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2013 38: 373Management and Labour StudiesChetan Agrawal

The Effects of Liberalization on the Indian Economy: A Labour Force Perspective

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Article

The Effects of Liberalization on the Indian EconomyA Labour Force Perspective

Chetan Agrawal

Abstract

In order to acquire a seat at the highest table and to deal with a severe balance of payment crisis, India began a process of economic liberalization in 1991. The liberalization process has impacted the con-ditions of Indian labour in the organized and unorganized sectors, both big and small, with regard to factors such as wages, labour welfare, trade unionism, social security, employability, labour utilization, job security, labour flexibility, employment growth and industrial disputes. This study has the follow-ing two main objectives: (i) to carry out a comparative study of the conditions of Indian labour in the pre- and post-liberalization era with regard to the above-mentioned factors; and (ii) to carry out an empirical study to test the claims made by the Indian government and noted authors regarding the effect of liberalization on the Indian workforce. The comparative study shows that drastic changes have occurred both in the mindset and the conditions of Indian labour due to the initiation of economic reforms in 1991. This has made government and business address issues such as welfare, social security and labour flexibility that were previously neglected. For the empirical study, surveys, interviews and secondary analyses were conducted, and the results clearly showed that the conditions of Indian labour after economic liberalization have improved with regard to wages, productivity and industrial disputes. However, disappointment was expressed by the respondents with regard to labour welfare, social secu-rity, employment growth, human resources development and management and trade union membership. The reasons given for the lack of progress range from a lack of political consensus to poor governance at the political and the administrative levels. India is a young country with an aging economy and in order to benefit from the economic reform, it has to ensure a balance between the market economy and the interests of Indian labour as a whole and develop and apply a set of regulations within which the market economy can work.

Keywords

Indian labour, labour, liberalization, economic liberalization, organized sector, unorganized sector

Introduction

Abraham Lincoln, in his first annual message to Congress on 3 December 1861, said, ‘Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had

Management and Labour Studies38(4) 373–398

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374 Chetan Agrawal

not first existed. Labor is the superior of capital, and deserves much the higher consideration.’ Centuries have passed since then and yet, labourers in most part of the world have not received due consideration from all sections of society. Media reports are replete with accounts of the deplorable situation of workers around the world and India is no exception.

India had a large industrial base at the time of independence in 1947 which was substantially diversified from the mid-1950s to the end of the 1960s under the government’s heavy industrialization strategy. Labour and domestic industry were protected in India’s own labour markets and product markets, respectively. Therefore, when compared to the rest of Asia, India’s growth was slow and its industrial, economic and political significance in the region and the world declined (Basu, 2005; VenkataRatnam, 2005).

Later, in 1991, during a severe balance of payment crisis, the government introduced economic reforms. The proponents of the reforms argued that the reforms would lead to all-round development and finally, Indian workers would get their due share. However, two decades since the reforms were introduced, income inequality has increased. When compared to yesteryear, improvements in the condi-tions of the ordinary Indian worker are evident but the situation is far from what was promised (VenkataRatnam, 2005). The suicide of nearly a quarter of a million Indian farmers since 1995 is a stark portrayal of the economic catastrophe that the country has undergone since independence.

The central aim of this article is to investigate whether the conditions of Indian labour have improved post-1991, during the economic liberalization era, as promised by the proponents of economic reforms. The conditions of Indian labour will be studied with regard to several factors such as wages, industrial disputes, employment growth and labour flexibility, working hours, welfare, social security, job security and unionism. The next section briefly discusses the changes in the occupational distribution of the workforce. Then, the features of the Indian economy will be discussed in the pre- and the post-liberalization periods. Government policy will also be examined with respect to the given points.

Occupational Distribution of the Workforce and their Contribution to GDP

It is difficult to make generalizations about the profile of the Indian industrial workforce because of its diversity (VenkataRatnam, 2005). According to the Labour Force Profile 2008, published by the Government of India, only 13 per cent of the workforce is in regular waged employment. Six per cent of the overall workforce is in the organized sector and four per cent is unionized. The majority (92 per cent) of India’s labour force is in the unorganized sector and 55 per cent of those are self-employed. It should also be noted that 74 per cent of the population is literate.

India has a population of around one billion, of which the workforce is an estimated 487 million. The agriculture sector has engaged the majority of the country’s workforce in both the pre- and post-liberalization era. About 52 per cent of the country’s workforce continues to be employed in the agriculture sector but contributes less than 18 per cent of gross domestic product (GDP). The post-reform period witnessed a rise in the contribution of the service sector to around 56 per cent of GDP and employs around 34 per cent of the workforce. Nearly 14 per cent of the workforce is engaged in the industry sector and contributes around 26 per cent of GDP (Tendulkar, 2003). The agriculture sector, which contains nearly 52 per cent of the workforce, is expected to grow but without any significant




The Effects of Liberalization on the Indian Economy 375

increase in employment. Moreover, global competition and the use of modern technologies are also reducing employment intensity in the industry sector. The service sector is likely to be the source of the major share of new job creation (Tendulkar, 2003).

Economic Liberalization and Employment

The major concern in India is that the acceleration in the growth of GDP in the post-reform period has not been accompanied by a commensurate expansion in employment. Moreover, employment in the public sector is expected to fall as the public sector withdraws from many areas. There are fears that the processes of internal liberalization and globalization are creating an environment which is not suitable for an expansion of employment in the organized private sector. Industrial units are shedding excess labour in order to remain competitive. New technology, which is necessary to remain competitive, is typically more automated and therefore does not lead to job creation. These factors could result in a very slow expansion of the employment opportunities in the organized sector (Bhalotra, 2002). The Planning Commission set up a task force on employment under the Chairmanship of Mr Montek Singh Ahulwalia1 to study the employment and unemployment situation in the country and to propose strategies for employment generation to achieve the target of providing employment opportunities to 10 million peo-ple over the next 10 years (Planning Commission, 2001). The task force submitted its report in July 2001 but failed to recommend a strategy that could achieve an annual average growth rate of 10 million jobs as specified in its terms of reference (Planning Commission, 2001). The task force basically suggested that total responsibility for employment generation should be placed in the hands of the corporate sector. The report was sharply criticized by sociologists, economists, policymakers and trade union leaders. The Planning Commission did not formally reject the report but sidelined it completely by setting up the S.P. Gupta Special Group on Targeting 10 Million Employment Opportunities on 5 September 2001. The Special Group recommended that in order to meet the Planning Commission’s employment goals, the use of labour-intensive and capital-saving technology should be encouraged. Further, there is a need to rejuvenate the growth of the unorganized sector which, at present, accounts for more than 92 per cent of the country’s employment. However, there is also a need to make the unorganized sector more produc-tive, so that it can sustain itself in the face of domestic and international competition through the proper choice of programmes and policies that are compatible with India’s economic reforms and the rules of the World Trade Organization (WTO) (Bhalotra, 2003; Datt and Sundharam, 2006).

Labour Welfare

Labour welfare is both conceptually and operationally a part of social welfare (Bhattacharya, 2008; Madhumathi and Desai, 2003). The International Labour Organization (ILO) includes under the term ‘labour welfare’:

Such services, facilities and amenities which may be established in the vicinity of undertakings to enable the persons employed therein to perform their work in healthy and congenial surroundings and to provide them with amenities conducive to good health and good morals. (Kumar and Kruthiventi, 2003: 4)




376 Chetan Agrawal

Labour welfare started in India in the pre-independence period but it was with the dawn of independence that the measures of labour welfare were intensified (Kumar and Kruthiventi, 2003; Srivastava, 2005).

In the First Plan period, 1951–1955, the total expenditure on labour welfare programmes was 16 mil-lion Indian rupees (INR), which was increased to INR 333 million in the Seventh Plan period, 1985–1990 (Goyal, 1995). In the post-reform period (1991 onwards), the expenditure on labour welfare was further increased to INR 1,050 million in 2001–2002 and INR 1,220 million in 2004–2005. A similar momentum in the post-reform period has occurred in central government expenditure on social services, which increased from 5.57 per cent in 2006–2007 to 7.34 per cent in 2010–2011 as a proportion of GDP (Singh, 2012).

Although a series of laws (for example, Employees’ State Insurance Act 1948, Provident Fund and Miscellaneous Provisions Act 1952 and the Payment of Gratuity Act 1972) have been passed to promote the welfare of the labour force, only limited success has been realized. The labour administrators2 have only focused on putting forward new legislative measures every year without paying attention to their implementation and proper execution. The current conditions of Indian labour represent a major intel-lectual failure—a failure to appreciate that overprotection of labour may ultimately do harm. In Southeast Asian and East Asian countries where employment and wages have risen, there are fewer protective laws in comparison to India (Basu, 2005). In India, there is a need for proper execution of existing laws rather than the introduction of a series of laws that are improperly executed. The other main reasons for the deterioration of labour welfare conditions are the apathetic attitude on the part of management and the illiteracy and lack of awareness about their rights on the part of workers. The situation is further aggravated by an inspection policy that is either corrupt or poorly executed (Basu, 2005).

The present infrastructure for ensuring the welfare of workers covers only a very small section of the labour force. By and large, there are no social security provisions for workers in the unorganized sector who constitute around 93 per cent of the Indian workforce (Ministry of Labour and Employment, 2011).The objective of the Eleventh Plan (2007–2012) was to increase the coverage of labour market institu-tions. However, certain recent trends make the attainment of these objectives difficult. The agriculture sector, which provides employment to a major part of the workforce, is declining in terms of its contribu-tion towards the GDP of India. The growth of jobs in the organized sector is also slowing down primarily because the public sector is shrinking. Therefore, economic and labour policies must facilitate the opening up of new avenues to employment. The labour welfare schemes need to focus on those establishments where much of the labour force finds work (Planning Commission, 2008).

Industrial Disputes

The National Commission on Labour has pointed out that: ‘Economic progress is bound up with indus-trial harmony for the simple reason that such harmony inevitably leads to greater cooperation between workers and management which results in better production and productivity and contributes to all-round prosperity of the country’ (Planning Commission, 1981).

India is one of the top ranked countries in the world with regard to the industrial unrest. The term ‘industrial dispute’ is used to denote work stoppages as well as differences between management and workers that are settled through the industrial relations machinery (Bhangoo, 1995). The number of





strikes and lockouts has generally been on the decline in the post-liberalization period as compared to during the 1970s, in terms of the number of disputes, number of workers involved and number of workdays lost. According to the Ministry of Labour’s 2007 report, in 1970, the total number of strikes and lockouts reported were 2,889, whereas in 2007, the figure came down to 389. There are several plausible explanations for the decline in the number of industrial disputes in the post-liberalization period, including the following:

1. The increased use of modern technology is shifting control over the work from workers to machines.

2. There has been a decline in union membership and power.3. The linking of most allowances and other facilities to wages and the Supreme Court’s3 ruling of

‘no work no wage’ means that workers are reluctant to lose earnings due to strikes.4. Fear of job losses among workers due to increased competition.5. The vast majority of stagnant organized/unorganized workers are moving from the working class

to the middle class and are less prepared to support unions during direct action.

According to the Ministry of Labour report (2007), in the pre-reform period, wages and allowances were the major cause of industrial unrest, whereas in the post-reform period, indiscipline and violence are the main cause—a worrying development for all the parties in the Indian industrial relations system. The magnitude of disputes as a result of wages and allowances issues declined from 34.3 per cent in 1971 to 22.2 per cent in 2007. In contrast, indiscipline and violence in 1971 accounted for only 3.6 per cent of the disputes, but it rose to 33 per cent of the total disputes in 2007. Therefore, in the post-reform period, factors other than wages and allowances, namely, indiscipline/violence and personnel/retrenchment, are the main causes of industrial disputes (VenkataRatnam, 2005).

Trade Unionism

Indian trade unions have a varied structure and can bargain at the following three levels: (i) enterprise-based unions, which may or may not have affiliations with political parties, bargain at the corporate sector plant level; (ii) in the service sector, unions affiliated with political parties bargain at the national and/or regional level—these unions usually represent employees of the central and state government (transport, postal services, police, firefighters, etc.); and (iii) in public sector organizations, centralized trade union federations having affiliations with political parties bargain at industry or national level with the state (as employer) (Bhattacherjee, 1999).

In India, the evolution of trade unionism can be described in terms of four phases:

1. The first phase of unionism is represented by the Indian trade union movement during the first three Five-Year Plans (1951–1956, 1956–1961, 1961–1966), a period of national capitalism.

2. The second phase of unionism (mid-1960s–1979) is associated with a period of political chaos and economic stagnation.




378 Chetan Agrawal

3. The third phase of unionism (1980–1991) corresponds to a period of uneven economic develop-ment and instability on the political front.

4. Finally, the fourth phase of unionism (1991–ongoing) represents the post-liberalization period (Bhattacherjee, 1999).

In the following sections, we discuss the third and the fourth phase of unionism. These two phases correspond to the pre- and the post-liberalization era respectively.

Third Phase

The macroeconomic changes that took place during the third phase had an immense effect on the politi-cal economy of trade unionism and the labour markets as well as on the structure of industrial relations. An important feature of the third phase was the rise of independent unions. They operated in the major industrial centres and competed with the traditional party-affiliated trade unions. The bargaining weak-ness of the traditional unions at the enterprise level led to the formation of the independent unions. Through their independent unions, Indian workers in a number of multinational companies were able to exert much more control over the labour relations process than their counterparts in those companies’ host countries (Pendse, 1981). Decentralized bargaining also appeared during this phase in a significant way. Evidence suggests that workers and unions, at least in the profitable mills, were able to make their own decentralized bargaining agreements (Van Wersch, 1992). In the organized and more profitable economic sectors, the unions (often independent unions) secured a part of the productivity increases through militant bargaining and/or through productivity bargains. In contrast, workers in unorganized and less profitable sites lost the battle and unions were left with few strategies (Bhattacherjee, 1999).

Fourth Phase

Finally, the fourth phase of unionism (1991–ongoing) represents the post-economic liberalization period. The adoption of the World Bank and International Monetary Fund (IMF) stabilization and structural adjustment programmes led to a demand for increased labour market flexibility, especially employment flexibility. Favourable views were expressed by transnational corporations about the new economic reforms. This resulted in a recruitment freeze, especially at the lower levels, in many public sector sites. Presently, the unions in these public sector sites have to cope with competition at the local level. In the unprofitable public enterprises, unions are conceding to the introduction of ‘voluntary’ retirement schemes. Labour commentators have also found that the centralized and traditional union structures often fail to fulfil worker’s expectations and that this is one of the main reasons for the rise in independ-ent and decentralized union structures (Murlidhar, 1994). The public has also become aware (mainly through the media) that the trade unions now represent the interests of a small section of people (Bhattacherjee, 1999).

The continuance of the economic liberalization process that started in 1991 is likely to have the following key implications:





1. greater employment flexibility; and2. further decentralization of wage-bargaining structures.

Such developments could result in less intervention by the government in the bargaining process, less strikes and a probable cessation of the disintegration of the union movement. On the one hand, the reforms could lead to an increase in employment and the union voice. On the other hand, they could lead to increased power in the hands of management and the fast growth of the non-union sector, thereby reducing the power of organized labour. However, the implementation of industrial relations reforms has been delayed for an indefinite period due to the lack of consensus between the centralized trade unions, political parties and state governments. A perturbing consequence of not reaching a consensus on labour market reform is the future effects that this might have on regional labour markets and labour relations, for instance, heightened inter-state competition to draw in foreign and local capital. In the absence of national reforms, various states may level down their labour market institutions to attract investment, which will result in regional differences in labour standards. This will then make it all the more difficult for the centralized trade unions federations to act at the national level (Bhattacherjee, 1999; Nagaraj, 2007).

Job Security

The Planning Commission (2001) argues that India’s labour laws may have obstructed the adjustment to a more competitive atmosphere created by the liberalization process and that these laws discouraged the expansion of labour-intensive sectors and made India uncompetitive in export markets. On the other hand, there were concerns that economic liberalization would lead to the erosion of many labour welfare institutions (Dev, 2000). Overall, in a poor country, job security can be a means of providing social security, but the possibility of it costing jobs makes it controversial (Bhalotra, 2003).

The law on job security provision required that firms seek the government’s permission for retrench-ment and closure. The law was introduced in 1976 (pre-reform period) and was applicable to firms with at least 300 employees. In 1982, it was extended to firms with at least 100 employees. This led to the encompassment of approximately an additional 15 per cent of workers. In 1982, employment growth went into negative figures and popular opinion is that this was an outcome of the extended scope of job security (for example, Government of India, 1993: 34). However, this argument is not totally plausible because the employment picture recovered in the 1990s (post-reform period) without any significant relaxation of the law. Fallon and Lucas (1993) estimate that there would have been 17.5 per cent higher employment in the organized manufacturing sector if there had been no job security provision. However, Dutta-Roy (1998) rejects the hypothesis that job security has a major impact on labour demand.

Scepticism about the importance of job security on employment growth is based on some of the fol-lowing reasons. First, time is needed to adjust employment and so, the correlation between a fall in employment and the time of the amendment to the law cannot be very significant. Second, various stud-ies have found that there was considerable evasion of the law (Deshpande, 1992; Papola, 1992). Third, because job protection lowers hiring and firing rates, its direct impact on employment is just as likely to be positive as negative and, indeed, investigations by the Organisation for Economic Cooperation and




380 Chetan Agrawal

Development (OECD) on job protection are inconclusive about its impact on labour demand (Layard et al., 1991). Fourth, if job security had a major impact on employment growth, we would have expected to observe its threshold effects in companies at the 100 workers level. Instead, factories with less than 1,000 workers had positive employment growth and larger ones had negative growth (Nagraj, 1994). Fifth and finally, recent evidence shows that there were no prohibitive restrictions on firing staff. There were layoffs in the 1980s and, in the 1990s, the public sector employment ceased to grow (Bhalotra, 2003).

However, it would be wrong to say that the introduction of job security has left no mark at all. Job security probably fosters wage increases, with consequences for employment that are captured by wage elasticity. Further, job security raises the cost of employment adjustment; it will give rise to employment dynamics (Dutta-Roy, 1998). Thus, job security probably does not hamper growth and employment as argued by some researchers.

The idea is that government must make job security and related provisions for registered sector workers compulsory in order to avoid casualization of the labour force and an overall worsening of employment quality (Bhalotra, 2003). Job security may well be in the interest of private employers because it provides an incentive for high-quality work. It may be necessary to recruit and retain workers and to motivate them. A casual low-cost workforce does not always raise a firm’s profits because in this scenario, it becomes difficult to guarantee a worker’s quality and dedication. The broad view is that the labour laws in India neither do much harm nor do much good. This view is supported by Jha and Golder (2011: 16–17), who conclude their study on labour market flexibility with the following remark: ‘To put it differently there is little basis to blame labour regulations [for] poor outcomes’.

In the post-liberalization era, life-long ‘employability’, based on a need for continuous upgrading of skills, is considered a viable alternative to life-long ‘employment’. Income security is considered an alternative to job security. Several Southeast and East Asian countries have adopted social accords to deal with the jobs crisis, mainly through skills development. It is the responsibility of all, employees, enterprises and the government, to establish social safety nets. Therefore, in the post-reform period, updating and upgrading skills is the ideal means to ensure life-long employability (Thakur and VenkataRatnam, 2001).

Labour Utilization

Nearly half of the increase in real earnings between 1979 and 1985 was accounted for by an increase in the time worked per worker (Bhalotra, 1995; Nagraj, 1994). It is estimated that one-sixth of official working time was being lost in the pre-reform period (before 1979) and that this was recouped to a fair extent in the post-reform period (Bhalotra, 1998). The evidence suggests that rather than overtime work, the growth of labour utilization reflected the recoupment of lost time. This feature might be related to the opening of the Indian economy in 1991. The reforms, in all probability, increased competition and uncertainty amongst organizations, while at the same time, reduced workers’ bargaining power (Bhalotra, 2003). These changes could have pressured firms to lay off surplus labour and also to disci-pline workers (for example, to ensure that less time was lost in strikes). In this period, there was increased investment aimed at improving the infrastructure, which explains the recovery of the time lost due to shortages in power and materials (Bhalotra, 2003).





Employment Growth and Labour Flexibility

During the post-liberalization era (2005–2006), the rate of GDP growth in India increased significantly to around 8 per cent. However, the high growth rate of GDP has not been accompanied by a proportion-ate growth in employment. Rather, there has been a steady slowdown in the growth of employment during recent years (Papola and Sahu, 2012).

In the pre-reform period (1961–1990), employment as a whole experienced growth of around 2 per cent (when the growth of GDP was only around 3.5 per cent). Employment growth in the post-reform period declined sharply to 1.5 per cent during 1990–1992, and then fell further to around 0.22 per cent during 2004–2010. The decline in employment growth in the post-reform period took place alongside acceleration in the GDP growth rate, that is, the employment content of growth deteriorated. This is reflected in the considerable decline in employment elasticity from 0.41 during 1983–1994 to 0.15 dur-ing 1999–2000. The failure is extremely disappointing in agriculture, the major labour-absorbing sector, with the employment elasticity in this sector dipping to zero as against the 0.50 assumed in the Ninth Plan (Datt and Sundharam, 2006; Dev, 2001). The reasons for this decline in employment growth include both government policies and technological changes in the production process over the last several years. The slowing down of employment growth has been accompanied by increasing workforce informalization. Organized sector employment has grown more slowly than total employment. During 1983–1994, organized sector employment grew at a rate of 1.20 per cent, but this rate fell to 0.53 per cent between 1994 and 2000. Consequently, the proportion of unorganized sector employment increased. Apart from the huge number of new jobs being created in the unorganized sector, a considerably large number of retrenched workers also found refuge in the said sector (Sharma, 2006).

Inflexibility in the labour market is believed to be the main reason for the deceleration in employment growth. Several economists (for example, Stiglitz, 2002), industry associations and mainstream media believe that labour market inflexibility has increased the labour costs for firms, thereby obstructing investment and growth. The inefficient and inequitable employment protection laws are also thought to be responsible for the slow growth and the division of the workers into protected and unprotected categories. On the other hand, certain economists (for example, Sengenberger and Campbell, 1994; and Wilkinson, 1992) and trade unions claim that treating labour like any other commodity is not acceptable and protective measures are required to sustain India’s position during the process of globalization. Countries such as Sweden and the Netherlands, which have maintained high levels of employment and income security, respectively, have also performed well in terms of employment (Datt and Sundharam, 2006).

Therefore, the Indian government has been facing a dilemma regarding the labour reforms issue because the labour force and the management are against each other, forcing the government to be circumspect in its attempts to reform the labour market, and over the years, the debate has been intensify-ing. The Economic Survey 2005–2006 states that because the inflexible labour markets and highly pro-tective labour laws are applicable only in the organized sector, the labour mobility in this sector has been restricted. This has resulted in the application of capital-intensive methods in this sector, which has adversely affected the sector’s long-running demand for labour. The post-reform period (1991–to date) is said to be the era of globalization. It is argued that because of the intense competition in this globalization era, more than 100 developing countries have carried out reforms of their labour laws.




382 Chetan Agrawal

Thus, there is a need in the post-reform period to bring about synergy between the interests of labour and employers so as to promote growth, rather than wasting energy in conflict (Sharma, 2006).

Wages

The real wage of the Indian labour force from 1961 to 1975 did not rise (that is, workers were only able to maintain their real earnings at the 1961 level). Then, the real wage index increased notably during 1978–1985. However, in 1991, the real wage index declined to that of 1969, which is a sad commentary on the workings of the Indian economy that has the word ‘socialist’ enshrined in the preamble of its constitution. Thus, in the early 1990s, the movement towards a fair wage seemed a distant dream; work-ers were not even able to retain their real wages at the 1975 level (Datt and Sundharam, 2006). Overall, in the pre-reform period, the real wage index fluctuated. However, with the advent of the economic reforms in 1991, there has been a consistent increase in the real wages of Indian workers. For instance, the daily average wage rate of causal wage labourers increased significantly in real terms during the period 1993–2000, at a rate of about 3.5 per cent per annum (p.a.). Earnings increased at a positive rate of about 2.5 per cent p.a. This growth in earnings was evident for males and females in both rural and urban areas.

Wages in the organized manufacturing sector displayed a similar trend, increasing at about 2.5 per cent p.a. in the 1990s (Goldar, 2002). It would be interesting to study how the skilled to unskilled wage differential has changed over the last two decades while the trade regime was being liberalized by the economic reforms. However, there has been no research as yet to answer this question in the case of India. There were no data, until recently, on the education and skills of workers in India. Overall, wages and earnings have increased more rapidly since the economic reforms were introduced. This is consistent with the rise in labour productivity levels in the organized manufacturing sector as well as in the broader economy. This has contributed to a decline in poverty as observed between 1993–1994 and 1999–2000. To maintain or improve real wages in the post-reform period, the management and the workers/unions should make a genuine attempt to contribute to productivity growth. The management should effectively utilize all its resources to maximize productivity and workers can help in this process by eliminating restrictive work practices (Bhalotra, 2003; Datt and Sundharam, 2006).

Social Security

As defined by Thakur and VenkataRatnam (2001: 60–61), social security manifests the

natural desire of communities for protection from life’s problems, from uncertainty, from diseases and depri-vation…[It is] the protection which society provides for its members—through a series of public measures—against the economic and social distress that otherwise would be caused by the stoppage or substantial reduction of earnings resulting from sickness, maternity, employment injury, unemployment, invalidity, old age and death; the provision of medical care; and the provision of subsidies for families with children.





In India, social security is a neglected area in terms of both research and policy. Very little discussion has taken place on this subject in the Indian Five-Year Plan documents. Thus, there is a need to document and analyze issues related to social security for the benefit of the Indian population. The types of social security currently available in India can be classified in terms of the organized and the unorganized sec-tors. India’s population has surpassed one billion and it has a workforce of about 487 million, but only around 50–60 million of those workers are covered by some form of social security. For the rest, a job is the best guarantee of social security at the moment. The government has introduced a variety of social security schemes through a series of legislation for the 8 per cent of workers engaged in the organized sector. Some of the important pieces of legislation are as follows:

1. Employees’ State Insurance Act, 1948;2. Maternity Benefit Act, 1961;3. Payment of Gratuity Act, 1972; and4. The Pension Ordinance, 1995 (amended in 1996).

Although the government has adopted multiple strategies for the provision of social security for organ-ized labour, all of these are funded by the employers and some by the employees too (Thakur and VenkataRatnam, 2001).

In the unorganized sector, which engages around 92 per cent of the workforce, the government schemes of social assistance are the only means of social security. While the central government largely took the initiative to introduce social assistance schemes, certain state governments (Kerala, Tamil Nadu, West Bengal and Maharashtra) have set up schemes for the unorganized sector workers located in the relevant geographical area (Subrahmanya, 1999).

In the post-liberalization era, the regional disparities in human development seem to be increasing and public action is necessary in terms of investment in physical and human infrastructure in order to reduce these disparities (Dev, 2001). The labour market is moving in a direction such that the changeover of jobs by an individual will become more frequent. Therefore, the mobility of labour in the globalization era is expected to increase. There is a need for a coordinated effort in order to extend the social security benefits to mobile/migrant labour—both inter-state migrants and cross-border migrants. In the new economy (of information, communication and entertainment), the younger workforce is known to be developing a credit-card mentality and seeking immediate cash returns in lieu of long-term and post-employment retirement benefits. This is evidenced by the fact that some multinational and software companies have approached the government stating that their employees do not want superannuation schemes (Thakur and VenkataRatnam, 2001).

The social security system in India is budget funded, but providing one that is similar to that available in developed countries is not feasible at present. Although the social security system of the organized sector covers a very small part of the labour force, it still has certain inefficiencies and weaknesses that need to be removed. A legislative and administrative framework needs to be created in order to provide social security to a significant portion of the unorganized sector (Thakur and VenkataRatnam, 2001). The second National Commission on Labour, constituted after a gap of 72 years, submitted its report in 2002 to the Government of India. The Commission was given the task of providing an umbrella frame-work for the unorganized sector and in this context, it has made certain recommendations which are




384 Chetan Agrawal

innovative and workable. A decade has passed since then, but still most of the recommendations made by the Commission have not been implemented (Ministry of Labour, 2002). Overall, a constructive effort is needed from both the government and the civil bureaucracy in order to bring the maximum number of workers (in both the organized and unorganized sectors) under social security cover.

The foregoing discussion clearly shows that while there are certain improvements in the conditions of Indian labour in the post-reform period, there are some disappointments as well. Based on the given comparative analysis, research questions are framed that will be investigated in the second part of this research. The subsequent section will discuss the research questions and the methodology adopted for the investigation of the questions.

Methodology

In order to answer the research questions, information was gathered from government reports, labour institute reports, labour activists and those working in both the organized and unorganized sectors. This information was insightful. The primary source of data (both for the organized and unorganized sector) was obtained through survey of and Internet research on the labour force itself. Two separate descriptive surveys4 were carried out in order to illustrate the current state of Indian labour in the organized and unorganized sectors with regard to several factors. This research was a cross-sectional study with the unit of analysis being individual labour. Pinsonneault and Kraemer (1991) state that descriptive surveys can adequately establish the current state of affairs provided they are based upon proper sample frames, adequate samples and good response rates.5

The media, labour research organizations and labour activists have also played a critical role in gen-erating awareness about the conditions of Indian labour on a mass scale. Awareness has been primarily generated through news articles, research reports and investigations and protests carried out by labour activists. Therefore, interviews6 of labour activists were conducted to further explore the reality at the grassroots level. Applying the rule of thumb, one researcher should conduct approximately 15–25 inter-views; this researcher carried out 15 face-to-face fully standardized in-depth interviews with labour activists. Interviews were conducted with only those labour activists (purposive sampling) who did not have an affiliation with any political groups so that they could describe their experiences with regard to the current conditions of Indian workers without compromising the various dimensions of information quality. The interviews were held between July 2006 and August 2006. The interviews with workers were conducted during gathering their responses for the survey questionnaire. Their views gathered dur-ing the interviews were summarized as part of their survey responses quoted in the study.

The data derived from the interviews and surveys were further explored by secondary analysis of three studies: (i) a study undertaken by V.V. Giri National Labour Institute7 in 2011; (ii) discussions of the 44th Session of Indian Labour Conference held on 14–15 February 2012 (Ministry of Labour and Employment, 2012); and (iii) a study conducted by Anup K. Karan and Sakthivel Selvaraj in 2008.

It should be noted that the use of one data collection method is limited in terms of what it can measure effectively. Therefore, we have used multiple methods, as just described, in order to collect more complete data on the phenomenon, thereby permitting us to gain a broader and richer understand-ing of the conditions of the Indian labour force in the post-reform period.





Results

Survey 1: Organized Sector

We chose and surveyed8 480 individuals from a database of 5,000 employees in the organized sector. The individuals included in the study were employed in the public central university, Banaras Hindu University, and in a private sector organization, Tata Consultancy Services.

The results of the survey analysis9 showed that 89 per cent of the individuals conveyed the view that in the post-liberalization era, their conditions with regard to wages have improved drastically, whereas 80 per cent of the individuals stated that the labour welfare system has strengthened and improved. Of the respondents, 75 per cent believed that trade union membership has declined and that there has been an increase in the number of worker–management councils in the workplace. Also, 90 per cent of the respondents stated that the number of industrial disputes has fallen. The survey also found that 81 per cent of individuals feel that there is a dire need to introduce innovative human resources systems and techniques in the workplace, and that human resources are not efficiently used in India, which leads to poor productivity. A few examples randomly selected from the 300 survey responses are presented next to illustrate the stated results.

On the issue of wages, Mr Ram Singh, a software engineer, states:

With the expansion of the Indian economy and the huge influx of foreign direct investment in India, Indian salaries are growing by 12 percent to 15 percent every year. Indian wage increases are directly linked with the pace of economic activity and demand for talent. Indian corporate salaries are growing at the fastest pace in the world and therefore India tops the global league. Indian companies have been doing pretty well with growth picking up, and there is an extra pool of cash.

On the issue of industrial disputes, Mr Kishore Pandey states:

This considerable decline in industrial disputes is attributed to the serious attempts made by industries to improve industrial relations with their employees. The employers are developing better relations with employ-ees and worker–management councils are being formed in order to resolve issues jointly before they become chronic. The creation of worker–management councils at the workplace has also contributed towards the weakening of trade unions.

The following quotation from another respondent summarizes the views of many that were gathered in the survey with regard to the labour welfare system:

In the organized sector the labour welfare system has strengthened in the post-liberalization era. The state has rolled out several schemes in order to provide better and comprehensive labour welfare schemes. The Ministry of Labour and Employment is continuously working to ensure the safety of workers and protection of labour rights. In my own career as a teacher in a public university, the state has continued to increase its share of the contribution towards enriching the various welfare schemes, for example, increased investment in providing healthcare to employees.

One of the biggest concerns raised by the majority of the respondents in the survey was the poor management of human resources in India. The human resources managers, especially those in the Indian




386 Chetan Agrawal

public sector organizations, were perceived to have a myopic perception of this rapidly evolving field. It would appear that human resources, although sufficiently available, are imprudently wasted in India. To quote Mr Girish Thakur:

Media reports are replete with accounts of how human resources are wasted in India. In the absence of proper systems relating to pay, allowances and career progression, this continues to remain a source of industrial unrest going forward. Air India [the national air carrier] is the quintessential example of how public sector organisations are managed in India. The airline continues to lurch from one crisis to the next, suffering from high costs, low productivity, unresolved human resource issues and an unviable business model.

There were also respondents who suggested that wages have not increased, that the labour welfare system has not strengthened, that trade union membership has not declined, that industrial disputes have not declined and that policies on human resources are appropriate. These responses were found to be mainly due to the following reasons: the respondents had not started working in the pre-liberalization era and hence could not make comparisons between the two periods; and/or the respondents were unaware of certain issues raised in the survey. The following example portrays the above picture: Satish Chandra states, ‘I remained unemployed throughout the pre-liberalization period; therefore, I am unsure about certain issues asked in the survey. Hence, I have ticked the box “Don’t know” for these issues.’ Therefore, rather than suggesting that the major findings of the survey are incorrect, the broad picture painted by the respondents was one of lack of knowledge with regard to the issues raised in the survey.

Therefore, to conclude, the overall results of Survey 1 clearly support the analysis carried out by the Ministry of Labour and Employment and researchers, that is, that there have been improvements in the organized sector with regard to wages and labour welfare schemes, that less industrial disputes have occurred, that trade union membership has declined and that there is an urgent need to focus on the diligent management of employees in order to improve productivity. These results were corroborated by the interviews and the secondary analysis. However, first, the following section broadly summarizes the information gathered through Survey 2.

Survey 2: Unorganized Sector

We surveyed10 300 individuals in the unorganized sector. The individuals included in the study were working in the construction sector, agriculture sector and households in the district of Varanasi and sur-rounding regions.

The results of the survey analysis11 showed that 92 per cent of the individuals conveyed the view that in the post-liberalization era, their conditions with regard to wages have not improved much. They state that middlemen and employers continue to enjoy the majority of the benefits derived from their labour. The results also showed that 95 per cent of the respondents feel that labour welfare and social security systems are non-existent and that they are left at the mercy of employers and contractors in terms of gaining these benefits. Moreover, 97 per cent of the respondents blame governance at all levels (central, state and local) for their poor conditions with regard to wages, welfare, social security and other related factors. A few examples, randomly selected from the 300 survey responses, are given next to illustrate the above results.





On the issue of wages, Mr Babloo Yadav, a construction worker, states:

In the absence of education and knowledge we continue to suffer at the hands of the contractor. We construct buildings for the rich while our family struggles even for basic needs. The contractor continues to exploit us and bribes the local government officials in order to flout the law. The daily wages have increased when compared to yesteryear but it is not even sufficient to meet the basic needs of our family. The contractor acting as a middleman between us and the employer reaps the majority of the benefits and keeps us on bare subsistence.

The following quotation from another construction worker, Ram Charan, summarizes the views gath-ered in the survey with regard to labour welfare and the social security system. He narrates his heart-wrenching story thus:

I met with a life-threatening accident at one of the construction sites due to inadequate safety measures. I was rushed to the hospital by my colleagues. The doctors demanded a huge sum of money in order to save my legs from amputation. The contractor for whom I worked for 15 years refused to own the responsibility. He bribed the local authorities and put the entire blame on me for negligence at workplace. Now I am paralysed and my two little daughters are working in local households to support the family. I want to commit suicide because I do not want to be a burden on them, especially on my daughters. The government officials have refused to consider my several requests for financial support stating that there are no schemes under which I can be compensated. Filing a legal complaint against the contractor is very costly and time consuming.

The agriculture workers described how poor governance on the part of the government officials has made their life miserable. Media reports are replete with accounts of thousands of farmers committing suicide12 due to the apathetic attitude of the Indian government towards them. The irony is that the aver-age Indian farmer, whose hard toil enabled the country to survive the era of scarcity in the 1950s, still remains poor and unable to look after his family’s needs of a good life, education and healthcare.

To paraphrase the responses of farmers, several problems have plagued the agriculture sector. However, the most prominent ones are: (i) government control ranges from fixing prices to renting godowns, and the corruption and apathetic attitude of government officials escalates issues that could be solved earlier; (ii) the agricultural crisis is not because of poor farm practices but due to deficient market-ing, supply and distribution chains in the country; and (iii) the absence of management professionals leads to poor management of/planning for farmlands. Due to poor governance, this sector is without proper wages, service conditions and social security protection. There are hundreds of middlemen (vegetable sellers, truckers, agents, wholesalers, etc.) who earn the majority of the revenue from agricul-ture at the expense of both farmers and consumers. Therefore, the government should concentrate more on introducing innovative management techniques that can make farmlands more productive and cost efficient.

Only a fraction of respondents did not agree with the majority views expressed in Survey 2; again, mainly because they were unaware of the issues raised in the survey. Therefore, rather than suggesting that the major findings of the survey are incorrect, the broad picture painted by these respondents was one of lack of knowledge with regard to the issues raised in the survey.

Therefore, to conclude, the overall results of Survey 2 clearly support the analysis carried out by the Ministry of Labour and Employment and researchers, that is, that the conditions in the unorganized sec-tor with regard to wages, labour welfare, social security and governance remain poor despite the major contribution of this sector to the expansion of the Indian economy. These results were corroborated by




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the interviews and the secondary analysis. The following paragraphs broadly summarize the information gathered from the interviews and secondary analysis.

Interviews: Labour Activists

Broadly speaking, the labour activists suggested that Indian employers are the main beneficiaries of the foreign direct investment (FDI) coming into the Indian markets. They classified Indian labour into white-, pink- and blue-collar workers and stated that while the conditions of the white- and pink-collar workers in India have improved considerably in the post-liberalization era, very little benefits have trick-led down to the hardworking blue-collar Indian labour force. Labour activist Rajwinder Singh, a post-graduate in international relations from the United Kingdom (UK), was shocked to witness the plight of construction workers he interviewed for his doctoral dissertation. He decided to remain in India and attempt to organize them. His response to interview question 2 summarizes the views gathered from several of the interviews with other labour activists. He states that

Construction workers are terribly exploited in India. A single worker is forced to do twice the amount of work he did a decade ago, yet takes home less money than he did then if one adjusts for inflation. The conditions in which they work are extremely unhygienic. In 2008 a construction contractor simply disowned a worker who was killed at a construction site due to inadequate safety measures. Government authorities were contacted and as expected no cooperation was extended from their side. We were forced to call for a strike and work was resumed only after adequate compensation was given to the worker’s family. These are very poor people who live in unimaginable squalor. Things can’t get any worse for them and they have no choice but to fight for their rights. The white-collar workers in India have benefited majorly in the post-liberalization era but the worker performing manual labour has been ignored by the government, employers, and the society.

In response to question 1, the broad view of labour activists was that in the post-liberalization era, major changes have taken place in the mindset of both government and employers. Both the government and the employers have come to understand that a satisfied worker is a productive worker. The Indian government, time and again, has pledged to continue its investment in the welfare of the ordinary Indian worker. Similarly, with the opening of the Indian economy, the Indian employers have been exposed to competition at the global level. They have found that merely having low-cost workers is not enough to attract FDI; the requirement is a low-cost, skilled worker. The rise of the Indian information technology industry is a quintessential example of how Indian employers have invested in the training and welfare of their employees to make them globally competitive. To quote Ms Geet Vaishali, a labour activist in the state of Haryana:

In the post-liberalization era many sectors of the Indian economy have opened up. This has led to massive employment growth in the country. The Indian government and the employers have shown both intention and commitment to invest in the development and welfare of Indian labour. However, the majority of the benefits have been reaped by the white-collar Indian workers while the state of affairs of ordinary manual labour remains pathetic. However, positive changes are happening with the liberalization of the Indian economy. The Indian government and employers have come in contact with the labour practices around the world and are understand-ing that in order to compete with other developing economies, namely China, Brazil, etc., they can no longer ignore their demands and concerns.





The views gathered in response to question 3 are summarized next. The interviewees (labour activists) stated that the conditions of Indian labour have definitely improved when compared to the pre-liberalization era. The major concern raised by the interviewees was that the benefits of liberaliza-tion have not trickled down to all classes of Indian labour. While white-collar, urban Indian workers’ earnings and other aspects related to their working conditions have improved considerably, those of manual labour in India remain a source of concern. The agriculture sector in India continues to underper-form and, as a result, its contribution to GDP continues to decline. Farmer suicides are everyday news in India and neither the government authorities nor society as a whole is startled by this news anymore. Manual workers in both the organized and the unorganized sector remain underpaid and not much is being done to provide them with adequate welfare and security provisions.

Out of the several interviewees, Mr Dharam Singh’s views are both interesting and sum up the argu-ment expressed by all the labour activists who were interviewed. He states:

India has a demographic advantage. It is a young nation and if it utilizes its human resources efficiently then it won’t be long before India will find itself in the company of rich nations. Unfortunately, the current state of affairs with regard to human resource management in India remains poor. The majority of the India workforce is employed in the rural unorganized sector. This sector suffers from multiple deficiencies and the most chronic of them all is the absence of any adequate human resource model that can efficiently use the human resources, abundantly available in India. The following steps should be carried out: 1) formulate a National Policy on human resources development and ensure that it is implemented in letter and spirit; 2) planned human resource development, including expanding access and improving the quality of the human resources throughout the country, including in the regions where people do not have easy access to education and training; 3) pay special attention to disadvantaged groups like the poor, females and minorities; and 4) provide financial help in the form of scholarships, loan subsidies, etc. to deserving students from deprived sections of society.

To sum up, all the interviewees expressed the belief that in the post-liberalization era, the conditions of the Indian labour force have improved. However, rural, unorganized, manual labour is still underpaid and has no welfare or social security provisions. Since the majority of the Indian workforce belongs to this group, both the government and the employers should take adequate measures to address these issues. If they do so, it will create a ‘win-win’ situation for all the parties in the Indian industrial relations system.

Secondary Analysis

Three secondary sources were analyzed and compared with the results of the surveys and interviews. Some apposite quotations from these sources are provided in order to highlight the salient points put forward in these sources. The three sources are:

1. Study titled, ‘Trends in Wages and Earnings in India: Increasing Wage Differentials in a Segmented Labour Market’, part of a series of studies launched by ILO to analyze and under-stand employment challenges in India. The study was conducted by Karan and Selvaraj in 2008.

2. Summary record of discussions of the 44th Session of the Indian Labour Conference held on 14–15 February 2012, Vigyan Bhavan, New Delhi (Ministry of Labour and Employment, 2012).




390 Chetan Agrawal

3. Study titled, ‘Interrogating Empirical “Support” for Labour Market Flexibility’, conducted by Praveen Jha and Sakti Golder in 2011. The study was supported by the V.V. Giri National Labour Institute, India.

Karan and Selvaraj (2008) conclude their insightful study13 with the following remarks:

To recapitulate, wage growth during the post-liberalization period has been mainly sluggish for the casual and informal workforce. The better-off sections have gained at the cost of the more vulnerable sections. This requires urgent policy attention if the interests of the poor, less educated and semi-skilled workforce are to be safe-guarded. In the era of economic liberalization, the labour market’s dualism has sharpened and there is need to provide better options to workers in rural areas and in the urban informal sector to acquire education and skills. Ensuring minimum wages in rural areas and improving working conditions in the urban informal sector must be taken up on a priority basis so that workers in these sectors can reap the benefits of increased labour productivity in general and earn a decent livelihood in particular.

Overall, they argue that there is widespread poverty among workers, particularly informal workers, due to the low level of wages and increasing wage differentials.

Similar views were echoed in the discussions14 of the 44th Session of Indian Labour Conference by Mr C.K. Saji Narayanan, President of Bharatiya Mazdoor Sangh15. He states that the unorganized sector is without proper wages, service conditions and social security protection due to poor governance. He concludes with the following observation:

...effective Government intervention is absent in terms of International Labour Organisation (ILO) standards by pointing out that out of the 189 conventions and eight core conventions adopted by the ILO so far, India has ratified only 43 conventions and four core conventions...the country requires creation of quality and productive jobs; and not mere jobs and decent work should not only be a global goal, but it has to be a national goal too.

Labour market reforms are at the centre stage of the policy debate in India. The popular view is that a high level of protection in the organized sector has led to rigidities in the labour market. However, this view has been rejected both by researchers and the Indian government. A study conducted by Jha and Golder (2011: 16–17), under the patronage of the V.V. Giri National Labour Institute, India, concludes:

In sum, a careful consideration of the empirical evidence of [the] industrial landscape certainly does not support the claims of the distortionists, and does not warrant privileging the labour regulations as the key to understand-ing output or employment performances. Clearly one needs to look at the importance of a whole range of other critical variables whether globally or for India. To put it differently there is little basis to blame labour regulations [for] poor outcomes.

Similarly, Indian Prime Minister, Dr. Manmohan Singh, addressing the 44th Session of the Indian Labour Conference, highlighted that the view that Indian labour policies unduly protect the interests of currently employed labour and hinder the expansion of employment in the organized sector has lost its importance in recent years because an increasing number of state governments have become more flex-ible in their approach to labour restructuring and rationalization (Ministry of Labour and Employment, 2012).





Therefore, to conclude, the surveys, interviews and secondary analysis jointly support the view that while the white- and pink-collar worker has reaped the majority of the benefits in the post-liberalization era, the conditions of the blue-collar Indian worker remain unsatisfactory. Lack of good-quality govern-ance and the apathetic attitude of the government remain the primary reasons for the current state of affairs with regard to the conditions of the Indian labour.

Discussion

While supporters of economic liberalization argue that the reforms are designed to improve the condi-tions of labour, it has highlighted that there are major challenges to overcome in relation to creating optimum living and working conditions for the manual Indian labour force. The collapse of the rural economy, an agrarian crisis and a drastic rise in income inequality are some of the adverse effects attrib-uted to the neo-liberal policies pursued by the Indian government since the 1990s. Several authors (for example, Narasimha, 2005; Nayar, 2003; and Sukhadeo, 2008) have suggested that instead of blindly relying on the belief that reforms such as trade liberalization and an influx of FDI will automatically lead to prosperity trickling down to the blue-collar Indian worker, the government should focus on reducing red tape and corruption, as well as improving governance.

This study sought to discover whether the economic liberalization process is perceived by those most closely affected to have improved the conditions of Indian labour with regard to wages, the welfare sys-tem, human resources management and industrial relations. Survey 1 was carried out to analyze the impact of economic liberalization on the organized sector of Indian workers with regard to the above-mentioned factors. The results showed that in the organized sector, the effect of liberalization has been mostly positive. The respondents stated that wages and the welfare system have improved, industrial unrest has declined and the reduction in trade union membership has fostered better relations between management and workers. However, poor utilization of human resources remains a source of concern because it is leading to poor productivity and inefficiency. The results of Survey 2 differ starkly from those of Survey 1. The respondents stated that wages, welfare and social security systems have not improved in the unorganized sector despite India achieving an average growth rate of around 7 per cent since 1997. The manual workers in the unorganized sector blame the apathetic attitude of the govern-ment and poor governance for their poor living and working conditions.

The main findings derived from the results were that while the white- and pink-collar Indian worker has prospered on all major fronts in the post-liberalization era, the blue-collar Indian worker, particularly in the unorganized sector, has been largely ignored by all sections of society, including the Indian gov-ernment. India currently has a demographic advantage because of its young population. However, to benefit from this demographic advantage, the Indian government, in conjunction with employers, will have to design systems and processes that can create conducive conditions for improved economic performance. There has also been increasing demand from Indian civil society for better and more trans-parent public services. Public officials will have to realize that they should be held accountable for their work in a system that is still highly feudalistic, secretive and elitist.

The findings from the interviews and secondary analysis clearly show that rural, unorganized, manual labour is still underpaid and has no welfare and social security provisions. The media and civil society




392 Chetan Agrawal

organizations are creating awareness about the conditions of Indian labour in the twenty-first century among the general public in India. All institutions should work together in order to create a win-win situation for all the parties in the Indian industrial relations system.

Conclusion

This study has attempted to reveal the conditions of Indian labour in the pre- and post-reform periods. The main research effort has been to study the effects of economic liberalization, introduced in 1991, on the Indian workforce. The economic reforms started in India on 24 July 1991 after the Indian govern-ment had to pledge 67 tons of gold as part of a bailout deal with the IMF. The new neo-liberal policies included the initiation of privatization, the opening of the economy to international trade and investment, tax reforms, deregulation and inflation-control measures. The fruits of liberalization reached their apex in 2007 when India achieved its highest GDP growth rate of 9 per cent, making India the second-fastest-growing major economy in the world, next only to China.

However, there has been significant debate on whether liberalization is an inclusive economic growth strategy. Organizations such as the OECD have published comprehensive reports regarding the deepen-ing of income inequality in India since 1992. In the Index of Economic Freedom16 World Rankings for 2013, India was ranked 119th among 177 countries, putting India in the category of ‘mostly unfree’ countries. The report clearly states that although there is improvement in labour freedom, it is offset by declining scores in other areas. Further, the report states that corruption is endemic throughout the econ-omy and is becoming more serious. The state maintains an extensive presence in many sectors and meddles with economic activity. Market-oriented reforms have brought about uneven progress and it is also being reversed by those who have an interest in maintaining the status quo.

This research clearly also supports the claims made by the above-mentioned studies. We found that the liberalization process has mainly benefited the top 10 per cent of wage earners who now make 12 times more than the bottom 10 per cent, up from a ratio of six in the 1990s. These problems, coupled with a host of other factors such as poor governance, corruption and inadequate human resources devel-opment and management, have made the situation even worse. It is now imperative that the corruption and the culture of secrecy in Indian government affairs is rooted out in order to pave the way for govern-ance reforms as well as greater accountability and transparency in government affairs. The Indian government should reorient public expenditure towards infrastructure investment by reducing subsidies. Furthermore, improvements with regard to social policies are also needed in order to benefit the poor. Human capital is very important and given the huge demographic advantage that India has, the education system also needs to be made more efficient. In order to realize these goals, the Indian government will have to make serious efforts to give up its old style of functioning, which is characterized by a ‘cloak of secrecy’ and opaqueness, and instead start to pay greater attention to the issues confronting the entire workforce. A credible mechanism for providing literacy and vocational training opportunities to all those in the labour market together with a support mechanism for basic social security and health are essential. Further, workplace industrial relations systems should be put in place that promote flexibility, facilitate change and prepare the labour force to be able, attuned and adaptive so that they can respond to the challenges of change that are yet to come.





Appendix A: Survey Questions for Organized Sector

Q.1. Wages situation after the economic reforms were introduced • Improved • Not Improvd • Don’t Know

Comment

Q.2. Current labour welfare and social security system conditions • Improved • Not Improved • Don’t Know

Comment

Q.3. Trade union membership in the workplace • Increased • Declined • Don’t Know

Comment

Q.4. Industrial relations situation in the workplace • Improved • Worsened • Don’t Know

Comment

Q.5. Which area needs most focus bearing in mind the changing patterns of employment practices? • Human Resources • Labour Welfare • Any Other • Don’t Know

Comment

Appendix B: Survey Questions for Unorganized Sector

Q.1. Wages situation after the economic reforms were introduced • Improved • Not Improved • Don’t Know

Comment(Appendix B continued)




394 Chetan Agrawal

Q.2. Current labour welfare and social security system conditions • Improved • Not Improved • Don’t Know

Comment

Q.3. Who should be held accountable for the conditions of Indian labour? • Central Government • State Government • Local Authorities • Employer • All the Above • Don’t Know

Comment

Appendix C: Questionnaire for Labour Activists

Q.1. In the post-liberalization era, what changes do you think have occurred in the government and employer mindset with regard to Indian labour?

Q.2. Do you have any personal experiences which you can elaborate to demonstrate your experience with Indian labour and their conditions?

Q.3. Please comment on the conditions of Indian labour in the post-liberalization era.Q.4. What do you think is the way forward with regard to improving the conditions of Indian labour?

Appendix D: Sampling Technique

Sampling Technique for Organized Sector Survey

Study objective: To explore the conditions of Indian labour in the organized sector with regard to wages, welfare, social security, disputes, training and development and union membership in the post-liberalization era.

Design: A survey using a structured interview schedule was conducted. The sample used in the survey was stratified by designation.

Sample: All the employees working in the Banaras Hindu University (public institution) and Tata Consultancy Services (corporate private limited company) were included: 250 employees from each institution were included in the study. From Banaras Hindu University, samples of 50 employees were randomly selected from each of the five designation levels, namely, lecturer, reader, professor, senior non-teaching staff and junior non-teaching staff. Similarly, from Tata Consultancy Services, samples of 50 employees were randomly selected from each of the five designation levels, namely, analyst, senior analyst, manager, senior manager and director. The total sample size was 500.

(Appendix B continued)





Methods: The employees in the sample were identified and traced from the current telephone directories of both institutions. Since the directories had been recently updated and included the contact details of individual employees, the response rate of the survey was excellent. Individual employees were con-tacted and face-to-face interviews were conducted.

Questionnaire: A one-page questionnaire was personally administered by the interviewer. This con-sisted of a range of close-ended questions on the conditions of Indian labour. The questions were multi-ple-choice based and interviewees were asked to choose an option and also to give a brief description where appropriate. To ensure confidentiality, a separate slip bearing the employee name, employee number and employment sector was attached to each questionnaire. Employees were asked to remove the slip before returning the completed questionnaire. This allowed us to keep the information obtained in the survey separate from the employees’ personal details. Permission was taken from the respondents who were quoted in the study.

Main results: Of the 500 employees, 490 employees gave permission to be interviewed and 480 were interviewed.

Conclusions: The response rate of the survey was excellent. The bias in the responses to the question-naire needs to be taken into consideration in future work. The method was found to be feasible and could be applied more widely.

Sampling Technique for Unorganized Sector Survey

Study objective: To explore the conditions of Indian labour in the unorganized sector with regard to wages, welfare, social security and governance in the post-liberalization era.

Design: A survey using a structured interview schedule was conducted. The sample used in the survey was stratified by employment sector.

Sample: Workers in the construction sector, agriculture sector and households in the district of Varanasi and surrounding regions were included: 100 workers from each sector were included in the study. Workers were randomly selected from each of the three sectors. The total sample size was 300.

Methods: Since there is no database from which those working in the unorganized sector can be selected, the snowballing sampling technique was employed to select and trace respondents. Efforts were made to reduce the biases associated with the snowballing sampling technique. For example, workers were requested to inform the researcher of the locations where workers employed in the above three sectors could be found rather than to recommend their friends and acquaintances. Individual workers were contacted and face-to-face interviews were conducted.

Questionnaire: A one-page questionnaire was personally administered by the interviewer. This consisted of a range of close-ended questions on the conditions of Indian labour. The questions were multiple-choice based and interviewees were asked to choose an option and also to give a brief




396 Chetan Agrawal

description where appropriate. To ensure confidentiality, a separate slip bearing the employee name and employment sector was attached to each questionnaire. Employees were asked to remove the slip before returning the completed questionnaire. This allowed us to keep the information obtained in the survey separate from the employees’ personal details. Permission was taken from the respondents who were quoted in the study.

Main results: All 300 employees gave permission to be interviewed.

Conclusions: The response rate of the survey was excellent. The bias in the responses to the question-naire needs to be taken into consideration in future work. The method was found to be feasible and could be applied more widely.

Notes

1. Mr Montek Singh Ahulwalia is an Indian economist and civil servant. He is currently the Deputy Chairman of the Planning Commission of the Republic of India.

2. People employed in the Indian Ministry and Department of Labour. 3. Supreme Court is India’s apex court. 4. See Appendices A and B for details regarding the survey questionnaires. 5. See Appendix D for full details about the sampling frame and response rate. 6. See Appendix C for details regarding the interview questions. 7. The V.V. Giri National Labour Institute is a premier and the only national-level institute exclusively devoted to

the study of and training in labour and labour-related issues. The Institute, established in 1974, is an autonomous body of the Ministry of Labour and Employment, Government of India.

8. Refer to Appendices A, B and D for details regarding the survey. 9. Note that this survey analysis was designed specifically in order to explore the conditions of the Indian labour

force in the organized sector in the post-liberalization era.10. Refer to Appendices A, B and D for details regarding the survey.11. Note that this survey analysis was designed specifically to explore the conditions of the Indian labour force in

the unorganized sector in the post-liberalization era.12. For information on farmer suicides in India, see http://www.indiatribune.com/index.php?option=com_content&

view=article&id=5389:every-12-hours-one-farmer-commits-suicide-in-india&catid=106:magazine13. Full details of the study can be accessed at http://www.ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/

documents/publication/wcms_098852.pdf14. Full details of the discussion can be accessed at http://www.efionline.in/images/Downloads/discussions-44th-

ilc.pdf15. Loosely translated, the term means association of Indian labourers.16. The Index of Economic Freedom is a series of 10 economic measurements created by The Heritage Foundation

and The Wall Street Journal. Its stated objective is to measure the degree of economic freedom in the world’s nations. The full report can be accessed at http://www.heritage.org/index/country/india

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Chetan Agrawal is a Policy Analyst, TrEd Consultancy Services, London. E-mail: [email protected]



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