SBI Report: Labour Code may drive ₹75,000 Cr increase in consumption
On November 21, the government notified the implementation of the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020.
| Photo Credit:
ANINDITO MUKHERJEE
Implementation of the four labour codes could generate employment for 77 lakh people and boost consumption by ₹75,000 crore, according to a research report released by SBI on Tuesday.
On November 21, the government notified the implementation of the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020.
Keeping in mind the current unemployment rate of 3.2 per cent, the research report has presented three scenarios — conservative, mid-range and optimistic. Under the conservative scenario, unemployment could fall by 0.28 per cent to reach 2.9 per cent. In the mid-range scenario, a one per employment gain may reduce unemployment by 0.57 per cent to 2.6 per cent. Under the optimistic scenario, unemployment could fall to 1.9 per cent.
“This would imply additional employment generation of around 77 lakh people based on current labour force participation rate at 60.1 per cent and average working age population at 70.7 per cent across rural and urban workforce,” the report said. Thus, it is estimated that India’s new Labour Codes, after a short transition phase, could reduce unemployment by 0.3 per cent to 1.3 per cent over the medium term, depending on reform implementation, firm-level adjustment costs, and complementary State-level rules.
On the impact on wages and consumption, the report noted the current Minimum wage rate in India is ₹546 per capita per day. This includes average wage across all categories of workers and all areas of the workers. The average wage as reported by ILO is ₹451 per capita per day. With the “Code on Wages” implemented, all workers will be entitled to the mini mum wage rate. This would imply that disposable income of workers on an average may rise by ₹95 per day post implementation of the labour codes,” the report said.
With a saving rate of approximately 30 per cent, this would lead to a consumption boost ₹66 per person per day post implementation. “This could lead to an approx. consumption boost of ₹75,000 crore,” the report said.
Further, it highlighted that implementation could lead to more formalisation. The report expects 15.1 per cent increase in the formalisation rate post the implementation of 4 labour market reform poised to reduce the compliance burden. Hence, “we believe that post labour laws implementation, based on PLFA data, formalization is likely to increase to 75.5 per cent,” the report said.
The report highlighted that approximately 44 crore people are working in unorganized sector. Out of which around 31 crore unorganized workers registered under e-shram portal. By assuming 20 per ceny will shift from informal pay-roll to formal payroll, it will benefit around 10 crore beneficiaries. With this “we expect, India’s social security coverage may reach 80-85 per cent in the next 2/3 years. Though there could be addition cost for employers, but compliance burden will be reduced substantially.
”The industrial relations code, 2020 has reduced number of rules to 51 from 105, forms to 18 from 37 and registers to zero from 3, thereby will reduce the overall compliance burden to spur employment, the report said.
Published on November 25, 2025
