Unlike in most East-Asian countries, India has over the years enacted and
implemented a variety of legislation meant to protect the well-being of the worker.
Thus there are laws protecting trade union rights, laws that abolish bonded labor and
child labor from hazardous industries, legislation guaranteeing a minimum wage and
laws to prevent retrenchment, layoffs and dismissal of labor. In this paper we
evaluate the consequences of this last set of laws concerning retrenchment.
In India firms employing more than 100 workers must seek government
permission for any retrenchments they wish to make, and the workers in these firms
are entitled to three months notice of any such action. As for plant closings,
companies employing more than 100 workers must receive government permission
before any closure; the government may grant or deny permission for such a closing,
even if the company is losing money on the operation.