Unpacking the Motives of Neo-liberal Regimes

The economic reforms that unfolded under the neo-liberal regime in India, as elsewhere, have been premised on a number of postulates. These include the postulate that: any intervention in the free operation of the markets would distort resource allocation resulting in inefficiency, and thus act as disincentive to investment and affect growth of output and employment. Therefore, the dismantling of the regulatory regime assumes instrumental primacy. In the case of the labour market, the prevalence of too many labour laws, even though most of them are confined to the organised sector, have been seen as an obstacle to competition and efficiency resulting and translating into disincentives for growth of investment and employment. The Second National Labour Commission’s (2002) recommendation for rationalisation of labour laws, including retrenchment, and lay-offs of workers and closure of units by suitable compensation, to facilitate labour market flexibility gave credence to this approach.

For almost two decades, ever since the labour law reforms were brought on the policy agenda of successive governments, there have been a number of empirical studies, examining the veracity of the argument for labour market flexibility. In spite of the gestalt that implies the shift in labour laws, there have hardly been any attempts to examine the nature of the theoretical underminings of these reforms. That gap is sought to be filled by the book under review, Labour Law ­Reforms in India: All in the Name of Jobs by Anamitra Roychowdhury. One of the stated main objectives of the book is to study the logical consistency of the theoretical framework and empirical underpinnings underlying labour market flexibility. It begins with a thorough analysis of the current status of legal provisioning relating to labour, and the main proposals put forward in the labour market flexibility (LMF) debate for rationalising labour laws in India, followed by an extensive review of the debate on LMF which has been mostly in empirical terms. It then turns to critical examination of the theoretical framework underlying the arguments for LMF and their internal consistency. Towards the end it shows not only how the results suggested by the neoclassical theoretical underpinnings are logically inconsistent and invalid, but also how factoring in autonomous role played by effective demand could explain unemployment.