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'Growing labour cost trimming India's competitiveness globally'
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SME Times News Bureau | 19 May, 2016
Growing labour cost is trimming India's competitiveness in manufacturing
vis-a-vis Europe, which may decline from about 44 percent at present to
30 percent by 2023, according to a study.
Archaic labour laws
should be done away with for the growth of the manufacturing sector,
including automobiles, noted the study 'Indian Auto Industry: The Way
Ahead'. It also gave a host of other suggestions to the government.
"Manufacturing
in India is currently 15 percent cheaper than Europe but the cost
difference is decreasing due to increasing labour wages and other
costs," it said.
The study was conducted jointly by the
Associated Chambers of Commerce and Industry of India (Assocham) and
Roland Berger Strategy Consultants.
It said India has a natural
cost advantage in engineering works vis-a-vis Europe but it is
imperative to do away with archaic labour laws for the growth of the
automobile and manufacturing sector.
"There is a need to set
clear guidelines on compensation to contract workers and permit
downsizing of contract and permanent labour with proper compensation,"
it said.
The study said red tapism and convoluted processes were
the primary reasons for India's tough business environment and
recommended tax reduction steps to expand the domestic market potential.
"There is a need to implement goods and services tax (GST) to integrate state economies, eliminate local body taxes," it said.
Highlighting
that implementation of Mahatma Gandhi National Rural Employment
Guarantee Act scheme and wage assurance had led to acute labour shortage
and wage hike pressures, the study said "rather than an employer, the
government should be a facilitator for private sector to absorb the
rural workforce and promote skill development in rural areas".
The
study also suggested the government to encourage foreign direct
investment by providing benefits for special economic zones and tax
holidays to overseas investors.
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Growing cost of labour
Pradip Churiwal CMD Macneill Engineering Ltd | Tue May 24 23:03:33 2016
It is absolutely true that India is losing global competitiveness due to extreme increase in cost of labour. Central government n state government have apparently decided to raise level of minimum wages to 15000 at the earliest . Therefore every six month min wages announced are substantially high. Unfortunately the output is not high as Indian labour do not work hard and consistently with their own initiative. High pf contribution esi share of employees increase it further by 19 %. Government should give free hand to company to employ n release workers at such cost without any additional compensation nor compulsive employment. Bangladesh with less than half cost has already taken lead in labour oriented industry Blake textile n garments. It is high time to balance need of both sides.
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