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India: Hindu right and capital: the Modi government’s labour policy

Sunday 20 July 2014, by siawi3


Economic and Political Weekly, Vol. XLIX No. 26-27, June 28, 2014

Race to the Bottom

The Modi government’s labour policy seeks to remove workers’ protection to increase business competitiveness.

The cabinet of the Bharatiya Janata Party’s (BJP) Vasundhara Raje-led Government of Rajasthan is being hailed in the media for having taken the lead in clearing amendments to the union labour law – the Industrial Disputes Act, 1947, the Contract Labour (Regulation and Abolition) Act, 1970, and the Factories Act, 1948. The amendments are reportedly scheduled to be introduced in the state assembly and are expected to be implemented soon after. Vasundhara Raje is also reported to have claimed that this measure will “creat[e] a habitat for job creation†. The commercial media has, of course, gone gaga over the move, claiming that it would “liberate the corporate sector from the shackles of stringent requirements of the laws†. These laws, neo-liberal economists and the representatives of business have long argued, “are holding back job creation in the country†.

The BJP-led National Democratic Alliance (NDA) government at the centre has now initiated a “fresh review†of the country’s labour laws in order to tailor them to the requirements of the National Manufacturing Policy (NMP) unveiled by the previous Congress-led United Progressive Alliance government in 2011. (Of course, the Gujarat government was a pioneer in amending the Industrial Disputes Act in its application in the state’s special economic zones (SEZs), allowing lay-offs of “redundant workers†in all units, without the requirement of seeking government permission.) India’s NMP aims at increasing the share of the manufacturing sector in the gross domestic product (GDP) from 15%-16% to 25% by 2022 and creating 100 million additional jobs by that year through the setting up of National Investment and Manufacturing Zones (NIMZs). The latter are conceived of as industrial clusters in the form of “integrated industrial townships with the state-of-the-art infrastructure†developed through the public-private partnership mode.

The NMP basically assumes that China’s process of accumulation of capital has reached its turning point in the Lewisian (after the Nobel Prize-winning economist, W Arthur Lewis) model of “Economic Development with Unlimited Supplies of Labour†. From now on, the rise in the Chinese real wage of industrial workers will, it is argued, undermine that country’s pre-eminent industrial position, and India should therefore opportunistically seek to take China’s place as the “workshop of the world†. To this end, a number of “Chinese-style mega-industrial corridors†are envisaged, for example, seven industrial cities along the Delhi-Mumbai freight corridor.

The name of the game is international subcontracting, where transnational corporations, either producers or retailers, arrange to use Indian firms to manufacture products, components and services. The transnational producer/retailer controls the final marketing and provides technological and managerial assistance to the Indian subcontractor. The whole operation is however predicated upon the super-exploitation of labour at the subcontractor’s sweatshop in labour-intensive manufacturing industries, for which labour protection has to be dismantled.

As the World Bank put it in 2008: “India’s labour regulations – among the most restrictive and complex in the world – have constrained the growth of the formal manufacturing sector where these laws have their widest application... Given the country’s momentum of growth, the window of opportunity must not be lost for improving job prospects for the 80 million new entrants who are expected to join the work force over the next decade.†The Chapter V-B amendment of the Industrial Disputes Act, which requires firms employing 100 or more workers to obtain permission with regard to lay off, retrenchment and closure, is often cited as the most onerous by business in restricting its flexibility. The facts however are that factories employing 100 workers or more not only account for the bulk of the fixed capital, workers employed and net value added in the organised manufacturing sector, but the value of fixed capital, the number of workers employed and the net value added of this segment of the organised manufacturing sector have grown much faster over the first decade of this century than the same in the segment composed of units employing less than 100 workers.

Indeed, rather than increase productivity through technological improvements complemented by industrial training and skill enhancement, the tendency of business has been to increase the proportion of casual and contract labour in the workforce and intensify the labour process to bring down unit labour costs as much as is possible. The strategy is basically one of global labour arbitrage, which is a means whereby transnational business earns a higher rate of profit by shifting production to businesses in countries of the global South to take advantage of the significant wage difference as between the global North and the global South, given the severe restrictions placed on international migration of labour. In the process, the countries of the South are driven to engage in a “race to the bottom†in order to emerge globally competitive as far as unit labour cost is concerned.

What more then should be said about the “liberalisation†of labour laws to serve this end? Basically, business’s need for labour market flexibility is being rationalised in terms of the supposed interests of workers as a whole – such flexibility is claimed to be in the latter’s interest, for them to accept casual labour, variable wages and working hours linked to product market demand. The “flexible labour market†is then the Modi government’s public declaration of labour policy on behalf of business, with the ostensible aim of redeeming the workers from misery. The workers will now be told to conduct themselves in a manner that maintains and enhances flexibility “in their own interests†. But to embrace such a denouement, false as it is, at a time when the developed capitalist countries are in the midst of economic stagnation will make it all the more oppressive and arduous for India’s workers.