Contracting the best

With just 43 million of India’s 418 million labour force employed in the formal sector, and just 23 million of this in formal contracts, it’s clear the existing labour system isn’t working and this needs urgent addressal. While the political class is against hire and fire, the reality of a rapidly-changing economy where today’s profitable firm is tomorrow’s loss-making one means firms must have flexible labour contracts if they are to survive—how can exporters be expected to keep labour when, for the last 5 months, exports have fallen (that’s in absolute terms, not just in terms of growth) steadily? The only way to do this is to stop repaying bank loans, which has other consequences, but even this cannot be sustained beyond a point.

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