Globalisation – changing the face of the Indian

labour scenario
The first four decades in the post-independence pre-liberalisation period were marked by a
social cohesion between the state and the trade unions to improve the conditions of the
working class. The arm of the state was in favour of the working class.
However, the economic reform process has led to a pro-management environment,
weakening the labour class. The manifestation of this new ideology can be observed in a
number of ways.
The judiciary has been pronouncing judgments hauling labour over the coals on the one hand
and baptising the employer's 'hire and fire' policy on the other. The Supreme Court, in an
epoch-making judgement, declared that government employees have "no fundamental, legal,
moral or equitable right to go on strike". In 2001, the judiciary also reversed its own
judgment on contract labour absorption in the case of Steel Authority of India Limited & Ors.
v. National Union Water
Front Workers & Ors. No effort has been made to foster any federation of unions to put up a
joint front and demonstrate solidarity. Various central level unions have been pulling in
different directions to suit the interests of their respective political parties. Moreover, to
extend cooperation to the state when their affiliate political party is in power and have an
attitude of confrontation when a rival political party is in power, has created the impression
that political affiliations rather than genuine response on labour issues is the touchstone of
cooperation or confrontation. Also, the instances of treachery by many union leaders are not
unknown. Employer militancy has increased in the form of lockouts, retrenchments and
closures leading to shrinkage of employment in the organised sector. The share of the
organised sector has declined to 6% and that of the unorganised/ informal sector has risen to
94%. The Eleventh Plan Approach Paper states: "The wage share in our organised industrial
sector has halved after the 1980s and is now among the lowest in the world. One reason for
this is increasing capital intensity in organised sector, another is outsourcing."
A lot of management do not understand the real causes behind workers going on strike. In
addition to reasons of trust deficit, and factoring in the interests of the workers, some
management also believe in paying off unions without realising that this could cause damage
to them through blackmailing.
The state labour department does not interfere in industrial conflicts as much as it should.
Further, India has ratified only 43 of the 188 ILO conventions and only four out of eight core
conventions.
More disquieting is the new avatar that labour protests have been taking in India. Labour
unrest, besides strikes and lockouts, includes marches to the parliament, public interest
litigations, dharnas, fasting and absenteeism.
The economic reforms in India have, undoubtedly, led to an increase in growth rate
but impact on labour has not been a healthy one. Though the advocates of economic
liberalisation plead that the reforms will result in creating more employment
opportunities but the fact, thus, remains that these reforms have caused retrenchment
on a large scale. According to official estimates, Indian companies as a whole shed
over 8, 70,000 jobs during 1990s. During the last few years, the growth in corporate
sector has been largely due to labour saving to an extreme degree. For example, in
1994, Tata Motors produced 1, 29,400 vehicles with 35,000 workers. In 2004, it
produced 3, 11,500 vehicles with just 21,400 workers. In the mid 1990s, Bajaj
produced a million scooters with a workforce of 24,000. Today, it produces 2.4
million vehicles with a labour force of 10,500. Thus, what we see is corporate sector’s
jobless recovery in recent times with jobs actually declining instead of increasing with
industrial growth. The public sector enterprises and banks have resorted to still larger
job cuts through the VRS route. This is by no means an exhaustive list. But it gives a
glimpse of the grave situation. When we add to this the workers who have lost jobs as
a result of the closure of the lakhs of Small Scale Industry units we get a very grim
picture of the employment situation12. From the available data, however, it can be
interpreted that the unemployment has largely been for the unskilled labour, but on the
other hand, due to large-scale automation of industry and growth of service sector, the
skilled and highly skilled labour is largely

On the front of industrial relations we find an unhealthy trend. As against the need for
harmonious relationship with an added amount of understanding and cooperation
amongst them in the new economic situation, it is noted that more of fear is prevailing
amongst the Indian working class. This can be seen from the lesser number the strikes
and added propositions of lockouts. The statistics in this regard, when analysed and
compared with the trend of strikes make the situation plain and simple.13 A review of
industrial relations in the pre-reform decade (1981-1990) reveals that as against 402.1
million man-days lost during the decade (1981- 1990) i.e. in the pre-reform period, the
number of man-days lost declined to 210 million during 1991 to 2000 i.e. the post-
reform period. This may give one the feeling that this is an index of improvement of
industrial relations. But if we break these figures down, we find that more man-days
have been lost in lock-outs than in strikes. A total number of 129 million man-days
were lost in lock-outs, and 80.2 million were lost due to strikes during this period.
Many workers do not seem to be willing to go on strike or resort to action that may
put their jobs in jeopardy. But employers seem to have acquired more confidence and
are resorting to lockouts more often. The agreements that are arrived at too are more
often in favour of managements. This reflects a changed situation.14
In the era of globalisation, while the national and per capita income levels have
increased, these have not trickled down to the working class en masse. Employment
growth has not kept pace with the rise in the labour force in the developing countries
while employment rates have increased in the developed countries. Consequently,
workers in the developing regions have become more insecure and vulnerable
unemployment and underemployment. Along with sluggish employment
opportunities, wages have also failed to rise. Minimum wages are considerably lower
and working class poverty is substantially high in large parts of the developing world.
It has also been confirmed that the process of globalisation is associated with positive
labour market dynamics in the developed countries and negative labour market
dynamics in the developing regions. It is, therefore commented that instead of
boosting the employment market in the developing countries in reality, the
globalisation process is leading to further squeezing of the labour market, and both
domestic and cross-national inequalities.
5 P.D. Shenoy, “Globalisation: its Impact on Industrial Relations in India”, (Geneva: International
Labour organisation, 2006) p. 382.
As noted in the Report of the World Commission on the Social Dimension of
Globalisation, instead of viewing employment growth as a ‘hoped for’ by-product of
globalisation, the time has now come to make it the centrepiece of the globalisation
process itself. In addition, the reduction of poverty through higher remuneration
should also form an integral part of the scheme. In order to do so, the developing
countries must first build up institutions to withstand the whirlwind of globalisation.6
At the time of announcement of the New Economic Policy the status of industrial
relations was not alarming, specially as compared to that in the mid 80s.
According to many, it was a lull and might breakout under some pretext or the other.
6 Rajarshi Majumder, “Globalisation and Employment: A Prelude”, (2008) 51, The Indian Journal
Labour Economics, .November 4, p. 513

Another trend worth-noting is that employment opportunities in the formal sector have
decreased and more and more people are being pushed to the informal sector without
any legislative protection

The Second National Commission on Labour made a few other general

observations about the industrial employment scenario;15
Firstly, it is increasingly noticed that trade unions do not normally give a call for
strike because they are afraid that a strike may lead to the closure of the unit.
Secondly, service sector workers feel they have become outsiders and are becoming
increasingly disinterested in trade union activities.
Thirdly, there is a trend to resolve major disputes through negotiations at bipartite
level. The nature of disputes or demands is changing.
Instead of demanding higher wages, allowances or facilities, trade unions now
demand job security and some are even willing to accept wage cuts or wage freezes in
return for job protection. Disputes relating to non-payment of wages or separation
benefits are on the rise.
Fourthly, the attitude of the government, especially, of the central government,
towards workers and employers seems to have undergone a change. Now, permissions
for closure or retrenchment are more easily granted.
Fifthly, the conciliation machinery is more eager to consider problems of employers
and today consider issues like increase in productivity, cost reduction, financial
difficulties of the employer, competition, market fluctuations, etc. They are also not
too serious in implementing the awards of labour courts awarded long back after
protracted litigation against employers wherein reinstatement or regularisation of
workers was required
14 Government of India, “Report of the Second National Commission on Labour 2002”, p. 247.
15 Ibid., atpp. 248-249.
.
Sixthly, recovery proceedings against employers who could not pay heavy dues of
workers are not being pursued seriously by the industrial relations machinery, if the
financial position of the employer is very bad. Lastly, the labour adjudication
machinery is more willing to entertain the concerns of industry.
Globalisation and Trade Unions

Trade unionism in India is nearly a century old. It is passing through a critical phase
and facing unprecedented challenges in liberalised and privatised global economy.
Labour is being pushed from the organised sector to the unorganised sector leading to
an increase in casual and contract labour. Downsizing, organisational restructuring,
political instability, apathetic attitude of government are the major factors16, which
weaken the power of unions. The employers are bypassing unions as they find them
obstructing the production process. This created more tension and pressure for the
unions and making them increasingly vulnerable.
The organised labour force in India, working under the modem conditions in factories,
mines government service, etc., constitutes only one tenth of the total labour force.
This small body of industrial workers, though numerically insignificant, is looked
upon by most people with distrust, suspicion and disgust17. Trade unions are also
perceived as institutions protecting the unproductive workforce who have no social
commitment. The trade unions, over the years, have lost sympathy of the common
people as frequent strikes disrupt day-to-day life and cause inconvenience to the
public at large
16 Dr. Ghosh Biswanath, Industrial Relations of Developing Economy, (Himalaya Publishing House,
2001) p. 247.
17 Sinha , Raj an, ‘The Indian industrial Relations Model”, (1991) 34 (2) Indian Journal of Labour
Economics, p. 138.

The union membership and union density in India in the post-reform

period
There has been a certain noticeable change in the union membership and union
density in India in the post-reform period. There are enough indications of decline of
union power in the post-reform years. The state level data on new registration of
unions indicate decline in registration of new unions in the post-reform era. Further,
most new unions are in the informal sector. Union membership has increased in the
informal sector, but it has declined in the formal sector. The shift of unionisation to
the informal sector has a major implication, as unions in the informal sector are not as
strong as unions in the formal sector. Another indication is that in the post-reform
period, there has been growth of no-union firms, and increasingly firms are adopting
strategies to remain non-union. In some firms employers are adopting union avoidance
strategies. For example, some employers are promoting workers in to
supervisory/administrative ranks to take them outside the purview of the Industrial
Disputes Act. The loss of job in the public sector through VRS and closures or
privatisation of inefficient and ‘sick’ public sector units has also contributed to decline
in union power and union membership in the organised sector. All these have led to
decline in union power.24
23 Supra note 8, at pp. 168-169.

. The changes in the economic and social contexts give a clear picture of changes in
union influence. In the pre-liberalisation period, unions developed in an environment
that protected both industry and labour and this led to progressive growth in union
membership and union density. The new economic policy removed many of the
protections and has led to decline in union power. There has not been any major
change in labour legislation, but economic liberalisation has put pressure on the Indian
industrial relations institutions to change and has affected the behaviours of unions.
With the withdrawal of industrial licensing in the post-liberalisation period, the states
are now actively lobbying and hence competing for both national and international
capital investment and adopting industry friendly policies. This has weakened labour’s
tie with the political parties and government support has shifted towards employers’
side. With the shift in the balance of power in favour of employers, they are now more
aggressive in dealing with the unions and workers. In various locations, they are
adopting practices that help them to avoid unionisation or curtail union power.

24 Subesh K Das, ‘Trade Unions in India: Union Membership and Union Density”, (2008) 51, (4) The
Indian Journal of Labour Economics, pp. 977-978.

The supporters of neoliberal approach have been arguing that the success of new
liberal economic policies requires labour market reforms as labour market flexibility
is necessary to ensure efficient industrialisation. The private sector should be allowed
to ‘hire and fire workers’. It is also said that the private sector enterprises, banks etc.,
are overstaffed and therefore, a reduction in staff strength is required to improve
efficiency levels. The proposal for introducing such an exit policy was first mooted in
September 1991. The World Bank and IMF have also been insisting for quite some
time that the government should introduce labour market reforms to allow employers
to shift workers from one unit to another and also retrench excess labour.43
Following this advice many companies in the large corporate sector and many public
sector enterprises have opted for retrenchment of labour through the announcement of
Voluntary Retirement Schemes. For example, a study by Business Standard Research
Bureau published in 2001 showed that 23 manufacturing companies accounting for 17
per cent of the total sales of the private manufacturing sector cut their workforce by a
whopping 40,338 in 2000-01 over 1998-99, i.e., in a matter of just two years.44 This
trend has gathered still more momentum in recent times. In fact, the growth in the
recent phase of revival of the corporate sector has been ‘labour saving’ to an extreme
degree. Improvement in operating efficiency has been due to dramatically reduced
workforce and wage bill.45 Thus what we see is corporate sector’s jobless recovery in
recent times with jobs actually declining instead of increasing with industrial growth.
The competitive advantage of India’s manufacturing sector in recent period went
directly against the country’s ‘comparative advantage’, its low cost of labour.
Indian manufacturers have increasingly substituted capital for labour despite labour’s
low cost.46
41 CPI (M), “Uphold Labour Laws in IT Sector”, The Hindu, dated October 26, 2005.
42 Supra note 5, p. 407.

The public sector enterprises have resorted to still larger job cuts through the VRS
route. In a period of three years between 1997 and 2000, six blue-chip public sector
units which include Steel Authority of India Ltd., Coal India Ltd., Bharat
Heavy Electricals Ltd., Hindustan Zinc Ltd. and Oil and Natural Gas Corporation
axed 1,20,000 jobs.47 Coal India Ltd alone cut jobs by 90,000 and Steel Authority of
India Ltd. by 20,000. Public sector banks like, State bank of India, Indian Overseas
Bank, Punjab National bank, Bank of India, Indian Bank, Syndicate Bank, Central
Bank of India, etc have also seen the exit of more than one lakh employees through
VRS route. Another study48 suggests that 23 per cent jobs in public sector enterprises
have been made redundant under voluntary retirement schemes following
privatisation.
Thus, companies are trying lean and mean to increase their profits. Due to increasing
threat from foreign competition, the local companies are now focusing more on core
competency and less on diversification. They are dying to avoid unrelated and
unprofitable businesses. VRS is also adopted by companies which form strategic
alliances with other companies or there is a takeover. Hapless workers are the victim
of the process of consolidation, restructuring, mergers, acquisitions and
amalgamations which is sweeping the Indian corporate sector presently.

43 S K Misra, V K Puri, Economic Environment of Business, (Mumbai: Himalaya Publishing House

Pvt. Ltd., 2009) pp. 563-564
44 Business Standard, August 18-19, 2001, p.l.
45 Supra note 11, at p. 9.
46 Supra note 43, at p. 564
One of the genuine fears of labour is that privatisation is bound to result in
unemployment. Most of the privatisation experiments around the globe are testimony
to the fact that this indeed does happen. The Government of India has been repeatedly
harping on the tune that as a result of privatisation there has only been a ‘marginal
retrenchment’ of labour.49 However, the fact is that there is a strong pressure from the
corporate sector to reform labour laws to enable it to hire and fire workers as it wishes
and indications are that the government is falling inline. This means that the future
employment scenario for labour is a cause of worry. The fear of retrenchment and the
consequent unemployment is all the more as there is no safety net scheme for labour
worth the name.

47 Business Standard in August 25,2001, p.l.

48 Gopal Joshi, A Study of Privatisation in India, 2000, as quoted by V R Panchamukhi, Nagesh
Kumar and Ram Upendra Das, “Economic Reforms and Implications for Labour Markets”, in
Ramgopal Agarwala, Nagesh Kumar and Michelle Ribound, Reforms, Labour Markets and Social
Security in India, (New Delhi, 2004), p. 145.

Low Paying Jobs

The Indian economy created about 80 million jobs between 1993-94 and 2004-OS.
The workforce increased from 334.54 million in 1993-94 to 415.27 million in
2004-05.50 However, the matter of concern is the fact that 95 per cent of these jobs
were created in India’s unorganised sector—mainly tiny outfits like neighbourhood
shops which employs less than 10 workers and does not keep regular accounts. Even
in rural India, which accounts for die three quarters of the Indian working class, the
vast majority work in unorganised sector enterprises. Many workers who are opting
for VRS in large corporate enterprises are also joining the unorganised sector. Jobs in
the unorganised sector are low paid, low quality jobs with no social security
whatsoever. It has been estimated that the productivity of 70 per cent of the jobs in the
rural unorganised sector is too low (below Rs.1000 per month) to sustain the average
worker, unless he or she works in other jobs.51 Thus more than 16 years after
liberalisation, the vast majority of Indians are still trapped in low quality jobs that can
barely sustain them and their families. And these jobs offer no security. This is the
reason why although India’s official unemployment rate is only 7 per cent; the official
poverty rate is far higher at 26 per cent. Many of those employed cannot earn enough
to keep their families above the poverty line.52
49 Government of India, Economic Survey, 2002-03 (Delhi, 2003), p. 150.
50 Government of India, Economic Survey, 2006-07 (New Delhi, 2007), Table 10.4 p. 208
51 Avinash Celestine, ‘Two Faces of Indian Labour”, Business world, March 1,2004, p.23.