New Delhi, April 15 -- When India enacted its four new Labour Codes, consolidating over 40 central labour laws, the promise was straightforward: simplify compliance, make labour markets more flexible and attract investment. These are worthy goals.

But for the Codes to deliver on that promise, they should be accompanied by a reform that has been conspicuously absent from the conversation: a properly designed, state-sponsored unemployment insurance system. Without it, the Codes will continue to impose costs on the wrong parties, distort company behaviour and leave workers exposed to financial precarity in every business-cycle downturn.

Most developed market economies have long understood this. Insurance cover for joblessness is seen as a ...