States, UTs to be ranked on labour welfare steps

New Delhi: The Ministry of Labour and Employment will start publishing an evaluation index that will benchmark states and union territories on inclusiveness, efficiency, and innovation in implementing labour welfare measures, said a senior government official.

Starting 2026, the annual composite index will rank states on key indicators including social security coverage, reduction in accidents and grievances, female labour force participation, formalisation levels, and innovation in delivery, the official, aware of the deliberations, told ET.

"Labour and Employment Policy Evaluation Index (LEPEI) will also track the extent of compliance by states to labour laws, equity in distribution of benefits to all categories of workers, and the effectiveness of labour welfare measures being implemented across states," the official said.

The index is also likely to help draw investments into states with the highest rankings, reflecting their labour friendly policies and ease of compliance, the official added.

The ministry expects the index to foster competitive and cooperative federalism and motivate states to improve administration and replicate best practices. Annual rankings published by the index are aimed at helping authorities make the required policy interventions to further improve worker welfare.

High-performing states and districts will also get performance-linked grants to further improve the labour environment, the official said.

The index will rely on a new digital backbone called the Labour and Employment Stack, which will integrate worker identities, enterprise databases, and social security entitlements for paperless governance within the Centre and states.

The state-specific data and subsequent ranking is expected to feed into country-level data tracked by the International Labour Organisation (ILO) through the ILOSTAT database on key labour market statistics including unemployment rate, wage rate.

The labour ministry will also develop state-level digital dashboards that will capture data on key performance indicators and will be directly linked to the national labour database for seamless flow of data while eliminating manual reporting delays.

This data is expected to identify regional disparities, forecast needs, and generate evidence-based insights, prompting states to shift governance from process compliance to tangible results to improve rankings.