India's New Labor Codes Signal Structural Shift Toward Inclusive Growth Says Motilal Oswal — Read Report

NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

Motilal Oswal Report

On November 21, 2025, the Government of India implemented four Labor Codes — Codes on Wages, Industrial Relations, Social Security, and Occupational Safety, Health and Working Conditions, replacing 29 legacy labor laws. This is the most sweeping labor reform.

However, these reforms come with higher costs for IT/ITES, QSR, tech, textiles, MSMEs, and electronics and semiconductor firms that have higher contractual positions.

While the companies would incur higher wage costs, increased social protection could support worker loyalty and reduce churn, improving operational stability.

• Benefits:

• Workers:

A national floor wage ensures that no one falls below a basic standard, while mandatory appointment letters bring clarity and fairness to employment.

Gig and platform workers, long operating in legal limbo, now enter the formal economy with access to provident funds, maternity benefits, and more.

Fixed-term employees, too, get a major boost – they now become eligible for gratuity after just one year, rather than five.

On the safety front, uniform health checks, safety committees, and formal registers help create workplaces that are not just productive but humane.

• Businesses:

Simplicity: A single registration, a single license, a single electronic return –streamlined compliance.

Flexibility: With the layoff-approval threshold raised from 100 to 300 workers, firms can adapt more nimbly to market cycles.

• Inclusivity:

Migrant laborers, platform workers, and informal-sector employees now have a safety net; women gain the right to work night shifts (with safety protections), and pay parity is more clearly enforced.

• Global Impact:

Clarity and predictability of a unified labor regime make India far more compelling for foreign investors.

Combined with formal social protections, the reform strengthens India’s "China + 1" proposition in global supply chains.

In an ESG-conscious world, these labor reforms help elevate India's “S” credentials — making Indian firms more attractive to global capital sensitive to social governance.

Risks:

Trade unions have sounded the alarm: several have called the reform “anti-labor,” citing worries over easier retrenchment and diluted bargaining power. Simply put, union discontent could spark industrial tensions. 

Small firms may struggle with the cost of social security and safety compliance.

State governments will need to notify detailed rules quickly or risk patchy adoption.

Fiscal costs might increase for the government for the Social Security Fund. The Union Budget 2026 could emphasize skilling/reskilling funds and reskilling for retrenched workers.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.