New Labour Codes Set to Increase Consumption by Rs 75,000 Crore, Says SBI Report

The introduction of new labour codes is anticipated to enhance consumption by Rs 75,000 crore and increase the formal workforce's share by at least 15%, according to a report by SBI economists. These changes, effective from November 21, are also expected to extend social security coverage to up to 85% within three years and lower the unemployment rate by 1.3% in the medium term.

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With an approximate saving rate of 30%, the implementation could result in an additional Rs 66 spent per person daily, leading to a significant consumption boost of Rs 75,000 crore. The economists highlighted that these four codes aim to empower both workers and enterprises, fostering a protected and productive workforce aligned with modern work demands.

Impact on Social Security and Workforce Formalisation

The note elaborated on the potential increase in social security coverage, pointing out that around 44 crore individuals work in the unorganised sector. Of these, approximately 31 crore are registered under the e-shram portal. If 20% transition from informal to formal payrolls, about 10 crore beneficiaries could see improved social security coverage, reaching 80-85% in two to three years.

Regarding workforce formalisation, the periodic labour force survey report estimates that India's formal worker share is currently at 60.4%. SBI economists predict a 15.1% rise in this formalisation rate. This shift is expected to significantly impact the overall workforce structure in India.

Factors Influencing Unemployment Reduction

The reduction in unemployment rates will hinge on several factors, including how reforms are implemented, firm-level adjustment costs, and complementary state-level regulations. These elements will play a crucial role in determining the effectiveness of the new labour codes in reducing unemployment.

Overall, these changes are poised to create a more structured and secure work environment for many individuals across India. The focus remains on enhancing both economic growth and social welfare through strategic implementation of these labour reforms.

With inputs from PTI