Draft Questionnaire
Analysis of Firm-Level Dynamics in Indian Apparel
Introduction. This survey is being carried out by the Asian Development Bank for a research study that will be presented at the “India 2030”
conference organized by the Department of Economic Affairs, Ministry of Finance. The objective of the study is to understand what types of
policies will be most effective in encouraging growth of India’s manufacturing sector and jobs.
Our study focuses on the experience of the apparel sector given that:


It is one of India’s largest manufacturing sector employers
It has not lived up to its full potential in terms of growth, productivity, and the creation of “good” jobs (e.g., jobs in the formal sector)
Comparisons with other countries (e.g., Bangladesh, China, and Vietnam) suggest that India’s apparel industry is characterized by:





Very large proportion of small firms that do not use modern technologies, have low productivity, and pay relatively low wages
Very small proportion of large firms and foreign direct investment (FDI)
Relatively low exports for a country of its size
High degree of subcontracting between small and large firms
Large firms operating many plants of relatively small size
Through our survey, we would like to understand the relationship between the policy and regulatory environment faced by apparel firms and the
performance of the industry. In particular, we would like to understand how the policy and regulatory environment influences decisions of firms
like yours in terms of:






Type of product produced
Market served: domestic traditional; domestic modern; export
Scale of operation
Number and type of workers
o Regular versus contract workers
o Skilled versus less skilled workers
o Older versus young workers
o Female versus male workers
Type of technology: more/less automated.
Extent of subcontracting
PART 1: GENERAL INFORMATION ON FIRM
Section 1. General information on the firm and key life cycle data.
Note: Questions below apply to the entire firm, including all its establishments (plants).
1 In what year did your establishment begin operations? ______(year)
2 What is the current legal status of your firm?
Publicly listed company = 1
Private equity (not listed), limited liability company = 2
Partnership (unlimited liability) = 3
Sole proprietorship (individual) = 4
Foreign Company
Cooperatives
Other (Pl. specify:_________ ) = 5
3 What percentage of your firm is owned by:
a. Private: i. Domestic ___ %
ii. Foreign ___ %
b. Government __ %
c. Other (Pl. specify: ) __%
Total 100%
Where are you located?
SEZ = 1
Integrated Textile Parks (Scheme for Integrated Textile Park) = 2
State Govt. Industrial Parks (Pl. specify state: ________) = 3
Other (Pl. specify state: ________) = 4
4 a. How many establishments (separate factories/plants) does your firm have? ______ (number)
b. Does your firm have holdings, factories/ plants in other countries? ___ (Codes: Yes=1 No=2)
5. a. What are your establishment’s three main products?
b. What percent of your establishment’s total sales is represented by each of these main product lines?
6.a What production process do you follow?
a. Spinning Mill c. Composite Mill
b. Pure Weaving d. Pure processing
(Codes: Yes =1 No=2)
b. How many men’s woven shirts can you produce per machine operator in an 8- hour shift?
___(number)
c. How many men’s woven jeans can you produce per machine operator in an 8- hour shift?
____(number)
7. How has your firm tried to take advantage of MFA phase-out in 2005 and recent de-reservation of certain textile and garment items from the
small scale reservation list? (Codes: YES=1 NO=2)
If Yes… ____________________________________________MFA Phase out__ De-reservation
Increase capacity _____________________________________R11_2a1 ________ R11_2b1
Increase utilization of existing capacity ___________________R11_2a2 ________ R11_2b2
Buy or enter into some kind of production arrangement with a R11_2a3 R11_2b3
foreign/domestic company
If No … ____________________________________________MFA Phase out__ De-reservation
Haven’t factored these events into future plans yet___________R11_2a4 ________ R11_2b4
Unaware about any phase-out or de-reservation issue ________R11_2a5 ________ R11_2b5
8. What are your establishment’s:
Currently
Revenues (Sales)
Total Full-time Employees
Management (includes working
owners/proprietors)
Professionals
Skilled production workers
Unskilled production workers
Total Part-time Employees
Management (includes working
Since
started?
you Last 5 years?
(2008)
Last 10 years?
(2003)
owners/proprietors)
Professionals
Skilled production workers
Unskilled production workers
NOTE the following definitions:
Professionals: Trained and certified specialists outside of management such as engineers, accountants, lawyers, chemists, scientists, software
programmers. Generally, Professionals hold a University-level degree. Includes managers (persons making management decisions), but exclude
supervisors.
Skilled Production worker: Skilled Production workers are technicians involved directly in the production process
or at a supervisory level and whom management considers to be skilled.
Unskilled Production worker: Persons involved in production process whom management considers to be unskilled.
9. What are your establishment’s:
2012 Value in thousands of rupees
Total revenues (sales)
Total purchases of raw material and intermediate
goods (whether used in production or not), including
finished goods for resale
Total energy costs
Total cost of labor, including wages, salaries and
bonuses
Rent on land and buildings
Rent on machinery, equipment, and vehicles
Interest charges
All other costs, i.e.: transport, overhead expenses, etc
Book value of Machinery and equipment
Book value of Land and buildings or leasehold
Book value of Vehicles
Note: Total sales is the value of all sales including manufactured goods and goods the establishment has bought for trading. If a firm makes blue jeans and also
imports blue jeans to sell, total sales is the value of all blue jeans sold, both produced and imported.
Purchase of raw materials and intermediate goods are all the costs of the raw materials and intermediate goods purchased during the year, whether or not
they were used in production
Total cost of labor, including wages, salaries and benefits is the total wages and all benefits, including food, transport, social security (i.e. pensions,
medical insurance, unemployment insurance).
Total Inventory of finished goods held at end of year includes all finished held in inventory on the final business day of the year.
11. What percent of your establishment’s sales in the last year (2012) were:
i. sold domestically _____%
ii. exported directly _____%
iii. exported indirectly (through a distributor) _____%
TOTAL 100%
12. If you export, which are your top three destinations?
PART 2: Regulations and key business decisions (Entry, expansion, exit): A Snapshot
We would now like to understand how existing regulations affect key decisions of apparel sector firms – both small firms and large firms. The
main regulations that are believed to be important for entry, expansion, and exit decisions of firms such as yours are as follows.
SHOW CARD WITH FOLLOWING TABLE RUNNING THROUGH ITEMS AND ASKING RESPONDENT’S VIEW ON: (A) ITS EFFECT
ON THE RESPONDENT; AND (B) OTHERS IN THE INDUSTRY.






Type of product produced
Market served: domestic traditional; domestic modern; export
Scale of operation
Number and type of workers
o Regular versus contract workers
o Skilled versus less skilled workers
o Older versus young workers
o Female versus male workers
Type of technology: more/less automated.
Extent of subcontracting
TABLE 1: Regulations and key business decisions
Key Governing
Regulation(s)
I.Operations
Entry 
licensing &
registration 




Implementing
Authority
Remarks and Hypotheses
(From World Bank colleagues)
Your View
Affected you?
Single
Window
Clearance Acts
Land Revenue Acts
Industrial Promotion
Acts
Industries
(Facilitation) Acts
The Companies Act,
1956
Companies Bill, 2012
States

Central



Single window clearances adopted by
several States in recent years
Implementation varies across States
Industrial promotion and facilitation acts
vary in scope and result in intense
competition among States
Land acquisition, conversion, valuation and
taxation is a massive problem and possibly
the seed of most irregularities in the
bureaucratic machinery
Affected others?
In terms of:





Type of product produced
Market served: domestic traditional;
domestic modern; export
Scale of operation
Number and type of workers
Type of technology: more/less
automated.



Small scale industry
(SSI)
reservations
(added by Rana)
MFA phase out in
2005 relevant to
entry
in
export
markets (added by
Rana)



Contract 
enforcement
and dispute
resolution 



Arbitration
and
Conciliation
Act
(1996)
The Indian Contract
Act (1872)
Sale of Goods Act
(1930)
Hire-Purchase
Act
(1972)
Negotiable
Instrument
Act
(1881)
Central and State




Commercial 
taxes

Income Tax Act
(1961)
Central Sales Tax Act
Central

Under Companies Act, once incorporated,
firm becomes a legal entity at a low capital
threshold (रर1-5 lakhs), with legal limits
and prescribed norms on functioning
Principal legislation for exit
The Companies Bill, 2012, passed in
December 2012, seeks to bring significant
changes in company law. Needed to
address
concentrated
ownership,
widespread use of corporate pyramids and
cross holding of shares which reinforce
dominance of large firms
SSI phased out (Raginee to check) but
some products may still be covered and/or
effects may still be lingering. (added by
Rana)
Enacted to speed up dispute resolution, but
as many as 46 procedures, 1,400+ days,
and costs as high as 40 percent of claims
from filing a case to enforcement.
The law seems to have had limited impact
and backlogs in the resolution of dispute
are substantial
Other Acts under this head are outdated
and a holdover from the license raj. In
addition to modernization and aligning with
international best practices to increase selfreporting and rapid decision-making, they
can be consolidated under other Acts
Criminal proceedings under the Negotiable
Instrument Act hurt small firms in financial
distress harder than most as they usually
do not benefit from protection under the
Companies Act
Small firms with specified turnover levels
are exempt from paying excise tax. Specific
goods also enjoy exemptions or lower



Extent of subcontracting




(1956, Amendments
2001, 2005)
Central Excise Tax
(1944)
Central Excise Tariff
Act (1985)
Service Tax (1994)
State VAT,
Excise Duty, Real
Property Tax, Stamp
Duty and Taxation of
Entry of Goods Into
Local Areas



State and
municipalities


Operational
compliances



Schemes 
Environment
(Protection)
Act
(1986)
Environmental
Impact Assessment
Notification (2006)
Construction permits
Central and State
Micro, Small and
Medium Enterprises
Development
Act
(2006)
Central and State

rates.
Small firms are also not required to
maintain any statutory records, such as
daily stock account of production
Observed as a disincentive to growth
Central and State levies create complex
web of taxation, wasteful tax competition
among States, distortions in location
decisions and, together with high number
of inspections, burden on interstate
movement of goods, especially by road.
VAT rates vary between 1 percent and 12.5
percent across States. With turnover, sales
or purchase thresholds for mandatory
reporting also variable.
Central State Tax (at 2 percent) is levied on
inter-state
movement
of
goods.
Introduction of the GST may address major
tax distortions, but non-tax regulatory
constraints to establishment of a national
market remain.
Compliance costs are high, delays are
endemic and prolonged, and there is a high
level of inspections which requires
management time that could be used
productively in running the firm

State and lower level


MSME Act is key and, while instrumental in
supporting the development of small firms,
incentives provided may also explain the
absence of job growth and the existence of
the so-called “missing middle” in the size
distribution.
Most schemes seem to result in creating
uneven playing field across products,


III.Expansion
Labour 




Factories Act (1948)
Contract
Labour
(Regulation
and
Abolition) Act (1970)
Shops
and
Commercial
Establishments Acts
Employees Provident
Fund Act (1952)
MFA phase out in
2005 relevant to
entry
in
export
markets but Indian
firms may not have
responded due to
labor
regulations
(added by Rana)
Central and State


State





Land 
IV.Exit
Land Acquisition Act
(1894)
Central and State

locations and firm sizes
Laborious paperwork and procedures,
locational and product segmentation
Regulation of working conditions, safety
and health in manufacturing
Registration mandatory for establishments
with ten or more workers if using power or
twenty or more if not using power. Fees
depend on size of establishment, with
penalties high in relation to turnover
Broad latitude for Central Government to
change employment thresholds for
coverage of firms under EPF
Together, major deterrent to expansion of
firms beyond ten/twenty workers
Explains why employment growth has
chiefly taken the form of casual and
contract labour, which avoids falling under
Factories/Industrial Disputes acts
Widespread abuse of contract labour is
causing serious cases of industrial unrest,
but problem lies with Factories Act and
Industrial Disputes Act restrictions
Above may explain why Indian firms may
not have responded in a big way to MFA
phase out in 2005 (added by Rana)
Laborious process of permits and
inspections and high variation among
governing
authorities
in
pricing,
compensation, allotment and dispute
resolution processes, very low floor-toarea ratios in urban areas that cause
perpetual shortages of space for industry
and services







Type of product produced
Market served: domestic traditional;
domestic modern; export
Scale of operation
Number and type of workers
o Regular versus contract workers
o Skilled versus less skilled
workers
o Older versus young workers
o Female versus male workers
Type of technology: more/less
automated.
Extent of subcontracting
Insolvency 


Debt 
Recovery

Labour 
Provisional
Insolvency
Act
(1920)
Presidency
Towns
Insolvency
Act
(1908)
Sick
Industrial
Companies
Act
(1965)
Central and State
Recovery of Debts
due to Banks and
Financial Institutions
(1993)
Securitization
and
Reconstruction
of
Financial Assets and
Enforcement
of
Security Interest Act
2002 (SARFAESI)
State
Industrial Disputes
Act (1947)
Central and State








Limited progress in formulating labour laws
appropriate to MSME, so insolvency
process is complex, governed by archaic
Acts and very lengthy
Firms have virtually no protection to
restructure and work toward solvency,
owners can be prosecuted under several
criminal statutes and all personal assets are
attached during liquidation
Liquidation proceedings can take two-toten years
Virtually any public creditor can seize and
sell assets of a “sick” firm under existing
regulations, selling them in collusion with
bidders
When banks become involved financial and
restructuring options for firm are cut off
either through asset attrition by creditors
or asset stripping by entrepreneur, thus
creating zombie firms
The Enforcement of Security Interest and
Recovery of Debts Laws (Amendment) Bill,
2011 seeks to amend the Securitisation and
Reconstruction of Financial Assets and
Enforcement of Security Interest Act, and
the Recovery of Debts Due to Banks and
Financial Institutions Act. This Bill was
passed in December 2012.
Violates basic ability of medium sized firms
to respond to demand shocks by adjusting
size of workforce and is packaged with
extensive requirements for worker
protection that need modernization
Firms with more than 100 workers need
State Government permission to retrench
or close, which is rarely given as labour
issues are highly sensitive




Possibly deters the expansion of firms
because of the higher adjustment costs
larger firms face during a downturn. Firms
may therefore choose to operate at smaller
scales.
TABLE 1 ALTERNATE: Regulations and key business decisions
Regulations
Key Provisions
Firms effected
Your View
Business
decisions
potentially
effected
Affected
you?
Factories Act,
1948

Regulation
of 
working
conditions, safety
and
health
of 
workers
at
factories
(manufacturing)
Firms with 10+ 
workers (with
power)
Firms with 20+
workers
(without power)
The Contract
Labor
(Regulation and
Abolition) Act,
1970

Regulation
of 
working conditions
of contract workers
including hours of
work, wages, leave
and
termination
policies
Firms with 20+ 
contract
workers
May
disincentive
small firm
from
expanding
beyond
10/20+
workers
May relax 
burden
of
IDA, EPF,
ESIA,
IE
Acts
depending
on:
(i)
definition of
core versus
Affected
others?
periphery
and
(ii)
enforcement
Employees
Provident Fund
Act, 1952

Provision
for 
pensions,
retirement,
discharge or death
benefits
Firms with 20+ 
workers
(without power)

Firms with 10+ 
workers (with
power)
Firms with 20+
workers
(without power)
Firms with 50+ 
workers
Employees State
Insurance Act,
1948

Provision
for
medical, maternity
and other health
related benefits
The Industrial
Disputes Act,
1947

Resolution
of 
disputes, provision
of compensation
on account of
closure
or
retrenchment
Chapter VB: Firms
employing 100 (50
in West Bengal) or
more
workers
require permission
from appropriate

May

disincentive
small firm
from
expanding
beyond
10/20+
workers
May

disincentive
small firm
from
expanding
beyond
10/20+
workers
May

disincentive
small firm
from
expanding
beyond
50/100+
workers

Industrial
Employment
(Standing
Orders) Act,
1946

Central Excise
Tax

government to fire
workers
Section 9A:
21
day notice prior to
changing
work
conditions (50/100
workers)
Firm must define 
the conditions of
employment,
by
way of standing
orders/services
rules and to make
them known to the
workmen
employed.
Registration

compulsory for all
manufacturing
firms, except those
with
annual turnover
not exceeding
Rupees 150 lakhs
Firms with 50+ 
workers (varies
by state and
section)
May

disincentive
small firm
from
expanding
beyond
50/100+
workers
Small
scale 
manufacturing
units
with
previous
financial year
turnover
not
exceeding
Rupees
400
lakhs
and
current
financial year
turnover
not
exceeding
Rupees
150
lakhs
are
exempt
from
May

disincentive
small firm
from
expanding.
paying
tax.
excise
PART 3: Product type, technology, scale of production, and number of workers
We are especially interested in whether and how regulations affect apparel firms’ choice of product type, technology, scale of production,
number of workers, engagement in subcontracting, and number of plants you operate.
Approach 1: Put forward a particular hypothesis and ask the respondent what he/she thinks. For example:
Q1 Data show that apparel firms in India operate smaller plants and hire fewer workers than apparel firms in countries such as China
and Bangladesh. Why is this?
For medium-sized firms
____Labor laws prevent firms with more than hundred workers from laying them off easily (Chapter VB of IDA)
____Labor laws prevent firms from adjusting working conditions and shifts easily (Section 9A of IDA; Industrial Employment (Standing Orders)
Act)
____ Weak infrastructure: energy
____ Weak infrastructure: transportation
____ Other
For small firms
____ Costs (actual and transaction costs) associated with Factories Act provide disincentives for small firms to grow large
____ Costs (actual and transaction costs) associated with Employees Provident Fund Act provide disincentives for small firms to grow large
____ Costs (actual and transaction costs) associated with Employees State Insurance Act provide disincentives for small firms to grow large
____ Weak infrastructure: energy
____ Weak infrastructure: transportation
____ Other
Q2. Some people argue that hiring of contract workers is believed to enable Indian firms to get around tough labor laws. Others argue
that it is difficult to become very large using contract labor alone, given the uncertainties created by the Contract Labor Act. Do you
agree or not?
Q3. Some people argue that the main reason why Indian firms are smaller than international counterparts is a lack of skilled labor.
Others disagree, pointing out, for example, that Indian workers are unlikely to be less skilled than counterparts and country such as
Bangladesh? What do you think?
Approach 2: Asked the following types of questions (from the World Bank’s investment climate service for India, 2005)
10.1What kind of labor shift did this establishment follow in 2004? _ R10_1____
1. Single shift
2. Double shift
3. Triple shift
4. Other: --------R10_1x_
10.2 How many days in 2004 did your plant operate? R10_2 (number)
i) While Producing for exports
ii) While producing for domestic consumption
iii) If you cannot separate the days distinctly
10.3 Do you face any of these constraints in labor contracting? (Codes: 1=Yes; 2=No)
1. Cost/restriction of dismissal -----------------------------------------------------R10_3a
2. Restriction on hiring casual labor -----------------------------------------------R10_3b
3. Restriction on hiring temporary workers ---------------------------------------R10_3c
4. The types of skills we need are not available in the market ------------------R10_3d
5. It takes a long time to find a trustworthy employee ---------------------------R10_3e
6. Others (Please Specify___ R10_3x -----------) -------------------------------R10_3f
11.4.1a At your current level of production, if you could change the number of regular full-time workers you currently
employ without any restrictions (i.e. without seeking permission, making severance payments, required to pay mandatory
benefits, etc.), would you increase, decrease or keep constant your current workforce? R11_4_1a
1. Remain the same -~ (skip to question 11.4.1b)
2. Increase. -~ If Increase, how many would you hire? (number) R11_4_1a2
3. Decrease. -~ If Decrease, how many would you fire? (number) R11_4_1a3
If the answer to 11.4.1a is not 1 (=remain the same), which of the following are the main two reasons? R11_4_1aa (most
important reason) _ R11_4_1ab__(next most important) (show card with alternatives)
i. Anticipated higher sales
ii. Laws and regulations regarding hiring, firing
iii. Union agreements or pressure
iv. Pressure from politicians or political groups
v. Fear of social sanctions
of workers
vi. High minimum wage or mandatory benefits
vii. Other (specify: -------------------------------------
11.5 a Please tell us if any of the following issues are a problem for the operation and growth of your business. If an issue poses a problem, please
judge its severity as an obstacle on a four-point scale where:
0 = No obstacle 1 = Minor obstacle 2 = Moderate obstacle 3 = Major obstacle 4 = Very Severe Obstacle Codes
No obstacle
Degrees of obstacle
A. Telecommunications
B. Electricity
C. Transportation
D. Access to Land
E. High taxes
F. Tax administration
G. Customs and Trade Regulations
H. Labor Regulations
I. Skills and Education of Available Workers
J. Business Licensing and Operating Permits
R11_5aJ 0 1 2 3 4
K. Access to Financing (e.g. collateral)
R11_5aK 0 1 2 3 4
L. Cost of Financing (e.g. interest rates)
R11_5aL 0 1 2 3 4
M. Economic and Regulatory Policy Uncertainty
R11_5aM 0 1 2 3 4
N. Macroeconomic Instability (inflation, exchange rate)
R11_5aN 0 1 2 3 4
O. Corruption
R11_5aO 0 1 2 3 4
P. Crime, theft and disorder
R11_5aP 0 1 2 3 4
Q. Anti-competitive or informal practices
R11_5aQ 0 1 2 3 4
R. Regulation specific to your industry
R11_5aR 0 1 2 3 4
S. Legal system/conflict resolution
R11_5aS 0 1 2 3 4
T. Access to Foreign Technology
R11_5aT 0 1 2 3 4
U. Other (please specify)
V. Price of thread
W. Price of cotton
X. Import of raw materials
Y. Dumping from abroad (ex. 2004 dumping of narrow cloth from China)
Z. Pollution Control Board
11.5. b. Among all of the above alternatives in part a, please indicate and list in order of magnitude the three biggest
obstacles for the operation and growth of your establishment
(i) _ R11_5b1 (ii) __R11_5b2 (iii) __R11_5b3_ (alternative)
11.6 If access to land (option D in question 11.5.a) is an obstacle (minor, major or severe) to the
operations or growth of your business in what way is that the case? (Code: Yes=1, No=2)
a) unsecured land titles generate uncertainty R11_6a
b) problematic and costly registration process R11_6b
c) red tape during the land development process R11_6c
c) Prices R11_6d
1
APPENDIX – From World Bank
Annex II
Detailed List of Regulations
I.
Labor Regulations
1. Conditions of Work
a) Factories Act, 1948
b) Shops and Commercial Establishments Act
c) Contract Labor (Regulation and Abolition) Act, 1970
d) The Mines Act, 1952
e) Beedi and Cigar Workers (Conditions of Employment), 1966
f) Cine Workers and Cinema Theater Workers (Regulation of Employment) Act, 1981
g) The Dock Workers Act, 1986
h) Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1996
i) Building & Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996
j) Unorganized Workers’ Social Security Act, 2008
2. Wages and Remuneration
a) The Minimum Wages Act, 1948
b) Payment of Wages Act, 1936
c) Equal Remuneration Act, 1976
3. Social Security
a)
b)
c)
d)
e)
f)
g)
Employees’ Provident Fund Act, 1952
Employees State Insurance Act, 1948
Workmen’s Compensation Act, 1923
Payment of Gratuity Act, 1972
Employees Liability Act, 1938
The Maternity Benefit Act, 1961
The Personal Injuries (Compensation Insurance) Act, 1963
4. Industrial Relations
a) The Industrial Disputes Act, 1947
b) Industrial Employment (Standing Orders) Act, 1946
c) The Trade Unions Act, 1926
d) The Plantation Labor Act, 1951
Key features of some size dependent labor regulations
Regulations
Implementing Agency
Factories Act, 1948


Key Provisions
Central
legislation 
subject
to
State
amendments
Administered
by 
Labor Department


Regulation of working conditions, safety
and health of workers at factories
(manufacturing)
Registration compulsory for establishments
with a) 10 or more workers with power b)
20 or more workers.
Registration fees dependent on size of
employment
Penalty is maximum punishment up to 2
years or a fine up to Rupees 1 lakh or both
Shops and Commercial
Establishments Act


State legislation

Administered
by
Labor Department


The Contract Labor (Regulation
and Abolition) Act, 1970


Central
legislation 
subject
to
State
amendments
Administered
by 
Labor Department


Employees Provident Fund Act,
1952


Central legislation

Administered through
Employees’ Provident
Fund
Organization 
(EPFO)


Regulation of working conditions of
workers including hours of work, wages,
leave and termination policies in shops and
establishments (trade and other services
mainly).
Registration fees dependent on size of
employment
Penalty is maximum punishment up to 3
months or a fine up to Rupees 250 or both
Regulation of working conditions of
contract workers including hours of work,
wages, leave and termination policies
Registration compulsory for establishment
or contractor with 20 or more contract
workers on any day in the preceding 12
months
Registration fees for obtaining license
dependent on size of employment
Penalty is maximum punishment up to 3
months or a fine up to Rupees 1000 or both
Applies to factories (manufacturing) in
specified industries with 20 or more
persons
Central government has wide powers to
apply the Act to factories with less than 20
persons
Provision for pensions, retirement,
discharge or death benefits
Exemption given to cooperative societies
employing less than 50 workers and

working without power
Penalty is imprisonment (6-12 months) or a
fine up to Rupees 5000
Employees State Insurance Act,
1948


Central legislation

Administered through
Employment
State
Insurance Corporation 
(ESIC)
and
state
government

Applicable to factories (manufacturing)
with a) 10 or more workers with power b)
20 or more workers.
Provision for medical, maternity and other
health related benefits
Penalty is imprisonment (6-12 months) or a
fine up to Rupees 5000
The Industrial Disputes Act, 1947


Central legislation

Administered through 
Labor Department
Covers all establishments across all sectors
Resolution of disputes, provision of
compensation on account of closure or
retrenchment
Firms employing 100 or more workers
require permission from appropriate
government to fire workers

Industrial Employment (Standing
Orders) Act, 1946


Central
legislation 
subject
to
State
amendments
Administered
by
Labor Department

An industrial establishment employing 100
or more workers during the preceding 12
months to clearly define the conditions of
employment, by way of standing
orders/services rules and to make them
known to the workmen employed.
The state government can apply the Act to
any industrial employing less than 100
workers by providing 2 months’ notice

II.
1.
2.
3.
4.
5.
Penalty up to Rupees 5000
Taxation Laws
Central Excise Tax
Service Tax
Customs Duty
Sales Tax/Value Added Tax
Income Tax
Key features of some size dependent tax regulations
Regulation
Implementing Agency
Central Excise Tax


Key Provisions
Central Legislation

Administered by the
Central Board of Excise
and Customs


Registration
compulsory
for
all
manufacturing firms, except those with
annual turnover not exceeding Rupees
150 lakhs
Small scale manufacturing units with
previous financial year turnover not
exceeding Rupees 400 lakhs and current
financial year turnover not exceeding
Rupees 150 lakhs are exempt from
paying excise tax.
Penalty equivalent to the tax due or
Rupees 2000 whichever is higher
Service Tax


Central Legislation

Administered by the
Central Board of Excise
and Customs

Small scale service units with previous
financial year turnover not exceeding
Rupees 10 lakhs and current financial
year turnover not exceeding Rupees 10
lakhs are exempt from paying service
tax.
Penalty equivalent to the tax due along
with interest up to 25% of the tax
amount
III.
Other Regulations/Regulators1
1. Companies Act, 1956
2. Partnership Act, 1932
3. Cooperative Societies Act, 1912
4. Societies Registration Act, 1860
5. Motor Vehicles Act, 1988
6. Road Transportation Corporation Act, 1950
7. Inland Vessels Act, 1917
8. Merchant Shipping Act, 2002
9. Directorate of Education/All India Council for Technical Education (AICTE)
10. Medical Practitioners Act (state legislation)
11. Charitable and Religious Trusts Act, 1920
12. Cinematograph Act, 1952
13. Money Lenders Act (state legislation)
14. Micro, Small and Medium Enterprises Development Act, 1996
15. Small Industries Development Bank of India (SIDBI)
16. Reserve Bank of India (RBI)
17. National Bank for Agriculture and Rural Development (NABARD)
18. Insurance Regulatory and Development Authority (IRDA)
19. Securities and Exchange Board of India
20. Foreign Exchange Management Act, 1999
21. Chartered Accounts Act
22. National Association of Software and Service Companies (NASSCOM)
23. Hire Purchase Act, 1972
24. Contract Act, 1872 (transactions)
25. Competition Act, 2002
1
Including laws covering businesses operating in the services and unorganized sector
26. The Environment Protection Act, 1986
27. Pollution Control Board
28. Sick industries, Sick Industrial Companies (Special Provisions) Act, 1985
29. Municipal Commissioner/Corporation/Local Body
30. Khadi and Village Industries Commission
31. Development Commissioner of Handlooms
32. Development Commissioner of Handicrafts
33. Coir Board
34. Silk Board
35. Jute Commissioner