The newly introduced Labour Codes are expected to create a mixed impact on India’s garment manufacturing ecosystem, according to Rahul Mehta, Chief Mentor of the Clothing Manufacturers Association of India (CMAI). With the sector dominated by micro and small enterprises, the regulatory changes will bring both relief and new challenges for apparel producers across the country.

Mehta noted that one of the significant advantages for units employing fewer than 300 workers is the removal of the requirement for prior government approval for lay-offs and retrenchments. “This will be beneficial for the majority of garment factories, which typically fall under the micro and small category, giving them much-needed flexibility in managing workforce requirements,” he said.

However, he cautioned that other provisions could tighten operational constraints. The restriction on using contract labour for ‘core’ activities may impact garment units that heavily depend on contract or piece-rate workers for essential functions such as stitching, checking, and finishing.

“For labour, this is a positive move as it will increase formalization and safety net,” Mehta added, highlighting that the Codes aim to bring greater structure and security to the workforce within the sector.

As one of India’s most labour-intensive industries, the garment sector will need to evaluate how best to balance the newfound flexibility with the challenges of compliance, especially as companies navigate core activity definitions, contract workforce dependencies, and the transition to more formal labour structures.

CMAI, representing thousands of garment manufacturers nationwide, continues to assess the broader implications of the Labour Codes and will work closely with stakeholders to ensure that the sector adapts smoothly while safeguarding growth and employment.