This paper examines the impact of labor regulation on manufacturing performance in Indian states from 1958 to 1992. The authors find that states that amended the Industrial Disputes Act in a pro-worker direction experienced lower output, employment, investment, and productivity in registered or formal manufacturing, while output in unregistered or informal manufacturing increased. Pro-worker labor regulation was also associated with higher urban poverty. The study suggests that attempts to balance the power between capital and labor can negatively affect the poor. The paper uses econometric analysis to test these hypotheses, controlling for various state characteristics and time trends. The results are robust to different specifications and controls, indicating that labor regulation significantly hinders economic performance in the formal manufacturing sector.This paper examines the impact of labor regulation on manufacturing performance in Indian states from 1958 to 1992. The authors find that states that amended the Industrial Disputes Act in a pro-worker direction experienced lower output, employment, investment, and productivity in registered or formal manufacturing, while output in unregistered or informal manufacturing increased. Pro-worker labor regulation was also associated with higher urban poverty. The study suggests that attempts to balance the power between capital and labor can negatively affect the poor. The paper uses econometric analysis to test these hypotheses, controlling for various state characteristics and time trends. The results are robust to different specifications and controls, indicating that labor regulation significantly hinders economic performance in the formal manufacturing sector.