Daily Newspaper Notes: March 13, 2026

India’s New Labour Codes: Formalisation Expectations And Structural Concerns

Economic Survey Projections

• The Economic Survey 2025–26 estimates that the labour codes could increase formalisation from 60.4% to 75.5%.
• The reforms are projected to generate 77 lakh jobs, reduce unemployment and increase female labour force participation.
• The codes are also expected to contribute 1.25% to GDP by 2029–30.
• These projections assume that simplifying compliance requirements will encourage firms to formalise employment and expand registered jobs.

Extent of Informality in India

• More than 80% of India’s workforce is employed in the informal sector, remaining outside most labour code protections.
• Trends indicate growing reliance on non-permanent employment arrangements.
• Direct factory employment declined from 61% in 2011 to 47% in 2023.
• Contract workers increased to 42% of the factory workforce.
• Regular employment in central public sector enterprises declined by 30,000 workers in 2024, replaced by casual and contract workers.
• The organised sector, historically associated with stable employment, is shrinking.

Regulatory Threshold Changes in Labour Codes

• The Occupational Safety, Health and Working Conditions Code raises thresholds for regulatory coverage.
• The definition of a factory with power increases from 10 to 20 workers.
• The definition of a factory without power increases from 20 to 40 workers.
• The threshold for application of contract labour provisions increases from 20 to 50 workers.
• The threshold for prior government approval for lay-offs increases from 100 to 300 workers.

Expansion of Fixed-Term Employment

• The labour codes promote fixed-term employment, allowing firms to hire workers through short-term contracts instead of permanent jobs.
• Fixed-term workers are entitled to appointment letters and equal gratuity after one year.
• However, fixed-term employment weakens job security, which has traditionally been a defining feature of formal employment.

Provisions for Gig Workers and Welfare Funds

• Platform companies are required to contribute 1%–2% of annual turnover towards schemes for gig workers.
• Operational details such as contribution mechanisms, benefit levels, coverage and claims procedures are to be notified later through separate schemes.
• A reskilling fund for retrenched workers requires employers to deposit 15 days’ wages per worker.
• The rules do not specify how workers will access the fund, which institutions will provide training, or what skills will be taught.
• As with many welfare funds and cess collections, utilisation may lag behind collection.

Wage Regulation under the Code on Wages

• The Code on Wages introduces a National Floor Wage and a National Minimum Wage.
• The rules do not clearly specify the methodology for determining these wages.
• The distinction between the floor wage and minimum wage is also not clearly defined.
• The framework allows greater administrative discretion in wage determination.

Labour Inspection and Enforcement Changes

• Labour inspectors are reclassified as “Inspector-cum-Facilitators.”
• Their role includes assisting employers with compliance rather than strict enforcement.
• Employers are allowed to compound serious violations such as wage theft or unpaid overtime by paying prescribed fines.
• If fines are lower than compliance costs, firms may treat violations as a rational business decision.
• In sectors where workers lack unions, labour courts or awareness of rights, weakened inspections reduce mechanisms for redress.

Structural Drivers of Informality

• Informality persists because it is structurally profitable for firms, not merely due to complex regulations.
• Technological change is automating routine jobs.
• New platform-based employment often bypasses traditional employment relationships.

Implications for Formalisation

• The projections of increased formalisation rely on the assumption that simplifying labour regulations will expand formal employment.
• Firms may respond by replacing permanent workers with contract workers rather than expanding stable employment.
• Higher formalisation figures may therefore reflect changes in employment classification rather than improvements in workers’ living conditions.

India’s Research, Development And Innovation Ecosystem: Progress And Structural Gaps

Recent Policy Initiatives to Strengthen RDI

• The Government of India announced a ₹1,00,000 crore Research, Development and Innovation (RDI) Fund.
• The Union Budget introduced a ₹20,000 crore corpus for deep-tech start-ups, extended tax incentives and investments in digital infrastructure.
• Funding for Atal Tinkering Labs increased from ₹500 crore to ₹3,200 crore, reflecting efforts to nurture future innovators.
• The government removed the three-year existence requirement that limited deep-tech start-ups’ access to schemes under the Department of Scientific and Industrial Research’s Industrial R&D Promotion Programme.
• The SHANTI Act, 2025 (Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India) now allows patents for the peaceful uses of nuclear energy and radiation, enabling greater private-sector participation.

Low R&D Investment

• India spends 0.65% of GDP on R&D, significantly lower than advanced economies and many peer countries.
• Among BRICS countries, India’s R&D intensity is among the lowest except for South Africa.
• Innovation-leading economies typically see industry as the primary driver of R&D spending.
• In India, the government continues to bear a disproportionate share of R&D expenditure, reflecting weak private-sector investment.

Patent Scale and Global Technological Influence

• Although patent filings in India are increasing, they remain small compared to major innovation economies.
• China filed over 1.8 million patent applications, including 1.6 million domestic filings.
• The United States filed about 600,000 applications, including 2,70,000 domestic filings.
• International patent activity further reflects the gap in global technological influence.
• India filed 4,547 Patent Cooperation Treaty (PCT) applications in 2024, a 22% increase from 2023.
• This remains far below China (over 70,000), the United States (over 54,000), and Japan (over 48,000).
• Switzerland filed over 5,300 applications, exceeding India despite its smaller size.

Human Capital Constraints

• According to GII 2025, India ranks 95th in employment in knowledge-intensive sectors.
• India ranks 80th in the number of full-time equivalent researchers.
• Gender diversity remains a major weakness in the innovation ecosystem.
• India ranks 101 among 119 economies in employment of women with advanced degrees.
• The government has introduced initiatives such as Women’s Instinct for Developing and Ushering in Scientific Heights and Innovations (WIDUSHI) and Women in Science and Engineering – KIRAN (WISE-KIRAN) to improve women’s participation in science and engineering.

Structural Issues in Innovation and Industrial Development

• India’s development trajectory has lacked large-scale labour-intensive industrialisation, unlike several East Asian economies.
• This has resulted in continued reliance on agriculture and services.
• Many Indian unicorns are built on labour-abundant models such as instant delivery platforms rather than deep R&D-driven technologies.
• The absence of globally significant technologies of Indian origin reflects limited private-sector investment in long-term R&D.

Weak Research-to-Market Linkages

• Innovation reaches full impact only when research successfully transitions from laboratory to market.
• In India, the commercialisation stage of the RDI chain remains the weakest.
• Universities and public research institutions generate increasing scientific output.
• However, technology transfer systems, venture creation mechanisms and risk-capital alignment remain underdeveloped.
• High-technology entrepreneurship requires patient capital, strong intellectual property protection and an ecosystem that tolerates failure.
• Countries leading in innovation have developed strong institutional bridges between academia, industry and finance.

Role of the Private Sector in India’s Innovation Future

• The private sector is expected to play a decisive role in strengthening India’s RDI ecosystem.
• Emerging sectors such as the commercial space industry show promising start-up activity.
• Deep-tech innovation represents another area where the RDI Fund could have transformative impact, provided industry invests long-term capital.
• The extent of Indian-origin patents among future global 6G standard essential patents (SEPs) will indicate the strength of India’s innovation ecosystem.

Industrial Heat Transition And Energy Security Challenges In India

Gas Supply Disruptions and Industrial Impact

• The Ministry of Petroleum and Natural Gas reduced gas allocations to non-priority industrial sectors to 65–80% of contracted volumes.
• This has disrupted operations in energy-intensive manufacturing clusters.
• In Morbi, Gujarat, about one-quarter of gas-fired ceramic kilns have stopped operating.
• In Ludhiana, Punjab, textile manufacturing units dependent on gas-fired boilers are facing similar disruptions.

Concept of Thermal Independence

• The crisis highlights the need for thermal independence, defined as having a sovereign domestic source of industrial heat, beyond conventional energy security.
• Traditionally, industrial heat has depended on hydrocarbon fuels such as coal and natural gas.
• Textile mills typically use gas-fired boilers to generate steam for dyeing and finishing processes.
• Ceramic manufacturing in Morbi requires kiln temperatures exceeding 1,000°C, traditionally achieved through gas combustion.

Concentrated Solar Thermal (CST) Technology

• Concentrated Solar Thermal (CST) technology uses mirrors to concentrate sunlight onto a receiver, heating fluids such as water or molten salt.
• CST systems can generate temperatures of up to 400°C.
• In textile industries, processes such as scouring and bleaching require temperatures between 100°C and 180°C, making CST suitable for steam generation.
• Parabolic trough installations can produce pressurised steam directly from sunlight.

CST Potential and Economic Viability

• According to the Ministry of New and Renewable Energy (MNRE), India has 15 GW potential for CST deployment.
• Adoption remains limited, but rising energy prices are improving its economics.
• Gas prices have tripled due to the West Asia conflict, reducing the CST payback period from seven years to less than three years.

Electrification of Industrial Heat

• Electrification of heat replaces combustion with electromagnetic or plasma-based heating technologies.
• Induction heating generates heat directly inside metal or materials using magnetic fields.
• This process avoids intermediary heat-transfer mediums such as air or steam.
• Induction heating systems can achieve efficiency rates exceeding 90%.

Plasma Torch Technology in Industry

• Some ceramic units in Morbi are experimenting with plasma torches for kiln heating.
• Plasma torches ionise gas to create plasma, enabling controlled high-temperature heating.
• The technology allows precise temperature control, reducing risks of under- or overheating during industrial processes.

Power Grid and Infrastructure Constraints

• Industrial heat accounts for about 25% of India’s total energy consumption.
• Large-scale electrification of industrial heat would shift energy demand from gas networks to electricity grids.
• If major industrial clusters switched entirely to electric heating systems, the existing power grid would face severe stress.

Energy Storage and Renewable Integration Challenges

• Industrial operations typically run 24-hour production cycles, while renewable energy sources such as solar and wind are intermittent.
• Electrified heat systems would require round-the-clock renewable electricity supply.
• This would depend on large-scale deployment of battery energy storage systems and pumped hydro storage.
• India’s energy storage capacity is currently limited, making it difficult to manage high electricity demand spikes.

Distribution Network Limitations

• Local electricity infrastructure in industrial clusters such as Ludhiana is ageing and capacity constrained.
• Electrified industrial heating requires high-voltage substations and reinforced last-mile cabling.
• DISCOM asset-loading reports indicate that 25–33% of distribution transformers in industrial clusters operate near critical load during peak hours, leaving little room for additional demand.

Advantages of CST-Based Heat Systems

• CST can generate thermal energy directly at the factory site, reducing dependence on the electricity grid.
• Heat can be stored in insulated tanks, allowing continued industrial operations at night.
• Thermal storage is significantly cheaper than lithium-ion battery storage.

Policy Gaps and Need for a National Thermal Policy

• Current energy subsidies primarily focus on electricity generation technologies, particularly solar photovoltaics.
• Direct-heat technologies such as CST receive limited policy support.
• A National Thermal Policy has been suggested to support industrial heat decarbonisation.
• Possible policy measures include extending production-linked incentives to CST mirror manufacturers.
• Industries could also utilise the Carbon Credit Trading Scheme to sell avoided emissions and offset the high capital cost of electric kilns.

Hybrid Energy Solutions for Industry

• Industrial decarbonisation may rely on hybrid energy systems combining multiple heat sources.
• A CST system could provide daytime solar-generated steam, reducing fossil fuel consumption.
• Gas-based systems could serve as backup for peak loads or nighttime operations.
• Induction heating can support precision industrial processes.

Global Policy Examples

• The Miraah project in Oman integrates a large CST plant with an existing gas-based industrial operation.
• Solar energy produces steam during daytime, reducing gas consumption by nearly 80%, while gas boilers operate as backup.
• In Spain, the Solar Heat for Industrial Processes initiative enabled development of modular solar thermal units that can connect directly to factory steam systems.
• Denmark introduced heat purchase agreements, allowing external providers to install and maintain CST or induction systems while industries purchase heat at fixed rates.
• Such models reduce engineering costs and simplify adoption of new heating technologies.

Women In Electoral Politics In India: Participation–Representation Gap

Convergence in Voter Turnout

• In the decades after Independence, women’s voter turnout was substantially lower than men’s due to structural barriers such as lower literacy, restricted mobility and limited political outreach.
• From the 1980s onward, this gender gap steadily narrowed.
• In recent Lok Sabha elections, women’s turnout has reached near parity with men, and in many State elections women now vote at slightly higher rates than men.
• This trend reflects a long-term expansion of women’s electoral inclusion.

Participation Beyond Voting

• While voting rates have equalised, active political participation remains uneven.
• Women participate less in campaign activities such as rallies, processions and door-to-door canvassing.
• Although their involvement in these activities has gradually increased, men continue to dominate visible campaign-level politics.

Social Constraints on Political Engagement

• Women’s public political participation is influenced by social and familial norms.
• Many women report requiring family permission to attend rallies, campaign meetings or other political activities.
• These constraints limit women’s visibility and autonomy in the political sphere despite high voter turnout.

Gap Between Participation and Representation

• Women’s representation in the Lok Sabha remains far below their share of the electorate.
• Although the number of women Members of Parliament has increased gradually over time, they still constitute a small minority in Parliament.
• This reflects a persistent gap between electoral participation and political power.

The Nomination Bottleneck

• A key barrier to representation is limited nomination of women candidates by political parties.
• Although the number of women contesting elections has increased over time, they remain a small proportion of total candidates.
• Evidence suggests that when women are given party tickets, their electoral success rates are comparable to or sometimes higher than those of men, challenging the assumption that women are less electable.

Political Autonomy and Institutional Barriers

• Women’s political choices are not always independent and are often influenced by family or social expectations.
• Perceptions of inequality in political opportunity also persist.
• Many women believe that political entry is easier for those from political families or higher economic backgrounds, and that political parties tend to prefer male candidates.

Structural and Social Barriers

• Women identify several factors limiting their political participation.
• Patriarchal social structures are seen as the most significant obstacle.
• Other barriers include household responsibilities, limited political exposure, cultural norms and financial constraints.

Changes In FDI Policy For Land Bordering Countries To Boost Manufacturing

Background: Press Note 3 (2020)

• In April 2020, the government introduced Press Note 3 (PN3) requiring prior government approval for investments from land bordering countries.
• The measure aimed to prevent opportunistic takeovers of Indian firms during the economic downturn caused by the COVID-19 pandemic.
• The policy largely targeted Chinese investments, as investments from other neighbouring countries form a small share of India’s total FDI inflows.

Recent Policy Changes

• Investment proposals from specified manufacturing sectors will now be processed and decided within 60 days to accelerate approvals.
• Automatic approval will be allowed where non-controlling beneficial ownership from LBCs is up to 10%.
• In investments from LBC entities in specified sectors, the Indian partner must retain majority ownership and control of the investee company.

Definition of Beneficial Ownership

• The amendment clarifies the definition of “Beneficial Owner” for non-LBC investor entities such as global private equity and venture capital funds.
• If the LBC shareholding in such entities is below 10% and non-controlling, investment proposals can proceed through the automatic route.
• Earlier, even minimal LBC ownership in global funds required government approval under PN3, slowing investment flows.

Sectors Covered Under the Amendment

The policy applies to strategically important manufacturing sectors, including:

• Electronic capital goods and electronic component manufacturing
• Polysilicon and ingot-wafer production
• Advanced battery components
• Rare earth permanent magnets and rare earth processing
• The Committee of Secretaries under the Cabinet Secretary may revise the list of sectors in the future.

Policy Rationale

• The change reflects the need to strengthen India’s manufacturing ecosystem and export competitiveness.
• Policy discussions highlighted that PN3 restrictions had unintended adverse effects on investment flows, including investments routed through global funds.
• Committees and policy assessments emphasised the importance of attracting foreign capital and technology while safeguarding national security.

Expected Impact on Investment

• The policy changes are expected to particularly benefit private equity and venture capital funds with minimal LBC ownership.
• The 60-day approval timeline is intended to speed up investment decisions across eligible sectors.
• The amendment aims to attract capital and technology for industries where India remains import dependent.

Strategic Importance for Manufacturing

• Electronic components, polysilicon wafers and rare earth magnets are critical inputs for high-technology industries such as electronics, defence and automobiles.
• China currently dominates global rare earth processing, highlighting the need for countries to develop domestic capabilities.
• The policy seeks to encourage technology partnerships while ensuring majority Indian ownership in sensitive sectors.

Industry Context

• Indian industry had sought easing of PN3 restrictions to facilitate technology collaborations and manufacturing partnerships.
• Some joint ventures between Indian and Chinese firms in the electronics sector have already been approved with majority Indian ownership.
• The policy adjustment aims to create conditions for greater manufacturing investment over time.

Key Insight

• The revised FDI rules attempt to balance national security concerns with the need to strengthen manufacturing capabilities.
• The policy provides a controlled opening for investment from land bordering countries while ensuring Indian ownership and faster approvals in strategic sectors.

India’s New GDP Series And The Issue Of Statistical Discrepancies

Meaning of GDP

• Gross Domestic Product (GDP) measures the market value of all final goods and services produced within a country in a year.
• It reflects the overall size and growth of an economy and forms the basis for policymaking.

Change in Base Year

• The new GDP series changes the base year from 2011–12 to 2022–23.
• The base year serves as the reference point for comparing economic output and prices over time.
• Base year revisions are necessary because the structure of production and consumption changes over time.
• Updating the base year ensures that GDP estimates reflect the current composition of the economy.

Controversy Around the Old GDP Series

• The earlier GDP series with 2011–12 as the base year faced criticism from several analysts.
• Critics argued that the data overstated economic growth, particularly in the post-pandemic period.
• Questions were also raised about the reliability of inflation estimates used to calculate real GDP growth.

Statistical Discrepancies in GDP Estimates

• In theory, production and expenditure approaches should produce the same estimate of economic output.
• In practice, the two estimates often do not match exactly because some data—especially expenditure data—may be unavailable or reported late.
• The difference between these estimates is recorded as a “statistical discrepancy.”
• Production-side estimates are generally given greater weight, and discrepancies are used to adjust the expenditure side.
• However, large discrepancies reduce the credibility of GDP estimates.

Components of GDP (Expenditure Side)

• Private Final Consumption Expenditure (PFCE): Household spending; the largest contributor to GDP.
• Gross Fixed Capital Formation (GFCF): Investment by firms and government in productive assets.
• Government Final Consumption Expenditure (GFCE): Government spending on administration and services.
• Other components include net exports, changes in inventories and valuables.

Discrepancies in the New GDP Series

• Despite the new base year, statistical discrepancies remain significant in recent GDP estimates.
• Growth in discrepancies and inventory changes has contributed to the difference between overall GDP growth and the growth of its major components.
• Rising discrepancies have again raised questions about the reliability of real GDP estimates.

Reasons for Rising Discrepancies

• One factor is data limitations on the expenditure side, especially household consumption and investment.
• Detailed economy-wide consumption data is not directly available and is estimated using sample surveys.
• Another issue arises as the economy moves away from the base year, when the quality of price information used to calculate real GDP weakens.
• MoSPI has increased the number of price deflators used in calculations to improve measurement accuracy.

Challenges in Estimating GDP

• Data on production is relatively easier to collect compared with data on expenditure.
• Reliable information exists for government spending, exports, imports and corporate investments, but household consumption data is less precise.
• This creates challenges in aligning production and expenditure estimates.