Demographics disturbed: India’s labour laws need to be reformed to include everyone

India's much celebrated demographic dividend exists, at least thus far, only in theory. The economy added only about 2 million jobs each year between FY05 and FY12, when it needs to add closer to 10 million. Not only this, increasing numbers of workers are leaving the workforce — the labor force participation rate has fallen by 3 percentage points over the same period. In the critical manufacturing sector, we lost 5 million jobs between FY05 and FY10, when the sector was growing by over 9% The industries which are losing jobs are the most labourintensive ones — textiles, electronics, apparel. Inflexible labour laws are the key reason why employers are replacing labour with machines. The restrictive labour laws are constraining gains from three powerful forces for growth — a young and burgeoning workforce, the movement of labour from low productivity agriculture to higher productivity manufacturing, and the benefits from economies of scale in production.