India's parliament on Friday passed a "historic" law to guarantee a minimum wage to hundreds of millions of workers, but labour activists said it did not go far enough to protect those in the informal sector.

The Code on Wages aims to set standard wages across India, where almost 90 percent of the labor force works in the informal sector with no security, low pay and little or no benefits.

Labour minister Santosh Gangwar said the "historic" bill would for the first time ensure about 500 million Indian workers received minimum pay. Previously, one in three casual workers on daily wages had been excluded, according to official data.

"This will be the first time that all workers who earn daily wages and employed across all sectors will have the right to a minimum wage," a labour ministry official told the Thomson Reuters Foundation, speaking on condition of anonymity.

India's minimum wage is 176 Indian rupees ($3) for an eight-hour work day, but local authorities can set their own lower rate and at least six states do so.

India's upper house passed the Code on Wages Bill, the first of four labour bills designed to replace 44 archaic laws, on Friday evening within three days of it being voted through the lower house.

Speaking in parliament, opposition lawmakers said the bill lacked teeth and failed to guarantee "fair wages" to workers.

"After so many years, our government is still talking about minimum wages and not fair wage. We have missed the opportunity to improve lives of millions of people living in sub-human conditions," said parliamentarian Madhusudan Mistry.

Labour activists said many workers would remain vulnerable to exploitation, particularly those hired through contractors, which is often the case for brick kilns and tea plantations.

Opposition politicians criticised a provision allowing employers to make deductions for staff benefits such as housing, food and travel payments, a practice that has for decades driven workers into debt bondage.

"India is legitimising modern-day slavery. The struggle for bonded labour just got more difficult," said Chandan Kumar, coordinator of labour rights organisation Working People's Charter.