New labour codes set to boost formal jobs, add Rs 75,000 crore to consumption

Economists at SBI on Tuesday said the implementation of the new labour codes, which came into effect on 21 November, could boost consumption by Rs 75,000 crore and raise the share of India’s formal workforce by at least 15 per cent.

In a research note, the economists said the codes will also expand social security coverage to up to 85 per cent over the next three years and reduce the unemployment rate by 1.3 per cent in the medium term.

“With a saving rate of approx 30 per cent, the implementation will result in a consumption boost Rs 66 per person per day post-implementation. This could lead to an approx consumption boost of Rs 75,000 crore,” the note said.

The four labour codes, according to the economists, are expected to empower workers and enterprises and support a workforce that is “protected, productive and aligned with the evolving world of work”.

On the expected expansion of social security, the note said India has about 44 crore people in the unorganised sector, of whom around 31 crore are registered on the e-shram portal. Assuming a 20 per cent shift from informal to formal payrolls, the codes could benefit around 10 crore workers, taking social security coverage to 80–85 per cent over the next two to three years, it said.

Citing the periodic labour force survey, the note said formal workers currently account for 60.4 per cent of India’s workforce and projected a 15.1 per cent increase in the formalisation rate following the implementation.

The note added that the reduction in unemployment will depend on the pace of reforms, firm-level adjustment costs, and complementary rules framed by states.

(With inputs from agencies)