The government of India, on November 21, 2025, announced the consolidation of the existing 29 labour laws into four comprehensive labour codes- the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020.
These new labour codes, aimed at strengthening job
security, wage protection, employees’ welfare and social safety, will govern India’s
labour market dynamism. This is a landmark decision that lays the foundation for
a future-ready, strong and resilient industrial sector for Atmanirbhar Bharat.
A quick glance at the key changes-
Also Read: G20 Summit 2025
Impact Assessment on GDP and Productivity via-
1. Women’s labour force participation
The female labour force participation rate has
improved from 23.3% in 2017-18 to 41.7% in 2023-24. The government aims to
increase this to 55% by 2030. With the new reforms, women are allowed to work in all establishments, including during night hours, provided they meet safety provisions, and we may even surpass the targets.
Increased female workforce participation has a positive impact on India’s GDP. A 2015 McKinsey report states that if India’s
gender gap is addressed, it could add USD 700 billion to India’s
annual GDP. A 10-percentage-point rise in women's workforce participation can add more than 70 per cent to the overall gain of USD 700 billion.[1]
Based on this, a simple calculation shows that if the present reforms could facilitate female labour force participation, the Indian economy could gain around USD 450-500 billion in annual GDP, or approximately 8% of current GDP. This is equivalent to adding a mid-sized economy to India’s GDP.
2. Formalisation and Productivity
India’s social security coverage has risen from
19% in 2015 to 64% in 2025, i.e. around 94 crore people are covered to avail at
least one benefit. The Employees Provident Fund Organisation (EPFO) now has a record number of members. This implies formalisation is already taking place.
Formalisation is vital because there is a vast gap in Gross Value Added (GVA) contributions by formal and informal employees. The latest data shows that the annual GVA contribution of formal workers is around INR 12 lakh, which is about 8 times that of informal workers (INR 1.5 lakh).
So, if we suppose 2 crore workers move from the informal sector to the formal sector, covered by
EPFO or similar schemes, then
1 worker would add around INR 10.5 lakhs to the overall GVA
2 crores would add, 2 crore *10.5 lakhs ≈
INR 21 trillion additional GVA per year, which is around USD 235 billion per
year of additional output generated.
Hence, only a small proportion of
employees, say 1%, if transitioned from informal to formal sector, can
potentially increase India’s GDP by 1-3% in the medium term through higher per-worker output.
In all, the new labour codes are not just about rationalising old laws, but they are a long-term macroeconomic growth strategy much needed to strengthen India’s domestic capabilities for a stronger and Atmanirbhar Bharat. Accelerating women’s participation and enhancing formalisation offers a double dividend to India’s GDP- more workers in the labour market and higher productivity per worker. Even conservative estimates suggest that just these could result in additional annual output of hundreds of billions of dollars in the coming decade.
Contact: policyprism02@gmail.com for Research, Publication, & Consultancy
[1] https://www.mckinsey.com/~/media/mckinsey/featured%20insights/employment%20and%20growth/the%20power%20of%20parity%20advancing%20womens%20equality%20in%20india/mgi%20india%20parity_full%20report_november%202015.pdf