India ranks poorly in employee-employer relations standing at 61st position, which is far behind countries like Mexico, Thailand and the Philippines, according to a report by Morgan Stanley.
"On the metric of cooperation in labour-employer relations India ranks at 61, behind Mexico (44), Thailand (37) and the Philippines (34)," according to the report titled 'What's Holding Back India's Labour Market Environment? Part II' by Morgan Stanley.
China is just ranked ahead of India in this regard at the 60th spot, it said.
India's demographic trend is likely to be one of the best among large countries in the world, however, the country's track record of converting this development into an opportunity is mixed so far, the report said.
The country's track record in terms of creating productive jobs has been slow so far.
"One of the key issues stifling productive job growth is labour market regulations in the country apart from other factors such as inadequate physical infrastructure," it said.
The most contentious issue with regard to labour regulation in India is flexibility to lay off workers if a firm employs more than 100 workers, because it needs to notify and take permission from the concerned government administration, it pointed out.
Looking at labour laws across countries, most other nations do not have such a stringent requirement of prior approvals and consultations, apart from Pakistan and Sri Lanka, the report said.
"Indeed, according to the World Bank's index on hiring and firing practices, Bangladesh ranks at 25, China at 28, and Pakistan at 35 compared to India's rank of 52," it added.
In labour market efficiency ranking among 148 countries, India is placed at 99th spot compared to China (34), Brazil (92) and Philippines (99), the Morgan Stanley report said.
It said, India needs to amend provisions which allow outsiders to be office bearers.
Currently, one-third of the office bearers or five can be outsiders.
"India also needs to introduce a strike ballot such that a strike can be called only if it is supported by a qualifying majority," it said.
On contract labour, it said, there is a need to allow free use of contract labour while ensuring that the rights of contract labour are protected.
Though countries such as China, Malaysia and Vietnam do not prohibit the use of contract labour for permanent tasks, other Asian countries prohibit the use of fixed-term contract labour for permanent tasks - such as Bangladesh, Indonesia,