Contract Labour Share in Organised Manufacturing Sector Hits Record High: ASI Report
The Wire Staff
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New Delhi: Contract workers now account for 42% of employees in India’s organised manufacturing sector, the highest level recorded since 1997-98, shows data from the Annual Survey of Industries (ASI) for 2023-24, as reported by Business Standard. The share has risen nearly eight percentage points in the past decade, reflecting a steady trend towards greater contractualisation of the workforce.
The share of contract workers had last declined in 2013-14 but has grown every year since then. In 1999-2000, contract labour accounted for just over 20% of total employment in organised manufacturing.
Economists attribute the increase partly to India’s legacy labour regulations, such as the Industrial Disputes Act, 1947, which impose additional compliance requirements and costs on firms employing more than 100 workers. These include prior government approval for layoffs, retrenchments, and closures. Firms have responded by hiring more workers on contract, which provides flexibility in managing workforce levels and wage costs.
Contract workers, however, typically receive lower pay and have limited access to benefits such as provident fund and insurance. This trend has implications for income security and domestic consumption.
The government has taken steps to encourage formal job creation, including the recently cleared Employment-Linked Incentives (ELI) scheme. Under this scheme, first-time employees are eligible for one month’s wage of up to Rs 15,000, and employers can claim incentives for two years with an option to extend for another two years.
Global comparisons show wide variation in the prevalence of contract work. A 2023 study estimated contract labour at 10.8% in the US, while Latin American countries like Brazil and Argentina have ranged between 10% and 20% at different times.
Labour market experts say the rise of contract work highlights the need to align job creation, worker protection, and productivity growth.
The ASI data, released on August 27, offers a snapshot of formal employment in the manufacturing sector and signals continuing structural changes in the nature of work.
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