The factors responsible for the lacklustre performance India’s manufacturing are well
identified in contemporary literature. The important ones are absence of world class
infrastructure, complex system of internal taxation, an unpredictable taxation environment,
and regulations relating to land and labour. This paper explores the difficulties in the area of
labour regulations, focusing on the enactments and provisions that inhibit flexibility of
manufacturing enterprises in adapting to swift changes in the conditions of competition in
international markets. The regulations in India that impinge on labour flexibility and the
related practices are analysed and compared with those prevailing in major developed and
emerging countries, before coming to a conclusion on the changes that are needed in the
country. The aspects that come in for detailed scrutiny are collective dismissal, fixed term
contracts, contract labour, trade unions and unemployment insurance. Although the main aim
of the authors is to obtain greater flexibility, the recommendations are designed to ensure that
a balance is maintained between labour market flexibility and protection of labour.