey also revealed that the wage share of workers, as percentage of net value added by factories, are falling.

The following graph maps these two trends.

Of the total workforce, the PLFS of 2020-21 showed, 6.8 per cent were in government sector (Centre and states) and another 5.3 per cent in public and private limited companies – taking the total of best quality jobs to 12.1 per cent. After 2020-21, the PLFS removed the column that revealed these numbers.

Workers’ last bastion

The rise of Indian middle class after independence is generally attributed to public sector enterprises and later the IT sector boom – both expanding quality jobs.

Jobs are important because of being better sources of wealth redistribution – compared to free ration, cash handouts and other subsidies or even tax incentives (being post-job income).

Also Read: Gig workers strike on New Year’s Eve over worsening work conditions

For India to become ‘Viksit Bharat@2047’ – the Indian government’s promise to the people to make India “a developed nation” by 2047 – India needs more quality jobs, not less. Thus, the new Labour Codes should have tried to facilitate that, not hollowed out the workforce through FTE.

For clarity, ‘Viksit Bharat@2047’ is an undefined concept, except that it means “a developed nation”. The Indian government has not spelt out its goals, strategies or roadmap; it hasn’t even “developed nation”. On February 9, 2024, late Debroy, then chairman of the EAC-PM had tried and ended up concluding (in an article “How will we know that Bharat is Viksit?”) that it may be “a movement to the high-income category in current (2047) US dollars”.

How many of those in the top 10 per cent jobs can aspire for a life that Viksit Bharat promises? Very few.

That is because, a May 2022 study, sponsored by the Economic Advisory Council to the Prime Minister (EAC-PM) and released by its then chairman Bibek Debroy said, “a monthly salary of minimum Rs 25,000 (Rs 300,000 yearly) is amongst the top 10% of the total wages earned”. This was based on the PLFS data of 2019-20.

At then exchange value of Rs 71 in 2020, Rs 25,000 works out to $352 per month or $4,225 per year.

Going by the World Bank’s classification of countries for FY25, per capita income of $1,146-4,515 qualify as “lower-middle income”, $4,516-14,005 as “upper-middle income and over $14,005 as “high income”.

At $4,225, the top 10 per cent Indian workers will qualify for “lower-middle” but not for “upper-middle” or “high income” bracket of nations. The PLFS definition of 'worker' means every single person involved in any economic activity, including those in managerial/executive positions.

A question arises here: How can the 2019-20 wage of the top 10 per cent be compared with the World Bank’s per capita levels for FY25?

The answer: It can be because wages have not increased for many years in India. Three examples:

1. The SBI Research’s November report shows, ‘real’ wage growth averages (-)0.14 per cent during FY19-FY25.

2. Maheshwer Peri of the Careers360 made a presentation on January 1, 2026 in which he used salary slips of some of the IT majors (TCS, Infosys, Wipro, Accenture and Cognizant) over the past 15 years to show how salaries of entry level B Tech graduates have remained “stagnant” in nominal terms and 49-60 per cent “drop” (fall in wages) in ‘real’ terms – despite 400-700 per cent rise in their profits during the same period.

3. In 2024, Chief Economic Advisor Anantha V Nageswaran repeatedly called out in public and through the Economic Survey of 2023-24 how listed Indian Inc. has seen “creeping informalization” (more contractual jobs) and stagnated wages even as it was “swimming in excess profits”.

If even the top 10 per cent workers can’t aspire for a Viksit Bharat life, can the rest do it?

Contract jobs lower wages

Another question that may be raised: Why should one assume FTE or any other contract job is necessarily bad for workers?

That question was settled long ago in India and abroad. A few examples:

(i) The organized manufacturing (ASI) data presented in graph earlier shows rise in contractual work happening simultaneously with a fall in wages. The ILO’s 2018 India Wage Report noticed the same trend during 1981-2013 and attributed it to “substitution of permanent employees with contract workers, increasing working hours” and others (replacing women for men as permanent workers, substitution of capital for labour, and substitution of technology for less skilled labour).

Also Read: Simpler for business, tougher for workers: Tamil Nadu debates impact of new Labour Codes

(ii) An Oxford University study of 2019 said, Indian manufacturing was hiring on contract because of “immediate cost advantages”, contract hiring was agnostic of skill levels and labour market rigidity was “insignificant”.

(iii) An ICRIER study of 2019 concluded that labour market rigidity had little to do with contract hiring, it had more to do with cost cutting as firms seemed to “using contract workers” to “keep their bargaining power and wage demand in check”. These ICRIER economists later wrote in a business daily, the ‘real’ wages of directly hired workers remained “almost stagnant over the last 15 years” by using contract workers as levers and the ‘real’ wage of directly hired were one-and-half times higher than contractual workers (contract workers paid substantially less wages).

(iv) The ILO’s Global Wage Report 2020-21 said: “At the global level, sub-minimum and minimum wage earners are more likely to have temporary contracts than those paid at higher levels; on average, they also work more hours. An estimated 46 per cent of those paid at or below the minimum wage worldwide are employed on temporary contracts; 14 per cent of them work part-time. Sub-minimum and minimum wage earners work on average 47 hours per week.”

As for productivity, contract work is below par.

The 2019 ICRIER study cited earlier said “productivity of directly employed workers is found to be significantly higher than contract workers”.

Can India become Viksit Bharat without workers?

Yet another question that arises is: Why can’t India become a Viksit Bharat@2047 with contract workers since developed countries, even China, have large presence of contract workers?

This is the easiest to answer.

Developed countries are already up there (upper-middle and high income) with far better standards of living – which reflect very high income and wealth levels. Inequality is rising in those countries too with contractual work adding its bit. Their inequality is not rising as fast as India’s but soon they too will feel the pinch.

Also Read: Domestic workers at the touch of an app: Exploitation in a new format?

It needs to be kept in mind that Indian workers numbered 643.3 million in 2023-24 or 43 per cent of population (WPR). As per 2011 Census, 55 per cent of Indian agricultural workforce was landless (China has none). Agriculture provides jobs to 46 per cent Indians.

It also needs to be remembered that 58 per cent of Indians are surviving on “free” ration and multiple other doles (cash handouts for farmers and women) and subsidies (LPG cylinders).

No country can aspire to be a developed one by leaving such a large population out of the growth process.