R Srinivasan

‘Aatmanirbhar’ in the sweatshop nation

R Srinivasan | Updated on May 13, 2020 Published on May 13, 2020

For productivity Countries with strict, transparent labour laws see better results   -  M Balaji

Nobody can build a sustainable business by exploiting one set of stakeholders

Arguably, the most shameful image of the Covid-19 pandemic and the consequent lockdown will be the pitiful possessions of migrant labourers lying scattered around rail tracks, after their owners, desperately trudging hundreds of kilometres home to find some kind of safety and shelter after having been thrown out of their jobs and homes, had been run over and killed by a train as they lay sleeping exhausted on the tracks. Every such death — and there have been dozens already — is a blot on the image of a resilient, aatmanirbhar (self-reliant) India that Prime Minister Narendra Modi tried to paint in his latest address to the nation.

Equally shameful is the disgraceful haste with which several States are racing to do away with even the minimal protection that workers were enjoying under India’s Byzantine and largely unimplemented laws protecting working conditions, wages, social security and health cover, and right to unionise and collective bargaining, by suspending the application of such laws — albeit temporarily for a period of two or three years in most cases — in the guise of attracting additional investments, and, supreme irony, creating new jobs!

Enforcing regulations

In India, we have a law for everything, and two babus to interpret them five ways. There are more than 50 statutes at the Central and State level, covering everything from hiring and firing to (I have actually seen such a notice) provision of spittoons in manufacturing establishments. So, at first glance, any reform of such a tangled mess should be welcome. All the States which have axed labour rights and laws have done so on the ‘reform’ plank.

But the absence of law does not mean reform. Just because the existing laws were either not implemented, or enforced primarily with rent-seeking in mind, does not mean that the laws themselves are bad.

Besides, in the motherland of jugaad, businesses have found a way to dodge most if not all of the regulations. One of the restrictions most often cited as stifling business activity and enterprise — the inability to expand or contract operations quickly in response to market conditions (hire and fire, in other words) and the principal justification advanced by the States who are doing away with worker protections at the moment – actually has not stopped any business from doing exactly what it wants.

In a written reply to a Parliament question filed in July last year, the then Corporate Affairs Minister Nirmala Sitharaman said that as many as 6.8 lakh firms — over 36 per cent of all companies registered with the Registrar of Companies — have shut shop in India till date. Clearly, India’s fabled difficulty in actually shutting a business did not deter these companies from upping sticks and closing down. A look at the NPA books of banks will show how many are alive only on paper. Add to that the companies undergoing resolution processes — where workers’ dues come way behind other creditors — will also show who is actually calling the shots in the ‘hire and fire’ marketplace.

Worker conditions

According to the government’s own data, released through the NSSO’s employment surveys and Periodic Labour Force Surveys conducted by the Ministry of Statistics (the last one was in 2017-18), even in the organised sector, the percentage of contract workers is far higher than regular workers.

In the informal sector, the situation is even worse. According to the Periodic Labour Force Survey’s Annual report for 2017-18, 71.1 per cent of male workers and 54.8 per cent of female worlers in the non-agriculture and AGEGC sectors were in the informal sector, where these laws anyway are observed largely in the breach.

Here are some more illuminating numbers from the report: Among regular wage/salaried employees in the non-agriculture sector, 71.1 per cent had no written job contract: 72.3 per cent among males and 66.8 per cent among females. Among regular wage/salaried employees in the non-agriculture sector, 54.2 per cent were not eligible for paid leave: 55.2 per cent among males and 50.4 per cent among females.

Among regular wage/salaried employees in the non-agriculture sector, 49.6 per cent were not eligible for any social security benefit: 49 per cent among males and 51.8 per cent among females. So what are we “suspending” actually?

Labour rights

However, giving legal sanction to the non-observance of even the bare minimum of laws covering workers’ conditions of employment, safety and security, and more importantly, taking away the right to organise and engage in collective bargaining, is a dangerous move.

Starving workers desperate for any kind of employment may well line up for jobs in such modern-day sweatshops — but they will not be happy and rising resentment may well turn into violence. This indeed happened in the automobile manufacturing hub in the NCR region, where the workers in marquee companies like Maruti and Honda clashed violently with the management a few years ago, and even lynched some managers. The clash was primarily over the disparity in work conditions and wages between the smaller number of “regular” employees protected by wage agreements and unions and the large number of “contract” employees.

Globally, the experience has been that countries which have a transparent system of labour regulations and strict enforcement actually perform better. Nobody can argue, for instance, that corporates are constrained by labour regulations in the developed Western economies and they cannot expand or contract as per market diktats; nevertheless, workers in such countries enjoy better conditions, higher pay and better security than their counterparts elsewhere — and they are more productive.

The moves have been interpreted by many as a transparent bid to drive investments into the BIMARU States, which also happen to be the ruling BJP’s primary vote-banks. But there is a reason why investments have flowed in the past, and continue to flow now, to the southern States, Maharashtra and Gujarat. It is not because these States have laxer labour laws — on the contrary (Gujarat excepted) these States have a fairly good system of labour dispute resolution and are the last remaining bastions of organised trade unions in India — but because they have better infrastructure, a better educated and more skilled workforce and have an administrative system which largely works. On the other hand, Rajasthan, where the Vasundara Raje government had carried out major labour law ‘reforms”, has not been that successful attracting investments.

It is therefore even more puzzling why India Inc, which should know the reality better than anyone else, has been disgracefully quick to welcome such “reforms”. Surely they must know that destroying worker trust and exploitation of the poor is no way to build a sustainable business.

Published on May 13, 2020

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