New Labour Codes Expected to Boost Indian Economy by Rs 75,000 Crore and Increase Formal Employment

The new labour codes implementation began on November 21 (Representational)

Mumbai:

According to economists at SBI, the implementation of the new labour codes will increase consumption by Rs 75,000 crore and enhance the formal workforce share by at least 15 percent, as stated in a Tuesday note.

The economists added that the code, which took effect from November 21, will expand social security coverage to 85 percent within three years and decrease the unemployment rate by 1.3 percent in the medium term.

"With an approximate saving rate of 30 percent, the implementation will generate a consumption boost of Rs 66 per person daily post-implementation. This could translate to an approximate consumption increase of Rs 75,000 crore," the note explained.

The economists stated that the four codes will empower both workers and enterprises, creating a workforce that is protected, productive, and aligned with work environment developments.

Regarding increased social security coverage expectations, the note mentioned that approximately 44 crore people work in the unorganised sector, with around 31 crore unorganised workers registered on the e-shram portal.

Assuming a 20 percent shift from informal to formal payroll, about 10 crore beneficiaries will gain advantages, pushing social security coverage to 80-85 percent within the next two to three years.

On the formalization front, the note referenced the periodic labour force survey report, stating that India's formal worker share is estimated at 60.4 percent, with SBI economists projecting a 15.1 percent increase in the formalization rate.

The note concluded that the unemployment rate reduction will depend on reform implementation, firm-level adjustment costs, and complementary state-level rules.