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Will Centre back Kejriwal's 50% higher wage rate for Delhi's workers?

Neeraj Thakur | Updated on: 10 February 2017, 1:48 IST

Post liberalisation, the talk about minimum wages for blue-collar workers has been lost in the din of making Indian industry competitive in the international market. However since 2008, exports haven't done well and a case for increasing the purchasing power of Indians through increase in minimum wages has been built. But the central as well as state government have avoided giving any significant hikes in the minimum wages for the fear of backlash from industry.

But now, Delhi Chief Minister Arvind Kejriwal has announced a mega hike of 50% in the minimum wages to be implemented in industries located within the boundaries of Delhi.

As per the government's proposal, minimum wages for an unskilled worker will be Rs 14,052 against the existing Rs 9,568 in the national capital. Besides, the same for semi-skilled and skilled persons will increase from Rs 10,582 to Rs 15,471 and from Rs 11,622 to 17,033 respectively.

The new proposal will make Delhi the state with the highest minimum wage rate in the country. Even the Central government, which has been considering a major hike in the minimum wages in the country for the past two years, is looking at a figure that is much less than what Delhi has proposed.

Ideally, this should mean good news for the workers as well as the economy as more money in the hands of the labour class means greater purchasing power.

But even before the unions celebrate, there are two major threats looming large over the implementation of the new minimum wages scale announced by the Delhi government.

Delhi not a full state

Ashok Desai, former Chief Economic Adviser to the government says "it would be difficult for the Delhi government to implement the decision. Kejriwal does not have any powers to implement it because he does not control the police and it is unlikely that the central government will support him on this issue".

Arvind Kejriwal has had a confrontational relationship with the Central government which rules Delhi with the help of the Lieutenant Governor.

The Ministry of Home Affairs has returned 14 Bills passed by the Delhi Legislative Assembly over the past one year.

Following this, Delhi Chief Minister Arvind Kejriwal tweeted saying "Should the Centre have the right to stall every law passed by Delhi? Is the Center Delhi's headmaster?".Industry will shift out of Delhi

Even if the Delhi government is allowed to implement its decision to increase the minimum wages, promoters may simply choose to shift to other states, where the minimum wage rate is much lower.

In the neighboring state of Uttar Pradesh, which governs the Noida region, the minimum wages for industry range between Rs 7107.64 to Rs 8757.85 per month.

In Haryana, which governs the industrial area of Gurgaon, the minimum wage rate is in the range of Rs 9,180 to Rs 11,730.

DK Nair, Former Secretary general of Confederation of Indian Textiles Industry says "It would not be possible for any labour intensive industry to implement the minimum wage scale announced by Delhi. Delhi anyway does not have many labour intensive industrial units left. With the new wage rates, even the remaining would shift to other states".

Labour unions, on their part, are happy but they are also worried about the implementation part of the Delhi. "We are happy that one government showed the sensitivity towards the needs of the working class in India. The labour unions wanted a minimum wage of Rs 18,000 per month, which was arrived at with a scientifically calculated formula. But even Rs 14,000 for unskilled labour and Rs 17,000 for skilled labour is appreciated.... however unless the Central government, too, adopts the same rate, it would be difficult to implement it in the whole country" said Tapan Sen, general secretary of Centre of Indian Trade Unions (CITU).India has witnessed high retail inflation - currently at 6.07% - over the past few years. This has made it difficult for blue-collared workers to make their ends meet. The NDA government for the last two years has been talking about increasing the minimum wages, but there has not been any consensus on the final rate.

Delhi government on its part has done its job, but it's unlikely to work unless the central government lends its support.

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First published: 17 August 2016, 5:42 IST
 
Neeraj Thakur @neerajthakur2

As a financial journalist, his interface with the two dominant 'isms'- Marxism and Capitalism- has made him realise that an ideal economic order of the world would lie somewhere between the two.

Senior Assistant Editor at Catch, Neeraj writes on everything related to business and the economy.

He has been associated with Businessworld, DNA and Business Standard in the past.

When not thinking about stories, he is busy playing with his pet dog, watching old Hindi movies or searching through the Vividh Bharti station on his Philips radio transistor.