India's decision to have a planned economy or the state controlled economy gave birth to the Licence Raj. Licences were given to a select few. Up to 80 government agencies had to be satisfied before private companies, the production of which was to come under government regulation.
The License Raj-system was in place for four decades. The reform policies introduced in after 1991 removed many of these restrictions but Indian labour laws still prevent manufacturers from reducing their workforce without prohibitive burdens.
The labour sector of the Indian economy consists of roughly 487 million workers. Of these over 94 percent work in unincorporated, unorganised enterprises. The organised sector includes workers employed by the government, state-owned enterprises and private sector enterprises. In 2008, the organised sector employed 27.5 million workers, of which 17.3 million worked for government or government owned entities.
Labour in India
Now look at the table that shows how poorly India is ranked in terms of busines climate: