Industrial Disputes Act

An Act to make provision for the investigation and settlement of industrial disputes,
and for certain other purposes. WHEREAS it is expedient to make provision for the
investigation and settlement of industrial disputes, and for certain other purposes
hereinafter appearing;
It governs the relation between workers and management, and settlement of
disputes between them; rules relating to the re-assignment of workers to different
tasks and conditions of lay-off, retrenchment and closure.

The march towards socialism in Phase 2, continued in the area of labor

legislation resulted in the introduction of a key amendment of Industrial
Disputes Act (IDA), 1947 in 1976 through the addition of chapter VB to IDA
Tightening of controls introduced during Phase2 had large detrimental effect
on growth rate.
Made virtually impossible for larger firms to lay off or retrench workers
Establishments including factories, mines and Plantations with more than
300 workers must get prior permission from the government authority to
retrench one or more workers. Given political pressure, authority never
gave such permission
As the provision applied to any establishments seeking shutdown, it made
the exit of firms nearly impossible
In 1982, the limit on the establishments subject to the provision was
revised downward to just 100 workers. More complication
Once the firm reaches 100 or more, it loses the right to fire workers or to
re-assign them to alternate task
The near absolute protection of workers from layoff and retrenchment had
a hugely detrimental impact on workers efficiency and therefore on the
effective labor costs in Phase 3 and beyond
Labor strikes became endemic with the owners of large establishments
unable to resist the escalating demands of the unions. Unions became
increasingly powerful
This situation increasingly drove entrepreneurs away from labor-intensive
and toward capital-intensive. For any particular industry, they chose the
most capital-intensive technology in-order to stay out of the ambit of
chapter VB of IDA Less employment
Contract labor was not subjected to IDA. So, Firms that did have to employ
labor looked for ways to rely on contract labor, which did not have the
protection provided by IDA
At 50 workers or more, will be subjected to worker-management dispute
resolution process.
Under Section 9A of IDA, an employer must give three weeks written
notice to the worker of any change in working conditions.
Also, workers had the right to object to these changes which may
culminate into an industrial dispute and associated cost of time and
money
 These policies put in place during this period created institutions and vested
interest in private and public sectors that made subsequent liberalization
much more difficult.
In turn, these institutions and interests delayed the launch of Indian Economy
into the growth orbit of 8 to 10 %
For ex- Privatization of banks and public sector units remains a major
challenge for the govt. even after 2 decades of economic reforms
Most detrimental on the entry of large firms into unskilled-labor intensive
industry.
The attempts to change the IDA was defeated by TradeUnions and was no
way out.