Sri Lanka can drive investment through labour reforms: Invest India former CEO

• Former Invest India CEO Deepak Bagla says global investors see labour laws and skills as top concerns when investing
• Praises Sri Lanka’s skilled workforce but urges better, modern labour regulations
• Highlights India’s success by simplifying 50,000 outdated rules under “Make in India”; notes India’s global ease-of-doing-business ranking improved dramatically via reforms
• Says uniform rules across provinces help boost investor confidence; urges strong enforcement, fair worker protections and modern dispute resolution
• Suggests using technology to speed up labour dispute processes
• Proposes Sri Lanka to leverage diaspora for investment, skills and networks
• Opines incentives alone insufficient, competitiveness must stem from productivity gains
• Points to apparel sector as successful example to build on other sectors

By Charumini de Silva

Invest India former Managing Director and CEO Deepak Bagla recently stressed that effective labour reforms are essential for Sri Lanka to attract foreign direct investment (FDI) and export development strategy to its export sector.

Delivering the keynote address at a webinar jointly organised by the Daily FT, Association of Chartered Certified Accountants (ACCA), the International Chamber of Commerce Sri Lanka, Women in Management (WIM), SLASSCOM, the Sri Lanka Institute of Directors, the MBA Alumni Association of the University of Colombo, and the Employers’ Federation of Ceylon, Bagla drew on India’s own experience in easing labour regulation to highlight the powerful link between labour market reform, productivity, and investor confidence. 

“Whenever we engaged with global investors, questions on labour laws and skill availability consistently ranked among the top three concerns when making investment decisions—even above issues such as economic growth or geopolitics,” he said.

He acknowledged Sri Lanka’s strong skill base as a comparative advantage in the region, noting that if this was supported with progressive labour regulation and a predictable operating environment, the country could unlock far higher productivity and competitiveness.

“Labour productivity, efficiency, and mobility are fundamental to a country’s competitiveness,” he noted.

Drawing on India’s outreach to its global diaspora, Bagla said Sri Lanka could do far more to mobilise its overseas community, many of whom hold influential positions worldwide.

“Prime Minister Narendra Modi made engaging the Indian diaspora a major priority, ensuring they were connected with the local economy in practical ways. Sri Lanka, too, can adopt a similar approach to unload resources, networks, and expertise,” he said. 

Drawing on India’s own reforms, Bagla highlighted how complex, outdated, and fragmented labour laws had once hindered investments there, whilst elaborating on how simplifying and modernising labour laws as well as enforcing them effectively had a direct positive impact on their FDI inflows, economic growth, and job creation. 

“India overcame these obstacles through extensive reforms, which included reviewing and revising over 50,000 policies, regulations, and rules under the flagship ‘Make in India’ and Ease of Doing Business missions launched in 2014,” he said.

Bagla pointed out that this move significantly improved India’s global rankings and reputation as one of the fastest growing economies in the world. “The dramatic improvement in FDI flows helped India’s World Bank Ease of Doing Business ranking from the 140s to the 60s within just 36 months—an unprecedented feat for a large economy,” he recalled.

Bagla also shared examples from India’s retail sector, where archaic labour laws had previously barred women from working past 8 p.m., adding that this prevented the sector from extending working hours and undermined job creation. “Policymakers were persuaded to update the laws and this opened up night-shift opportunities for women, improving both employment and productivity,” he said.

He urged Sri Lanka to focus on three essential pillars of simplification of laws and consistency across provinces, strong enforcement capacity, and worker welfare and social security. 

“Having different rules between provinces or localities could discourage investors. Thus, having one format framework or an aspirational model across the country helps boost investments with a clear compliance guideline,” he added.

Bagla pointed out that policies alone would not suffice without effective enforcement, which requires training, capacity building, and modern inspection methods. “Reform must also balance employer flexibility with fair worker protections and dispute resolution mechanisms to ensure worker welfare and security,” he stressed.

In addition, he asserted that modern dispute resolution should leverage technology to speed up processes, extend coverage to rural and remote areas, and build trust in the system. 

He highlighted that policies supporting skill development, such as India’s National Skill Development Corporation, were critical to improving worker mobility and employability. “When workers feel included in reforms and can be upskilled and reskilled, they help drive the change rather than resist it,” he emphasised.

He stressed that modern dispute resolution should leverage technology to speed up processes, extend coverage to rural and remote areas, and build trust in the system.

Further, Bagla highlighted how India used its National Skill Development Corporation to scale up skills for millions of workers, raising their employability while supporting industry needs. “When workers feel included in reforms and can upskill, they help drive the change rather than resist it,” he emphasised.

He also explained India’s innovative use of startups and crowdsourced ideas to develop and execute reforms, citing how grand challenges issued by the Government brought fresh thinking to policy problems, including labour law modernisation. “The same ecosystem of innovation can help Sri Lanka by encouraging policymakers to use technology and entrepreneurship as tools to co-create solutions,” he added.

Bagla opined that instead of focusing too much on incentive-led investment strategies, Sri Lanka should focus on boosting productivity, competitiveness, and its own strengths. 

“While incentives can help attract investment in new sectors where infrastructure or systems have not yet matured, they are not a sustainable long-term solution. Ultimately, competitiveness must come from productivity gains through skills, efficient infrastructure, and a robust economy,” he added. 

He opined that Sri Lanka has significant untapped strengths. “Sri Lanka’s skill availability is excellent and the diaspora is one of your biggest global assets. These are tremendous positives to build on,” he noted.

Bagla also reminded that the country has already created internationally recognised success, particularly in the apparel sector. “The ‘Made in Sri Lanka’ label is globally respected, especially in ready-made garments. Thus, Sri Lanka should analyse how those sectors thrived and replicate their success factors in other export industries to develop the export strategy,” he said. 

He stressed that technology and India’s thriving startup ecosystem had played a key role in designing and executing policy reforms, including crowdsourcing ideas and scaling up solutions rapidly. “Platforms enabling faster dispute resolution and regulatory enforcement were particularly impactful,” he added.

Bagla urged Sri Lanka to similarly adopt a 360-degree approach that combines simplifying regulations, enforcing them effectively, protecting worker welfare, and enabling skills development. “Only then would the country be able to realise higher levels of productivity and competitiveness that attract sustainable investment and expand export capacity. 

He expressed optimism that Sri Lanka could benefit from best practices while tailoring solutions to its own needs and challenges. “The world is watching and Sri Lanka has everything it needs to succeed, provided it can create a modern, efficient, and fair labour market,” he stressed.