Journal : Phoenix Weekly Date : Author : Mao Keji, Page No. : NA



In early September of 2015, several large-scale protests broke out across India. Reporters of local media said that nearly 150 million workers took part in the strikes, affecting the  banking, manufacturing and construction industries of – all supported by 10 influential trade unions. In New Delhi, drivers of taxis and rickshaws refused to pick up any passengers; in the State of Kerala – a southern fortress of left-wingers — shops and banks were shut down.


Labeled as “the most serious protests in national history”, the crisis in September sheds light on labor regulations of India – already a focus before the strikes. It is fair to say that the recent breakout of unprecedented protests was attributed to the clashes of two things: the hackneyed labor regulations of India with accumulated malpractices, and the  drastic reform measures carried out by Prime Minister Modi. Hidden behind the hustle and bustle of every Indian street was a game being played between old and the new notions, regulations and interest groups, with an intensity never seen before. The final result of the game might determine the economic course of India in the foreseeable future, and without exaggeration, the fate of thel Indian people.

滞后的劳动法体系 Laggard system of labor laws


Since he won the election with an overwhelming majority in May of 2014, Modi pushed through several revolutionary measures, aiming to throw into the reform agenda  labor regulations, land ownership and environmental protection criteria – which were seen as major hindrances to development of manufacturing in India. Among them, labor issues, with accumulated malpractices, were regarded by many economists as the largest hindrance for Indian economy to take a leap forward. They were the forts most unlikely to be conquered in the process of reform.


Until now, the system of labor law in India depends on the main body of laws drawn up under British colonist rule, and many of them were never modified or updated. The Industrial Disputes Act (IDA), which deals with labor disputes, was laid down as law in 1947; Trade Union Act (TUA), which regulates all trade unions in India, dates back to as early as 1926. Frankly speaking, the world does not run short of laws of very long history, but even the ancient laws can advance with the times through modifications. However, India is a rare example in the world, in the sense that she never leaves the beaten track in her legal system.


The laws in India, to a large extent, were the result of the game playing between British colonial authority and Indian local congress. Faced with the vehement British capital and the assertive colonist compradores, the legislators in India held the assumptions that “all the employers are exploiters”, “all the laborers have no way out other than to be employed”, and “all the employers are large corporations”. Therefore, the basic logic of legislation was to limit the expansion of capital, to alleviate the exploitation imposed by the employers, and to guarantee the welfare of laborers. For example, Industrial Disputes Act stipulated that any redundancies and shut down should be approved by government, if the corporation had more than 100 employees. Likewise, the Factories Act stipulated that the length of overtime by any laborer should not exceed 50 hours quarterly.


To be fair, the legislation of that era succeeded in protecting the welfare of common Indians, considering the fact that India people were burdened by a mix of colonialist rules and capitalist exploitation. These laws, therefore, were reasonable and advanced in that background. Nevertheless, with the gigantic changes taking place in India’s economic, social and political background, these ancient laws would easily become shackles for further development if they remained unchanged over time.


For example, the Industrial Disputes Act restricted the size and development of corporations in India. The corporations would not dare to expand too hastily, and the investment needs were seriously limited.  The government, on the other hand, would usually not approve the redundancies and shut downs, for fear that the tide of unemployment would exert “ballot box boomerang” effect on future elections. As a result, it was extremely hard for the parent corporation to have its malfunctioning factories shut down, and it had no choice other than to bear the blocks. In light of this, most individual units would refuse to expand their production capacities even if they managed to make profits. Instead, they invariably kept within low-level cycles, overlapping investments and duplicated many individual workshops. As a result of IDA, most foreign investors were reluctant to look towards India.


Let’s look at another example. To ensure the security of women laborers, Factories Act stipulated that“the working hours of woman laborers were kept between 6 am to 7 pm”. The stipulation seemed thoughtful, but turned out as an example how “good intentions bring about bad” outcomes. Their work hour being restricted, women found that their chance of being employed was lower that their male counterparts, and that they could barely work any longer even if they were willing to. Considering the already omnipresent prejudices they had to bear, women would become further marginalized in their professional careers, and excluded from the “reserve army” of laborers. The comprehensive production capacity of Indian society was unlikely to be enhanced under such circumstances.


These regulations and laws resulted in a distorted and inefficient industrial structure: 90% of the labor force in India is hired informally. Since the economic reform of 1991, all the growth in job opportunities came from the informal sector. 50% of them are self-employed, mostly deep down in the lowest level of economic chain. 50% of them are employed in agricultural sector, which contributes less than 15% of India’s GDP. 12% of them are employed in manufacturing industries, the same level as the  post-industrial USA.

对于这样的现状,印度经济学家、人力资源专家Manish Sabharwal的评论极为精辟:“印度企业规模小,并非因为他们是处于事业初创期的‘婴儿’,而是因为被摇篮强压而畸变成了矮壮侏儒。”

Manish Sabharwal, a famous economist and HR expert in India, made an insightful comment on the current situation: “Most Indian corporations remain small-sized, not because they are ‘infants’ in the early stage of their development, but because they grow as short, bulky pigmies – crushed and deformed in their cradles.”

莫迪尚难纠正“正确”的错误 Modi is unable to fix those “rightful mistakes”


However, the sizes of Indian population and economy determine the fact that the basic need is always there, regardless of the suppression of policies and regulations.


According the  World Bank statistics, the population of India reached 1.267 billion in 2014, with an annual growth rate of 1.2%, and average age of 26. India is thus enjoying a notable “demographic bonus”, with a large population basis, rapid growth and relatively young age structure. Meanwhile, India is faced with a golden opportunity of developing labor intensive industries, and achieve broad based industrialization.


BJP (Modi’s the political party) is a tough, strong newcomer on the political stage of India in recent 30 years. Since BJP started to rule, it remains a core issue for the party to reform the ancient, outdated labor system, and to make the best of the “demographic bonus” of India. It is noteworthy that the State of Gujarat, under the governance of Modi, achieved rapid economic growth for one key reason – reform in the labor system. After the apprehension of foreign investors was dispelled, Gujarat benefited from abundant foreign investment and the relatively low labor cost to develop labor-intensive industries. That’s why Gujarat is now dubbed “Indian version of Guangdong Province”.


Perhaps a more persuasive example lies in the software service industry. A legislation of 2001 excluded software, outsourcing and other high-tech third generation industries from the current system of labor laws – becoming “special zones exempt from laws and regulations”. Since then, corporations of service industries are allowed to adjust the size of employment to their operational status. Besides, women can now work in the 24-hour global call centers, and engineers now enjoy “work more, earn more” arrangements, free from the interrogations of labor inspectors. These “special zones exempt from laws and regulations” did not fall into chaos owing to a lack of supervisions; instead, they now become the most competitive industries in India, and even worldwide, thanks to the flexible management and free business environment.


The future is bright, but it doesn’t necessarily mean that Modi’s reform is easy. 90% of the labor force in India is in the informal sector, and the rest 10% in formal institutions. Let’s look at a tricky number – people who took part in recent anti-reform demonstrations account for 10% of Indian population – a simple coincidence?


Protected by law, those employees of formal institutions are invariable secured with “iron rice bowls”. The departments of railway, bank, mail and manufacturing services in India are overflown with excess personnel, and are often accused of for their low efficiencies. After Modi pushed a series of reforms, they sensed the threat to lose their “iron rice bowls”. Meanwhile, these formal institutions usually have complete organizations of labor unions, and are often highly politicized. Compared with the collection of atomized individuals in those informal institutions, these formal ones would form various labor unions, and build them into political allies, so as to influence the trend of national politics. Such a  high degree of political organization and mobilization, in conjunction with ballot democracy gradually become indestructible political groupings. After all, if a politician ever dares to challenge the “ballot groups” that account for 10% of Indian population, he/she is committing suicide.


Modi is fully aware of the formidable obstacles he has to face if he is to continue reforms in the labor system. In light of this, he chose the State of Rajasthan, which is relatively underdeveloped, as the experimental field. At first, reforms proved successful in the States of Rajasthan and Uttar Pradesh, where those formal institutions are relatively weak. But things became tough and complicated when the reforms moved to the States of West Bengal and Kerala, where the labor unions are strong, and formal institutions are proportionately more. Riots, involving hundreds of thousands of people, broke out. Once the disturbances consolidate politically, Modi’s government might be shaken at its foundation. In that case, Modi’s labor system reforms might fail even before being commenced. As a result, although Modi keeps making high-sounding noises about reform plans, he cannot afford to be too pushy o specific labor issues.


All said and done, labor issues in India reflect essential gaps between economic foundations and superstructure. The top-level designs of laws and policies far surpass the economic and social conditions at the grass root level, and spaces lie within for interest groups to be active. These interest groups use the well meaning top level designs to consolidate their vested interest, and prevent any outside forces from fixing the unfair, distorted state of affairs. From a broader perspective of history, the hackneyed labor system in India is, without doubt, a distortion that exploits most people and caters to the needs of a minority. But from the micro, social perspective, the labels “labor interest”, “social equality” and “anti-exploitation” seem unassailable and indisputable. Confronting the crux of labor issues in India, the tricky situation Modi has to handle is to do his best to fix those “rightful mistakes”.


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