The economic survey tabled on Thursday, a day before the Union Budget presentation, suggested deregulating the labour law restrictions in order to create more jobs.
"Deregulating labour law restrictions can create significantly more jobs, as seen by the recent changes in Rajasthan when compared to the rest of the states," the report presented by finance minister Nirmala Sitharaman in the Parliament said.
No major labour reforms were initiated by the states in a seven-year span from 2007 to 2014, the report noted, adding that Rajasthan was the first state to implement changes which were followed by other states.
"A comparison between the indicators for labour, capital and productivity of manufacturing firms makes it clear that flexible labour laws create a more conducive environment for growth of industry and employment generation," the survey said.
It added that states that are rigid in their labour laws are suffering in all dimensions and are failing to create enough jobs or attract enough capital.
On average, plants in labour-intensive industries and in states that have transited towards more flexible markets are 25.4 percent more productive than their counterparts in states which continue to have labour rigidities, it further mentioned.
