NEW DELHI: Thelabour ministryhas put on hold a proposal to increaseminimum wagesfor all by up to 25% for the time being because of a fall in both global and domestic demand that impacted Indianmanufacturers.An official said the time is not ripe to enhance wages and make it binding on all states as this would raise the input cost for manufacturers and make them uncompetitive.
A senior labour ministry official told ET that the time is not ripe to enhance wages and make it binding on all states as this would raise the input cost for manufacturers and make them uncompetitive.
"We are holding back the increase in minimum wages for a while now and may reconsider this at a later stage when demand picks up so that the additional burden incurred by manufacturers through higher wages is compensated by increase in order inflow," the official said on condition of anonymity.
The central government is projecting lowercost of labour in India vis-a-vis China, where wages are on the rise, as a major attraction for manufacturers to set up shops in the country along with its focus on the ease of doing business.
"This kind of substantial hike in labour wages will go against the government's approach to 'Make in India' and could impact investment decisions as of now," an industry expert said, requesting not to be identified.
As part of its proposal to enhance minimum wages, conceived by labour ministry last year, all states and union territories were grouped into three categories based on per capita income and minimum wages for the unskilled, semiskilled and skilled workers in each of the provinces.
Based on the formula arrived at, states like Goa, Delhi, Sikkim, Chandigarh, Pondicherry and Maharashtra, with highest per capita income in the country, would be in the first category where minimum wage for the unskilled would be in the range of Rs 8,000-9,000 per month.
For states like Bihar, Uttar Pradesh, Manipur, Assam and Jharkhand, with least per capita income, the minimum wage could be around Rs 6,000 a month, a hike of 25% based on recently raised National Floor Level Minimum Wage.
Going by this, minimum wages would range betweenRs 9,000 and Rs 12,000 for semiskilled and skilled workers in poor states & between Rs 12,000 and Rs 16,000 in rich states.
Trade union leaders said higher wages are essential. "Naturally, employers' side will be hurt by increase in wage cost, but this is essential as wages in India are the lowest and unless the worker is compensated well he would not be motivated to deliver to his best ability," said DL Sachdeva of the All India Trade Union Congress.
The National Floor Level Minimum Wage was revised last year to Rs 160 a day from Rs 137. This ranslated into a monthly salary of Rs 4,800 for an unskilled worker, but is not mandatory for states to follow.
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