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Strengthening enforcement mechanisms is the most critical priority. A persistent challenge in India’s labour market is the weak enforcement of regulations, especially in the informal sector

The recent strike by gig workers and the protest by factory workers in UP against low wages and poor working conditions underlie the operational challenges of labour reforms in the country. The four labour codes — Code on Wages, Code on Social Security, Industrial Relations Code, and Occupational Safety, Health and Working Conditions Code — represent a major attempt to rationalise India’s complex labour regulatory framework. Their impact on employment and wages is expected to be incremental, with outcomes that are heterogeneous across sectors, firm sizes, and worker categories. While the employment effects will be largely compositional through shifts in type and quality of employment, the productivity effects are likely to be moderately positive, depending critically on implementation quality. Against this backdrop, the policy implications become central to realising the potential gains of these reforms.

Specifically, the Code on Wages may correct wage suppression and reduce wage inequality at the lower end of the wage distribution. However, its effectiveness depends on where the national floor wage is set, relative to the current market wage. In terms of labour productivity, the codes create enabling conditions for improvement through better worker protection, reduced compliance, and more efficient labour allocation. Large firms are likely to benefit most, as they can absorb compliance costs while gaining from reduced worker turnover, improved health outcomes, and better workforce stability. In contrast, SMEs may face disproportionate compliance burdens, which can offset any labour productivity gains. Given these dynamics, the policy implications are crucial for ensuring that the labour codes translate into meaningful improvements in work conditions, wages and labour productivity.

First, strengthening enforcement mechanisms is the critical priority. A persistent challenge in India’s labour market is the weak enforcement of regulations, especially in the informal sector where the majority of workers are employed. Without credible enforcement, minimum wages remain non-binding, social security provisions fail to reach intended beneficiaries, and safety regulations are not adhered to. The government must invest in digital compliance systems, including mandatory digital wage payments, electronic maintenance of employment records, and data-driven inspection systems. Targeted inspections based on risk profiling can improve efficiency while reducing opportunities for rent-seeking. Building administrative capacity at both central and state levels is essential to ensure consistent and credible enforcement.

Second, careful calibration of wage policy is necessary. The national floor wage should be set at a level that is binding yet sustainable, taking into account regional variations in cost of living and sectoral differences in productivity. Periodic revisions, ideally linked to inflation and productivity growth, can prevent the erosion of real wages while avoiding sudden shocks to employers. A poorly calibrated wage floor — either too low or too high — can undermine the objectives of the Code on Wages.

Third, there is a strong need to support small and medium enterprises, which form the backbone of India’s employment structure but are also the most vulnerable to regulatory costs. Compliance subsidies, tax incentives, and simplified reporting requirements can help ease the transition to formalisation. Providing access to affordable credit and technology can further enable SMEs to improve productivity and absorb higher labour costs. Without such support, the labour codes risk having regressive effects, benefiting large firms while burdening smaller ones.

Fourth, expanding and deepening social security coverage is essential. Thresholds for schemes such as EPF and ESIC have eroded in real terms and exclude a large share of the workforce. They should be revised upward and indexed to inflation to maintain their relevance. Equally important is the operationalisation of provisions for gig and platform workers, including the establishment of a functional Social Security Fund, notification of contribution rates, and design of tangible benefit schemes. Bridging the coverage gap for informal workers requires proactive policy action rather than reliance on gradual formalisation. Fifth, policymakers must address threshold-based distortions that discourage firms from scaling up. Regulatory thresholds continue to create incentives for firms to stay small or fragment operations to avoid compliance. Smoother, graduated frameworks can encourage firm growth.

Sixth, labour reforms should be complemented by skill development and human capital investment. Higher wages and better working conditions must be supported by corresponding improvements in worker productivity. This requires expanding access to vocational training, strengthening industry-academia linkages, and promoting continuous skill upgrading. Seventh, there is a need for policy coordination across sectors. Labour reforms alone cannot drive employment growth unless supported by broader economic policies, including industrial policy, trade liberalisation, infrastructure development, and investment promotion. This ensures that productivity improvements translate into expanded economic activity and job creation rather than merely cost savings for firms.

Eighth, improving administrative coordination and institutional integration is vital. Moving toward a true single-window system for compliance and benefit delivery can reduce transaction costs and improve user experience. Greater coordination between central and state governments is also necessary to avoid regulatory fragmentation and ensure uniform implementation.

Finally, leveraging the digital architecture of the labour codes can create long term gains. The development of integrated labour databases, real-time compliance monitoring systems, and publicly available data on workplace safety and employment conditions can enhance transparency, accountability, and evidence-based policymaking.

The new labour codes represent an important step toward modernising India’s labour regulatory framework, with the potential to improve efficiency, formalisation, and productivity at the margins. However, their success depends not on legislative design alone but on effective enforcement, supportive policies, and institutional capacity.

The writer is professor of Economics, ISI (Delhi), and visiting professor, NCAER

The growth of India’s economy is a means, not an end in itself. It must translate into good jobs and better lives. However, Time Use survey data shows significant disparities in the hours that India’s young work. Could AI adoption reduce these gaps?

The recent revision of India’s gross domestic product (GDP) data has generated much discussion. GDP measures the size of an economy. What gets missed, though, is that a larger economy is a means, not an end. We need growth and a bigger economy to create more productive jobs. So, what does the evidence on this front show, especially for young Indians?

In a recent paper by N. Gowthaman, A. Mishra and the writers of this piece titled ‘Young Adults at Work in India’ which uses 2024 Time Use Survey data, we find that just 47% of India’s 200 million young adults aged 20-29 are in paid employment. Another 11% report being in higher education.

Only eight major states—Gujarat, Maharashtra, Punjab, Karnataka, Delhi, Tamil Nadu, Telangana and Haryana—record employment participation above 50% among young adults.

Gangetic belt states are at the lower end, with employment rates for young adults below 40% in Bihar, Uttar Pradesh and Uttarakhand, suggesting that structural constraints on job creation have not yet eased. The majority who are neither in employment nor in education are women.

The quality of employment matters as much as participation. Formal enterprise employment—in the corporate sector, public sector and NGOs—remains below 20% in all states. Even high-performing states rely heavily on household enterprises. In Punjab employment is 46.5% informal versus 7.7% formal; in Gujarat, 46.3% versus 11.8%; and in Maharashtra, 37.0% versus 17.6%.

Another issue is: among those employed, how long are young people working? This is a pertinent question since the adoption of artificial intelligence (AI) tools across industries means less time would be taken to do the same amount of work.

The data reveals a dual reality: excessive work hours for some young adults and too few for others. Consider the findings on actual work hours (or the net workday, excluding breaks). On average, young adults spend 6 hours 55 minutes or nearly 7 hours per day doing paid work. That sounds reasonable until you unpack the numbers.

On average, men in urban household enterprises work the longest at 7 hours and 59 minutes (almost 8 hours), followed closely by men in urban and rural formal enterprises, both averaging over 7.5 hours. Among women, those working in urban formal enterprises (7 hours and 5 minutes) have the longest workdays. In urbanized states—Delhi, Tamil Nadu and Telangana—the gender gap in formal enterprise work hours falls below 30 minutes.

The gender gap in time spent at paid work widens sharply in household enterprises: women in rural household enterprises clock the lowest of any group at just 4 hours and 35 minutes—a full 3 hours and 24 minutes less than their male counterparts. However, while employed young men on average work longer for pay, if unpaid household and care work is added, employed young women work longer hours—9 hours and 31 minutes, versus 7 hours and 57 minutes spent by young men.

Where is overwork most intense? Delhi leads, with young adults recording over 8 hours 30 minutes of net work per day, rising to nearly 9 hours 40 minutes with a daily commute. Gujarat, Maharashtra and Himachal Pradesh are not far behind.

Long commutes are a structural reality of formal urban employment for India’s young, especially in formal enterprises. When work and commute are combined, more than 1 in 3 young adults in formal enterprises spends over 9 hours per day on work-related activities. Even in informal enterprises, 26.9% of young workers exceed 9 hours of work per day. This highlights how spatial mismatches between jobs and housing, congestion and urban-transport constraints magnify time burdens.

Overall, two patterns stand out. First, for young men, the formal versus household enterprise distinction barely matters for time at work—the difference is marginal across locations. For women, a shift from formal to household-enterprise employment is associated with a collapse in working hours, suggesting that work in informal enterprises remains fragmented by domestic responsibilities and/or lack of paid work.

Second, urbanization alone is insufficient to create full-time jobs and enhance the ability of women to take them. Urban women with informal jobs work over an hour less than those with formal jobs, indicating that a combination of urbanization and formalization—not either in isolation—comes closest to equalizing hours across gender.

As AI reshapes industries globally, India faces a compounding challenge. AI-driven automation tends to displace routine tasks—precisely the kind of work that dominates much of formal employment: basic data entry, coding and repetitive manufacturing. By contrast, household-business work tends to be dominated by tasks that cannot easily be automated. The gap in work hours between the two is therefore likely to shrink.

It is possible that average working hours at formal enterprises will decline with greater heterogeneity among workers. The few who can complement AI as value creators will see higher demand for their skills; their work hours may well rise. Consequently, the gap between formal and household-enterprise work hours may narrow; not because hours in the latter increase, but because those in the former fall on average.

Our GDP debate will go on. What that trillion-dollar GDP figure delivers on the ground matters far more than the headline itself.

The authors are, respectively, Union Bank Chair professor of economics, Great Lakes Institute of Management; and professor, National Council of Applied Economics Research.

The productivity crisis is no longer a theoretical risk; it is a mechanical and biological reality crippling India’s industrial heartlands

India is currently winning the global trade shuffle. As political instability rocks traditional hubs such as Bangladesh, international buyers are pivoting toward Indian textile clusters. But as factories in Tiruppur and Bengaluru take on these surge orders, they are walking into a thermodynamic crisis they haven’t budgeted for.

The crisis is personal before it is industrial. A textile worker in Tamil Nadu loses 50% of her work capacity on a 40°C afternoon; and as she does not have any sick leaves or cooling breaks, she also loses 50% of her day’s wages. She absorbs the cost of a warming planet so that global supply chains remain ‘efficient.’ However, the biology of labour is hitting a wall, and India’s textile industry is quietly cracking under the weight.

The crisis of productivity

Between 2001 and 2020, India lost an estimated 259 billion labour hours annually due to heat stress, a productivity haemorrhage exceeding $600 billion each year. In 2024 alone, that loss spiked to as high as 247 billion hours.

The productivity crisis is no longer a theoretical risk; it is a mechanical and biological reality crippling India’s industrial heartlands. In the manufacturing hubs of Palghar, Maharashtra, factory owners report production capacity dropping by up to 50% as extreme heat triggers hazardous conditions that jeopardise both man and machine. Intense temperatures often restrict operations to just four hours daily, as heat becomes unbearable for the workforce. It also increases the likelihood of workplace injuries and serious health conditions, including heatstroke and dehydration. Industrial equipment, designed for more temperate baselines, frequently overheat, leading to sudden operational shutdowns and technical failures that derail tight production schedules. This physical collapse of the shop floor is mirrored in Karnataka’s textile factories, where, indoor temperatures routinely exceed 35-40°C, far above the permitted threshold of 30°C. At these extremes, the “human engine” throttles down as a matter of survival. International studies confirm that at 33-34°C, a worker’s capacity is effectively halved.

As per research published in the Journal of Political Economy in 2021, annual output falls by 2% per degree Celsius. On individual hot days, the decline reaches 4%. For India’s textile industry, which employs 45 million people and controls 39% of global cotton cultivation, this crisis has led to operational collapse.

The supply chain trap

Global brands impose strict delivery deadlines and heavy financial penalties for delays. Yet, workers cannot be pushed beyond physiological limits. Thus, factory managers face an impossible choice: ignore worker collapse to meet a shipment, or face financial ruin. As orders shift to India due to regional and political instability, hubs such as Tiruppur are being crushed by a “thermodynamic bottleneck” where surge orders collide with record-breaking heat. This creates a regressive tax on the poor, disguised as a weather problem. While global brands insulate themselves by diversifying sourcing — shifting orders to Vietnam or Mexico — local factory owners lack the bargaining power to renegotiate terms and the burden is pushed downward. Ultimately, the cost is absorbed by the millions of informal workers who have no safety net; when a factory floor becomes a furnace, they don’t just lose productivity, they lose their daily wages. History has shown that when disruption strikes, workers pay the price; for example, during COVID-19, brands cancelled $2.8 billion worth of orders from Bangladesh in March 2020 alone, affecting approximately 1.2 million workers.

By 2030, India is projected to lose 5.8% of its daily working hours to extreme heat, the equivalent of 34 million full-time jobs. The supply chain will not break gradually; it will break when orders simply cannot be met because the human element has reached its thermal limit.

The way forward

India has a choice. It can either continue to externalise the cost of a warming planet onto workers, or the country can systematically transit to a climate-smart supply chain. This requires action on five fronts: first, policymakers must recognise heat stress as a supply chain risk and integrate climate-heat projections into industrial policy and trade agreements. Second, industrial clusters must adopt mandatory heat-action plans with enforceable temperature thresholds, cooling breaks, and worker health assessments. Third, financing mechanisms must be reformed. Banks must incorporate climate risk into loan assessments, and governments must offer concessional credit lines supporting investments in cooling systems, water management, and heat-resilient technologies. Fourth, labour protection codes must be strengthened to address heat stress explicitly. Workers must have guaranteed access to clean drinking water, and shaded rest areas. Fifth, innovation must be driven through targeted R&D grants for wearable cooling technologies, heat-tolerant cotton varieties, and energy-efficient manufacturing processes. And finally, international buyers must bear part of the adaptation cost, through fairer pricing and longer lead times. For decades, the global fashion industry has operated on a convenient lie: that the ‘cost of production’ is a static number on a spreadsheet. This number was artificially deflated by a climate we took for granted. The physics of thermoregulation will not bend to profit margins. If heat stress remains invisible in boardrooms, India’s workers will pay in lost wages and shortened lives.

Sreoshi Banerjee is a postdoctoral researcher at the Potsdam Institute for Climate Impact Research (PIK); Raktimava Bose is consultant at the National Council of Applied Economic Research (NCAER). Views expressed are personal.

In a warming world, the value of irrigation lies not only in what it produces, but in the uncertainty it removes.

In a canal-irrigated village in eastern India, farmers increasingly speak not just about yields, but about certainty. “Earlier, we waited for rain,” one cultivator observed. “Now we plan.” That shift—from dependence on rainfall to the ability to plan production—captures a deeper transformation underway in Indian agriculture. As climate change makes monsoons more erratic, dry spells longer and extreme events more frequent, irrigation is no longer merely a tool for boosting agricultural output. It is quietly emerging as a form of climate infrastructure.

For decades, irrigation in India has been evaluated through a narrow lens: how many hectares were brought under assured water and how much crop output increased. But in a warming world, the more relevant question is not just how much irrigation produces, but how much risk it absorbs. Climate change is fundamentally altering the nature of agricultural risk—less about average rainfall and more about its unpredictability. In this context, irrigation’s primary value lies in stabilising incomes and reducing vulnerability.

Evidence from a large field-based assessment of major irrigation projects across 20 states by NCAER reinforces this shift in perspective. Households in canal-irrigated command areas earn, on average, significantly higher incomes than comparable households in nearby non-command villages, even after accounting for observable differences. More importantly, their incomes are less volatile. This is not simply a story of higher yields. It reflects a broader transformation: farmers diversify into higher-value crops, invest more confidently in inputs, expand into allied activities such as livestock, and rely less on costly informal credit. Irrigation, in effect, converts uncertain rainfall into predictable production—and predictability is what underpins resilience.

What is often missed in conventional analysis is that a substantial share of irrigation’s benefits arises beyond the farm. Across projects, indirect gains account for roughly 30-35 per cent of total benefits—yet these are rarely captured in formal appraisal frameworks. These gains manifest in multiple ways. In drought-prone regions, seasonal migration is often a distress response to crop failure. In irrigated areas, this pressure eases: mobility becomes more of a choice than a compulsion. At the household level, improved water access reduces the time women spend collecting water, allowing greater participation in income-generating activities or community institutions. When income volatility declines, families are also better able to keep children in school, reinforcing long-term adaptive capacity.

These are not incidental spillovers; they are central to how rural economies adapt to climate stress. Irrigation does not merely increase production—it reorganises the rural economy by stabilising expectations and enabling longer-term decision-making.

Yet these benefits are far from uniform. Within command areas, access to water is often uneven, with tail-end farmers and marginal households receiving less reliable supply. This unevenness points to a critical insight: irrigation outcomes depend as much on governance as on infrastructure. Where water distribution is predictable, institutions are responsive and maintenance systems are functional, benefits are broad-based. Where these conditions are weak, gains remain concentrated and inequalities persist.

The environmental dimension further complicates the picture. Canal irrigation interacts closely with groundwater systems and local ecology. In some regions, it contributes to groundwater recharge and improved vegetation cover. In others, it coexists with over-extraction or leads to waterlogging and soil degradation. Similarly, while improved water access can enhance health and sanitation outcomes, poorly managed systems can increase risks of water-borne and vector-borne diseases. Irrigation, therefore, is not inherently climate-positive; its long-term impact depends on how it is designed and managed.

There are also emerging examples of irrigation infrastructure enabling economic activities beyond agriculture. In some project areas, reservoirs have supported tourism and related services, generating additional income streams for local communities. While such outcomes are context-specific, they highlight a broader point: water infrastructure can act as a catalyst for diversified rural economies, with effects that extend well beyond crop production.

All of this has important implications for how irrigation is valued and governed. If a significant share of its benefits lies in reducing risk, stabilising incomes, supporting human capital and enabling non-farm activities, then conventional metrics based solely on agricultural output underestimate its true contribution. At the same time, the variability in outcomes across projects underscores that infrastructure investments alone are insufficient. Without effective institutions, equitable water distribution, groundwater regulation and ecological safeguards, irrigation can create new forms of stress even as it alleviates others.

India’s irrigation systems were originally built to secure food production. That objective remains important. But in today’s climate context, their role is expanding. By reducing dependence on erratic rainfall, irrigation cushions rural economies against shocks. By lowering distress migration, it stabilises communities. By saving time and enabling diversification, it strengthens household resilience. And by supporting continuity in education and livelihoods, it builds the foundations of long-term adaptation.

In a warming world, the value of irrigation lies not only in what it produces, but in the uncertainty it removes. Canals are no longer just conduits of water—they are instruments of stability. And in an era defined by climate volatility, stability may well be the most critical resource rural India can have.

Saurabh Bandyopadhyay, Pradip Biswas, Laxmi Joshi, Charu Jain, Kushagra Thakral and Cheruvu Bharadwaja work with NCAER. Views are personal.