India's Labour Reforms Expected to Create 77 Lakh New Jobs and Boost Formal Employment

India's social security coverage is projected to expand to 80-85 percent within the next 2-3 years.

New Delhi:

According to a recent report by the State Bank of India (SBI), the implementation of the government's new labour reforms could substantially enhance employment opportunities and formalization in India's labour market over the medium term.

The report indicates that these new labour codes could potentially reduce unemployment by up to 1.3 percent, resulting in the creation of approximately 77 lakh additional jobs.

The report stated: "India's new Labour Codes after a short transition phase could reduce unemployment by upto 1.3 percent over the medium term... This would imply additional employment generation of 77 lakh people."

This projection is based on the current labour force participation rate of 60.1 percent for individuals aged 15 years and above, and the average working-age population of 70.7 percent across both rural and urban areas.

The SBI report suggests that implementing the new labour codes will increase labour force formalization by at least 15 percent, elevating the total formal workforce to 75.5 percent from the current estimated 60.4 percent, according to PLFS data.

Additionally, the report highlights that social sector coverage could increase to 85 percent, thereby strengthening India's overall labour ecosystem.

With an approximate savings rate of 30 percent, the reforms could generate a consumption increase of around Rs 66 per person daily after implementation.

This would contribute to an overall consumption boost of Rs 75,000 crore over the medium term, significantly enhancing domestic spending and economic growth.

SBI noted that approximately 44 crore people currently work in India's unorganized sector, with nearly 31 crore workers registered on the e-Shram portal.

Assuming that 20 percent of these workers transition from informal to formal payroll, approximately 10 crore individuals could directly benefit from improved job security, social protection, and formal employment benefits.

With this transition, India's social security coverage is expected to reach 80-85 percent within the next 2-3 years.

The report emphasized that the implementation of the four labour codes will empower both workers and enterprises, creating a protected and productive workforce aligned with the evolving global work environment.

These reforms, which came into effect on November 21, 2025, consolidated 29 existing labour laws into four comprehensive codes to simplify regulations and improve workplace governance.

The four codes include The Code on Wages, 2019; The Code on Social Security, 2020; The Occupational Safety, Health and Working Conditions Code, 2020; and The Industrial Relations Code, 2020.