Electronics manufacturers are waiting for India's labor law relaxation

As India is looking to attract more investments in manufacturing and build itself as an emerging global production hub for electronics, the country may find it challenging to liberalize its labor code to compete with China and Vietnam.

Financial Times reported that earlier in the year, two of India's southern states, Tamil Nadu and Karnataka, revised their labor laws to permit extending the duration of work shifts from 8 hours to 12 hours.

However, amid the strong opposition from trade unions and opposition parties, the government of Tamil Nadu announced in May that it would put the revision on hold. Meanwhile, the Indian National Congress, the opposition party in Karnataka, achieved a decisive victory over the ruling Bharatiya Janata Party and said it would repeal the labor law revision.

Besides, Hindustan Times reported that after India's parliament passed four labor codes to deregulate the labor market, the implementation of the laws was stalled due to opposition from trade unions. According to the report, these laws are viewed by critics as contentious and unfavorable toward workers. For example, the amendment of these laws expanded the range of companies that can terminate employees without requiring government approval, implemented new regulations on strike procedures for unions, and eliminated restrictions on women working night shifts.

Financial Times quoted Antara Haldar, an associated professor at the University of Cambridge, saying that if India had its way, it would deregulate a lot of the key markets, particularly land and labor, adding that while India may desire to accomplish it, there is political opposition and resistance encountered in practice.

Thanks to investments from global electronics manufacturers, especially Apple suppliers, Hindu BusinessLine reported that Tamil Nadu surpassed Uttar Pradesh and Karnataka, becoming India's top electronics exporter in fiscal 2023 (April 2022 to March 2023). Tamil Nadu and Karnataka accounted for more than 40% of India's electronics exports during the period. On the other hand, the northern state of Uttar Pradesh, despite being surpassed by its southern peers in exports, remained India's major mobile phone production hub for domestic demands.

Source: DPIIT, July 2023