Globalization, Labour Market Institutions, Processes and Policies in India

Essays in Honour of Lalit K. Deshpande

K.R. Shyam Sundar, K.R. Shyam Sundar, K.R. Shyam Sundar

• Publisher: Palgrave Macmillan
• Year: 2019
• ISBN:
  9789811371110
• Topic: Economía
• Subtopic: Economía laboral

This book explores the effects of product market and labour market reforms on firms, labour institutions and labour rights in the economic and industrial relations system in India. India has over the years liberalized its economy through a broad range of reforms concerning the product market and complementing these it has also sought to reform the labour market and the industrial relations system. The book assesses the impact of these reforms on both the formal and informal labour markets in India, critically examines the labour processes and uncovers/describes precarious conditions of labour in various industries and occupations, and analyzes the dynamics involved in the making of industrial, employment and labour policies in contemporary India.

© The Author(s) 2019

K.R. Shyam Sundar (ed.)Globalization, Labour Market Institutions, Processes and Policies in Indiahttps://doi.org/10.1007/978-981-13-7111-0_1

Begin Abstract

1. Introduction: Towards an Understanding of Informality and Precarity and of Some Institutional Developments and Challenges in Labour Markets and Industrial Relations in a Globalizing India

K. R. Shyam Sundar¹

(1)

Professor, HRM Area, XLRI, Xavier School of Management, Jamshedpur, India

K. R. Shyam Sundar

Email: [email protected]

Keywords

GlobalizationLabour institutionsLabour law reformsIndiaInformalityPrecarity

End Abstract

1 The Institutional Framework of Labour Markets and the Industrial Relations System

Independent India sought to secure faster economic progress through economic planning. Economic planning strategized a significant role for the state and its institutions. State intervention was preferred to market-led growth model in the product market and to collective bargaining model in the industrial relations system (IRS) in India. Fierce nationalism and the need for speedier economic progress defined the role of labour in economic development as one of the nation builders, as one who would eschew sectional interests to espouse the cause of national interest. The industrial and the labour policies designed during the years immediately after political Independence envisaged state intervention in industrial economy via industrial licensing and other instruments and also in the IRS in order to usher in speedier economic progress and to ensure industrial peace (Shyam Sundar 2009).

During the planning, a kind of implicit social pact between state, capital and labour at least concerning the organized sector was obtained. State would extend organizational legitimacy to trade unions and provide labour welfare via a host of labour legislations; it would enable supply of disciplined and committed workforce to the firms. In exchange, labour and capital would accept state intervention and ensure industrial peace and industrial growth. The relations between state, capital and labour were accordingly structured. In the process of ‘regulation accumulation’ the state and its instrumentalities like the legislature, the labour administrators (such as the labour inspectors) and the judiciary expanded their scope and coverage of intervention. In India, state has determined the procedural and substantive rules of the IRS through labour laws, whereas in countries that have adopted voluntarism model, collective bargaining supplemented by mediation and voluntary arbitration determines such rules (Deshpande 1992).

The legal framework of the IRS has been determined in accordance with the International Labour Organization (ILO) instruments (comprising Conventions and Recommendations) and the Constitution of India, 1950. Though the Constitution assures freedom of association and unions as a fundamental right under Article 19(1)(c), but the complementary rights or rights derived from the former right such as the right to strike or the right to trade union recognition are not elevated to the status of a fundamental right. The Directive Principles of State Policy constitute the aspirational goals of Indian Society and hence provide directions to policymakers and judiciary. They include right to work, living wage, equal pay for equal work, workers’ participation in management and so on. Under the Constitution, ‘Labour’ figures in the Concurrent List, which means that both the central government and the state governments can enact laws subject to the condition that in the event of conflict between the laws passed by both the law enacted by the Centre will prevail over the state; however, the state governments can pass amendments on the same subject which are different from those of the central law if they secure the assent from the president.

As a result of the aforementioned Constitutional arrangement, reportedly 44 central labour laws and hundreds of state-level laws apart from hundreds of judicial decisions (which constitute case laws and become governance instruments), govern the IRS and labour market actions in India. The central labour laws cover aspects relating to (a) safety and conditions of work in factories, (b) industrial relations, (c) wages and other aspects of compensation and (d) social security. The three main labour laws that concern us here are, the Trade Unions (TU) Act, 1926, the Industrial Disputes (ID) Act, 1947 and (d) the Contract Labour (Regulation and Abolition) (CLRA) Act, 1970.

The TU Act provides for voluntary registration of trade unions and extends a set of rights (immunity from civil and criminal conspiracy) and liabilities (e.g. governance aspects of a trade union) but does not provide for compulsory recognition of trade unions for collective bargaining purposes. The ID Act has created institutions like works committee, grievance redressal cell, collective bargaining, conciliation, court of inquiry, voluntary arbitration and compulsory adjudication (labour courts and industrial tribunals) to prevent and resolve industrial disputes. It also seeks to regulate strikes and lockouts, especially in public utilities. More importantly, it requires industrial establishments (only registered factories, mines and plantations) employing 100 or more workers to secure prior permission from the appropriate government (apart from serving notices to trade unions and workers as relevant) before effecting layoff and retrenchment of workers and closure of establishments, and provide compensation as provided for in the Act. This has been a contentious provision as we see later. The CLRA Act primarily provides for abolition of contract labour under certain conditions (as stipulated under Section 10 of the Act) and regulates the welfare facilities concerning contract labour.

2 Labour Markets in India

It is well established that labour market in India is not only large, comprising approximately 500 million workers but deeply segmented, but it is segmented on the basis of gender (which is not unusual in any country as Papola 2013 points out) and other features which are unique to India, such as caste, religion, geographical origin (rural and urban) and cultural and linguistic features (see Deshpande 1983; Papola 2013). But segmentation of labour market on the basis of regulatory (labour laws or trade unions) coverage is unique to India and has been a subject of extensive debate—one with which this book is also concerned. As we noted earlier the legal framework in India is quite complex in terms of its coverage. Prof. L.K. Deshpande carried out a seminal work on labour market in Mumbai during the mid-1970s which brought out in a clinching manner the segmented (rural/urban origin) nature of it (Deshpande 1983) (Table 1.1).

Table 1.1

Total employment by sectors, 2011–12

Economic activity/sectors	Employment (in millions)	% Share
Agriculture	231.9	48.89
Manufacturing	59.8	12.61
Non-manufacturing	55.3	11.66
Services	127.3	26.84
Total	474.3	100.00

Source: Mehrotra et al. (2014, Table 1)

Note: Employment count is based on the usual principal and subsidiary status (UPSS) approach (see GoI 2014 for definitions). Non-manufacturing sector includes construction, electricity, gas and water supply

We see from Table 1.1 that agriculture accounted for nearly half (48.89 per cent) of the workforce in 2011–12 (the latest year for which we have the data), while the manufacturing (organized and unorganized) and the non-manufacturing sectors employed 12–13 per cent each, and the services sector little more than one-fourth (26.84 per cent) of total workforce. The open unemployment rate in 2011–12 was estimated to be 10.6 per cent (Mehrotra et al. 2014, Table 1). The most important segmentation of labour market is the so-called division variously called as organized and unorganized or formal and informal (Table 1.2).

Table 1.2

Distribution of employment in various sectors by matrices of organized/unorganized and formal/informal (figures unless otherwise mentioned, in millions)

Sectors	Organized		Unorganized		Total		Overall
	Formal	Informal	Formal	Informal	Formal	Informal	(6) + (7)
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Agriculture	0.5	17.7	0.1	213.6	0.6	231.3 (99.74)	231.9
Manufacturing	6.1	14.6	0.4	38.7	6.5	53.3 (89.13)	59.8
Non-manufacturing	2.7	19.7	0.2	32.7	2.9	52.4 (94.58)	55.3
Services	24.2	16.1	1.2	85.8	25.4	101.9 (80.05)	127.3
Total	33.5	68.1	1.9	370.8	35.4	438.9 (92.54)	474.3

Source: Mehrotra et al. (2014, Table 4)

Note: Figures in parentheses in column (7) refer to percentage of informal employment in the total employment in each sector. The definitions of informal sector and informal worker correspond to the definitions given by the National Commission on Enterprises in the Unorganised Sector (NCEUS) (see Mehrotra et al. 2014, 57 for the definitions)

The predominance of informal employment (informal in the organised plus informal in the unorganized sectors) is evident in all the sectors though its share is slightly less in the service and the manufacturing sectors. In the economy as a whole, informal employment accounted for 92.54 per cent. Most labour laws apply to the manufacturing sector, and we see here that it could at best cover 10 per cent of total employment in this sector. According to Papola et al. (2008), the proportion of workers eligible to be covered (as per laws’ definition on coverage of workers) in the total workers estimated in 1999–2000 was the highest, that is, 38.1 per cent in the case of the Minimum Wages Act, 1948, and for all other important laws, it ranged from 2.2 per cent to 10.5 per cent. Seen in terms of the status of workers, the self-employed workers constituted a little more than half (52.2 per cent) of the total workforce in 2011–12, while the casual workers 29.92 per cent and the regular workers 17.86 per cent. We see that informality is already built into the labour market in terms of ‘non-coverage’ of most of the workers by any applicable labour laws and in this sense it is a fundamental governance failure.

The tremendous rise in the share of contract workers in the total employment in the post-reform period reveals informality (often referred to as ‘contractualization’) also in the organized factory sector in India (see the Fig. 1.1).

Fig. 1.1

Percent share of contract workers in total workers in the organized factory sector, 1990–91 to 2013–14. Source: Various issues of the Annual Survey of Industries, Ministry of Statistics and Programme Implementation, Government of India

3 Post-reform Period, 1991 Onwards

In a concrete sense, economic reforms concerning domestic and external economic aspects began since 1991. The economic reforms came to be introduced under duress as India secured financial assistance under the structural adjustment programme (SAP) loan facility from the International Monetary Fund (IMF) which imposed conditionalities covering fiscal, monetary, trade and labour market governance. These conditionalities are built on the premises of a ‘neoliberal perspective’ which calls for deregulation in the product and the labour market apart from calling for state retrenchment. (see Shyam Sundar forthcoming, for a full discussion of these aspects). In the domestic economy it simply means complete liberalization of the product market and privatization, and on the external front it includes measures like free trade and investment (both portfolio and productive). With respect to the labour market it means liberalization of labour laws and labour market governance. In a basic sense these affirm the neoliberal idea of globalization. (see Das 2015; Patnaik 2014). There exists revisionist as well as augmented versions of neoliberalism which are based on the Washington and the post-Washington Consensus (see Shyam Sundar forthcoming). More importantly, neoliberal perspectives argue that labour institutions such as labour laws and other regulations, trade unions and collective bargaining, etc. impose ‘rigidities’ on the working of the market forces and thereby produce adverse outcomes in the labour market such as unemployment and rise in informality, which eventually hurt economic growth, and these in turn affect workers’ welfare (e.g. see OECD 1994; Besley and Burgess 2004). So, neoliberal agenda, among others, calls for flexible labour market and weakening of collective institutions and in a sense restoration of class power in favour of capital (see Coates 1999; Patnaik 2014; Harvey 2007; Das 2015).

Employers (both domestic and foreign), pro-market academics and the global financial institutions have exerted tremendous pressure on the government to introduce labour laws and governance (inspection and administrative) reforms. Specifically, their demands are broadly the following: amend the labour laws to provide freedom to hire (contract labour for all activities, irrespective of whether they are core or non-core, fixed-term employment, etc.) and fire (remove the clauses providing for prior permission from the government for retrenchment of workers and closure of firms), and to enable employers to freely take decisions on work organization like introduction of new technology, liberalize inspection system to remove corruption and harassment and simplify labour administration (records maintenance and returns submission to the government), and simplify and codify numerous labour laws (e.g. see FICCI-AIOE 2005; Shyam Sundar 2015, 2018a).

The government has been convinced that reforms of labour laws and governance are necessary for two reasons. It has clearly accepted the arguments of global financial institutions like the World Bank that such reforms will, among others, promote ease of doing business in the economy to attract foreign investment and promote employment. This argument has received academic support which has faulted labour institutions such as labour laws, trade unions as imposing ‘rigidities’ in the free working of the market forces and as obstructing employment generation (e.g. Fallon and Lucas 1991; Besley and Burgess 2004 (BB); Ahsan and Pages 2009), though these studies have been challenged (Bhattacharjea 2006; Guha 2009; Sarkar and Deakin 2011; Deakin and Haldar 2015). For example, Sarkar and Deakin have shown that labour laws (including their amendments) are in fact institutional ‘responses’ to wider economic factors (say unemployment) rather than the obverse of it (Deakin and Haldar 2015). It is important to note that while a stream of macro-econometric studies that were conducted since the 2000s followed the BB methodology and arrived at conclusions which are not materially different from those of BB despite the so-called revisions in the BB methodology done in response to strident criticisms by Bhattcharjea, among others, much of the Labour Econ...

Table of contents

• Cover
• Front Matter
• 1. Introduction: Towards an Understanding of Informality and Precarity and of Some Institutional Developments and Challenges in Labour Markets and Industrial Relations in a Globalizing India
• Part I. Mapping and Understanding Informal Labour
• Part II. Profiles of Informality and Precarity: Industry and Occupational Studies
• Part III. Understanding Industrial Relations and the Dynamics of Trade Unions and Workers’ Organizations
• Part IV. Jobless Growth, Industrial and Employment Policies and Labour Law Reforms