On July 5, 2025, the Government of Telangana enacted a significant amendment to its labour regulations, effectively permitting commercial establishments to schedule workdays of up to 10 hours at regular pay, with overtime compensation now triggered only after a 48-hour week is surpassed. Justified as a necessary measure to enhance the “Ease of Doing Business” (EoDB) and attract Foreign Direct Investment (FDI), the move has ignited a fierce debate, pitting a vision of corporate flexibility against the century-old fight for worker rights. While the government presents this as a pragmatic step to align with a globalized economy, a deeper analysis reveals that the policy is built on a precarious foundation: a discredited development model that misidentifies the true drivers of investment and ignores the overwhelming evidence linking overwork to diminished productivity and public health crises. This article will argue that by prioritizing a deregulatory “race to the bottom,” Telangana is not only undermining the well-being of its most valuable asset—its human capital—but is also pursuing a flawed strategy that is unlikely to secure the high-quality, sustainable investment it seeks.
Telangana’s Economic Engine and the New Rules of Work
At the heart of this policy change lies Hyderabad, the engine of Telangana’s economy. The city’s burgeoning Information Technology (IT), IT-enabled Services (ITeS), and broad commercial sectors are the state’s economic powerhouse, contributing over 65% of its Gross State Value Added (GSVA). With an IT workforce exceeding 900,000 professionals and generating exports second only to Bengaluru, Hyderabad is a globally significant economic hub. It is home to the largest international campuses of tech giants like Microsoft, Amazon, and Google, making the state’s regulatory climate a critical factor in their operational calculus.
It is precisely this workforce that is targeted by the new law, G.O. Rt. No. 282. The order exempts “commercial establishments” from the standard 8-hour workday rule for overtime calculation. Previously, any hour worked beyond eight in a day was compensated at twice the normal rate. The new framework eliminates this daily threshold. Now, an employee can be asked to work 10 hours a day for five days a week at their regular wage, as overtime is only calculated after the 48-hour weekly limit is breached. This represents a fundamental reclassification of what was once premium-paid overtime into standard work, constituting a direct and significant transfer of value from employees to employers. The government’s framing of this as “flexibility” is misleading; it is not flexibility for the worker, but for the corporation, which can now schedule longer days at a lower cost, effectively normalizing a 10-hour workday and facilitating a “crunch culture” where long hours can be demanded to meet project deadlines without the financial disincentive of overtime pay.
The following infographic effectively shows what the change in the law does.
The Myth of Deregulation: Deconstructing “Ease of Doing Business” and FDI
The core justification for this policy—improving Ease of Doing Business to attract FDI—is rooted in a development narrative that has been empirically challenged and officially discredited. This narrative was largely shaped by the World Bank’s annual Doing Business report, a tool that for years pressured developing nations to weaken labour laws. However, in September 2021, the World Bank permanently discontinued the report after investigations revealed data irregularities and ethical breaches, fatally undermining its credibility. Any policy based on climbing the rankings of this defunct report is, therefore, built on a phantom metric.
Even before its cancellation, the report’s “Employing Workers” sub-index was heavily criticised for its inherent anti-worker bias. Its methodology explicitly penalized countries for having robust worker protections, such as setting maximum weekly work hours, establishing a meaningful minimum wage, or requiring notice for dismissal. The index failed to distinguish between the absence of regulation and the presence of efficient, well-designed regulations that foster stability and equity. It promoted a simplistic and ultimately harmful view that labour rights are an impediment to economic growth.
The notion that diluting labour laws is a primary lever for attracting FDI is not supported by the balance of economic evidence. A broad consensus in academic and institutional research points to a different set of factors as the true determinants of investment decisions, especially for the high-value, knowledge-based FDI that a city like Hyderabad aims to attract.
Investors are primarily drawn to large and growing consumer markets where they can sell their goods and services. Availability of Credit has been an important factor impacting ease of doing business, according to recent research. Ease of getting permits has been identified as an important factor in enabling ease of doing business. Reliable transport, consistent energy supply, and high-speed digital communications are non-negotiable prerequisites for modern business operations. Investors require a predictable environment with low political risk and stable economic policies to protect their long-term assets. A transparent, efficient, and predictable legal system for enforcing contracts and protecting property rights is paramount for investor confidence.
When viewed against these factors, labour law flexibility is, at best, a secondary and often statistically insignificant consideration. For labour-intensive, low-skill manufacturing, low wages can be a draw. But for the service and technology sectors that define Hyderabad’s economy, competing on the basis of longer work hours is a strategic mismatch. It is a “race to the bottom” that devalues the city’s core competitive advantage: its vast pool of highly skilled human capital. Weakening worker protections risks alienating this talent, fostering a culture of burnout, and paradoxically making the state less attractive to the very high-value companies it wishes to court.
The Productivity Paradox: Why More Hours Mean Less Output
The most fundamental flaw in the logic of extending work hours is the assumption that more time spent at work equates to more output. A vast body of scientific research from economics, public health, and management studies refutes this, revealing a non-linear and often inverse relationship between long hours and productivity.
Foundational research from Stanford University demonstrated that productivity per hour declines sharply after an employee works more than 50 hours a week. Beyond 55 hours, the drop is so precipitous that the additional time yields almost no discernible benefit. This “productivity cliff” means that a 70-hour workweek accomplishes virtually nothing more than a 55-hour one. The International Labour Organization (ILO) corroborates this, noting that while gross output may rise in the short term, output per hour steadily decreases with excessive working time due to fatigue, which leads to a higher rate of errors, poorer quality work, and an increased risk of accidents.
This is not merely a theoretical concept. Real-world experiments have consistently validated it. When Microsoft Japan trialed a four-day workweek, it saw a 40% surge in productivity. An extensive trial in Iceland involving shorter workweeks resulted in improved employee well-being alongside equal or even higher levels of output. Historically, Henry Ford’s pioneering decision to reduce the workday to eight hours famously led to a spike in productivity, as rested, motivated workers proved far more efficient.
Beyond the economic inefficiency, policies that encourage overwork are a significant public health concern. A landmark study by the World Health Organization (WHO) and the ILO established that working 55 or more hours per week is a serious health hazard, leading to a 35% higher risk of stroke and a 17% higher risk of dying from heart disease. The report attributed over 745,000 deaths in a single year to the effects of long working hours, framing it as a major occupational risk factor. The health consequences—including hypertension, diabetes, chronic fatigue, anxiety, and depression—translate directly into tangible business costs through higher rates of absenteeism, employee burnout, and increased turnover of skilled professionals.
A Normative Framework for Progress: Working Smarter, Not Longer
The Telangana government’s decision represents a choice between two competing visions of development. The first, embodied by the new amendment, views labour as a cost to be minimized. The second, grounded in evidence, views human capital as the primary engine of sustainable growth. The latter path is not only more equitable but also more effective for achieving long-term prosperity.
The alternative to a low-road strategy of extending hours is a high-road strategy of enhancing the value and productivity of each hour worked. This “Productivity-Welfare Flywheel” creates a virtuous cycle of growth. It begins with investments in technology, automation, and modern management practices that allow employees to work smarter, not longer. This includes streamlining processes, automating routine tasks, and fostering a results-oriented culture that measures value created, not hours logged.
When productivity per hour increases, it allows for better wages and improved work-life balance. This, in turn, enhances worker well-being. Well-rested, motivated, and healthy employees are more creative, make fewer errors, and are more loyal to their employers. This high-productivity, high-welfare environment becomes a powerful magnet for the highest-value FDI and the most sought-after global talent, spinning the flywheel faster and moving the economy up the value chain.
The role of government in this model is not to engage in a deregulatory race to the bottom but to act as a steward of a high-productivity ecosystem. This means investing in infrastructure, education, and R&D, and maintaining fair and stable regulatory frameworks. Corporate responsibility, in turn, extends beyond mere compliance to actively investing in the tools, training, and culture that enhance both productivity and well-being.
In conclusion, Telangana’s decision to extend working hours is a regressive step based on a flawed and outdated economic ideology. It misinterprets the true drivers of foreign investment, ignores the scientific consensus on productivity, and jeopardizes the health and well-being of its workforce. By treating the 8-hour day not as a fundamental right but as a bureaucratic hurdle, the policy threatens to erode the very human capital that has made Hyderabad a global success story. A truly competitive and prosperous future for states lie not in working longer, but in working smarter. It lies in rejecting the false trade-off between worker rights and economic growth and embracing a synergistic model where investing in people is understood as the surest path to lasting productivity and shared prosperity.
(The author is part of the legal research team of the organisation)
Related:
ILO raises deep concern over recent trend of labour law reforms, asks PM to engage with states
New Trade Union Initiative (NTUI) demands that governments retract changes in labour laws
Battle against dilution of labour laws to culminate in Supreme Court?