Economists and investors have long warned that India’s onerous and byzantine labour laws are preventing the country from capitalising on its vast and youthful demographics. Attempts at reform have frequently run into political resistance. This changed late last month, when Prime Minister Narendra Modi pushed through a sweeping deregulatory package that promises to ease compliance burdens for businesses, improve flexibility, and raise security for workers across the jobs market. For a country that aspires to reach “developed nation” status by 2047, the measures mark an important step forward.

The reforms build on legislation passed in 2020 that has been stymied by opposition parties and unions. But state election victories for Modi’s coalition and US President Donald Trump’s steep tariffs on the country have provided a new impetus. The government has now introduced four new labour codes that update and consolidate 29 former laws, some of which date back to the colonial era. The rationalisation alone will be a boon for large businesses. The number of rules that govern workers is estimated to have shrunk from 1,400 to about 350, while the volume of form-filling has been slashed by over a half.

The most promise for raising India’s already fast growth rate, however, comes from three particular rule changes. The first is a change to a rule that meant companies with over 100 workers had to obtain approval to hire and fire workers, relocate or shut down. This led many industrial firms to restrict their workforce, thereby forgoing expansion. The latest reforms raise this threshold to 300.