Mumbai: Implementation of India’s new labour codes is expected to deliver a major economic and social boost, including a ₹75,000-crore rise in consumption, a significant expansion of the formal workforce, and a sharp improvement in social security coverage, according to a research note released by SBI economists on Tuesday.
The codes, which came into effect on November 21, will also help increase India’s social security coverage to nearly 85% within the next three years and reduce the unemployment rate by 1.3% over the medium term, the note stated.
₹75,000 Crore Consumption Boost Expected
The economists highlighted that with India’s average household saving rate at roughly 30%, the new labour framework will leave workers with more disposable income.
“The implementation will result in a consumption boost of ₹66 per person per day post-implementation. This could translate into an approximate consumption increase of ₹75,000 crore,” the SBI note said.
Four Labour Codes to Empower Workers and Enterprises
The four consolidated labour codes—wages, social security, industrial relations, and occupational safety—aim to simplify India’s complex labour regulations while strengthening protections for workers.
According to SBI:
- The codes will create a workforce that is more productive, better protected, and aligned with the changing needs of the global labour market.
- They will also incentivise formal employment, benefitting both enterprises and workers.
Major Push to Social Security Coverage
The note points out that India has around 44 crore workers in the unorganised sector, with nearly 31 crore registered on the government’s e-shram portal.
Assuming that just 20% of informal workers shift to the formal payroll system under the new regime, the codes could benefit around 10 crore workers, raising social security coverage to 80–85% within the next two to three years, the economists projected.
Formal Workforce Share to Rise by 15%
Citing the Periodic Labour Force Survey (PLFS), the note says India’s current formal workforce stands at 60.4%. SBI economists anticipate that the labour codes could drive an increase of 15.1% in formalisation, significantly strengthening India’s organised labour market.
Unemployment Rate to Decline by 1.3%
The economists expect India’s unemployment rate to reduce by 1.3% in the medium term, but the actual pace of improvement will depend on:
- Speed and quality of reform implementation
- Firm-level adjustment capabilities
- Complementary rules adopted by individual states
The note underlines that these variables will determine how smoothly businesses transition and how effectively the benefits reach workers.