Global capital, local labour

In the months following his rise to power, India’s Prime Minister Narendra Modi has repeatedly touted the importance of manufacturing to different audiences. Recently, Modi has talked about manufacturing as a way to bolster the health sector and has called on ministries to review and reduce “inessential imports”. Earlier in his Independence Day speech, Modi traversed a variety of topics, from nationalism to women’s security to endorsing public-private partnership while also making sure to emphasise the importance of increasing domestic manufacturing. A substantial portion of the speech, which was delivered with some striking theatrics from the grounds of Red Fort in Delhi, endorsed the idea of manufacturing as a form of national service and a solution to tackle both the trade deficit and the burgeoning problem of unemployment.

The gravity of repealing labour laws or making them more ‘flexible’ is greatly aggravated by India’s abysmal expenditure on social entitlements as well as volatility of the global market.

While the prime minister has presented a slick take on increasing manufacturing output with a renewed message of “Make in India”, the emphasis on boosting manufacturing with foreign capital has received attention ever since the limitations of a service-based economy have become glaringly apparent during the last decade. Concerns regarding the underperformance of the manufacturing sector in India received significant mention in both the Economic Survey 2013-14 and the Union Budget 2014-15. The chapter in the Economic Survey on ‘Industrial Performance’ mentions that “In addition to slowdown in fixed investment, several domestic and external factors such as higher interest, infrastructure bottlenecks, inflationary pressure leading to rising input costs, drop in domestic and external demand for some sectors have together contributed to low growth in the manufacturing sector.” Among the global and local factors listed as reasons for the underperformance in manufacturing, none had to do with the hampering of production due to labour or lack of productivity of labour itself. In fact, the latest Union Budget reported a massive drop in organised labour strikes from 421 in 2008, to 181 at the end of year 2013 (based on provisional data). In spite of this, the need for the simplification and, to a great extent, repeal of labour laws has been presented at various forums as one of the most crucial steps for attracting global capital to boost manufacturing. The arguments made in favour of ‘reforming’ labour laws require systematic analysis and critique.

In the way global supply chains are organised, capital and labour rest in geographically distinct regions of the world; global supply chains link these two essential aspects of production. Belying this apparently simple logic is the power asymmetry that exists between capital and labour. Additionally, global capital, under current regulations, poses risks such as highly volatile market conditions due to short-term, unsystematic and unregulated capital investments on the one hand, and weakening of domestic laws on the other. Despite this, the requirement of capital for tackling issues of the trade deficit and high unemployment is taken for granted and univocally stated in popular discourse and policy literature. Of primary importance in this tension between appropriating global capital while maintaining equity and autonomy nationally, is the role of individual states in ensuring favourable market conditions, a prerequisite for being a significant actor in the global economy and also ensuring development within the country. The debate on doing away with labour legislation deemed restrictive seriously challenges the latter mentioned role of the state.

In capital’s interests
Ever since the new Bharatiya Janata Party (BJP)-led National Democratic Alliance government was voted into power earlier this year, the issue of labour reforms has managed to find mention in more than one platform: intra-government communication led by Rajasthan and Haryana state governments, appeals from pressure groups such as industry and mercantile associations, and even newspaper editorials. The need for creating jobs in the manufacturing sector so as to tackle mass unemployment is a concern stated repeatedly. Across all these platforms, existing labour laws have come to be seen as the cause of low output in the manufacturing sector and responsible for impeding the march of global capital, which, as the argument goes, is needed for catalysing the enlargement of the production base and thereby development in the country.

The amendments to existing labour laws that the present Rajasthan government has sought relate to three central government labour legislations: Industrial Disputes Act (IDA), 1947, Contract Labour (Regulation and Abolition) Act (CLRA), 1970, and the Factories Act, 1948. The amendments suggested to IDA are to make retrenchments and closures easier for manufacturers, and raise the minimum requirement needed to form representative trade unions or collective bargaining entities. The amendments suggested to CLRA basically recommend a higher minimum number of workers employed in the production unit for the legislation to be applicable, in effect allowing for a larger number of units to be beyond the scope of CLRA. Amendments to the Factories Act would increase the ceiling on overtime hours to 100 hours per quarter and remove the ban that restricts employers from employing women for night shifts.

While these changes have been touted as reforms, the amendments are, in fact, directed single-mindedly towards relaxing regulations and thereby decreasing the liability of employers towards labour. Terming these changes as ‘reforms’ is a misnomer since they do not fundamentally modify the hierarchy of employer-employee relations. Assertions in media discourse that such legal provisions, aimed at ensuring fair conditions for labour, are responsible for creating labour market distortions not only indicate an overly simplistic understanding of how the labour market functions in a stratified society like India, but also erroneously suggest that labour is the biggest beneficiary and in greatest need of global capital. This assertion has been challenged based on the experience of states such as Gujarat, Uttar Pradesh and Andhra Pradesh, where the Industrial Disputes Act was ‘reformed’ following which there is a lack of evidence suggesting a significant link between relaxation of IDA and enlargement of production base.

Let us delve a little further into the above mentioned rhetoric that is driven by the assumption that laws aimed at protecting labour actually hinder global capital that could potentially benefit impoverished labourers. First, the assumption that global capital benefits Third World labour under a laissez faire state is highly disputed. The shortcomings of relatively labour law-free Export Processing Zones (EPZ) and Special Economic Zones (SEZ) in boosting manufacturing output is lesson enough to conclude that reforming labour laws and absolving manufacturers from responsibility towards labour may not be the magic bullet to adequately appropriate global capital into the manufacturing sector. Additionally, from this standpoint, the local owners of production are viewed as victims of a globally competitive market scenario, restricted by labour laws that make manufacturing economically impractical. In effect, it masks the antagonistic interests of manufacturers and labourers under the present system of production, and pitches them together as a single entity against labour laws – which, despite being limited in their scope, are presently the only formal tool available for the adequate protection of the labouring class employed within the organised sector.

Weakening labour’s position
The second rationale given for supporting the labour reforms is the archaic nature of some labour legislation and the lack of efficacy of these laws in bringing employers to the book. The fact that most employers circumvent existing legislation in place to protect labour, thereby rendering the legal provisions ineffective, is presented as sufficient basis to scrap labour-supporting provisions and policies. Loopholes in labour laws which enable exploitation by employers are symptomatic of elite bias and inefficient design, but misuse does not negate the core rationale and spirit of ensuring the welfare and protection of labour. The focus should be on identifying and rectifying provisions that are susceptible to misuse by employers. The movement towards relaxation of labour laws, which in a way legitimises the illegal practices of employers, suggests a retreat of the state from moral authority rather than real authority. According to the National Sample Survey, over 70 percent of the non-agricultural workforce is employed in the informal sector. Hence, the threat of relaxation of the labour laws is more likely to be felt in the moral-legal sphere. Laws are vehicles that can ensure moral claims; while they do play a role in ensuring people’s rights in real ways through legal outcomes, they also set the landscape against which moral claims that a collective makes on behalf of its members are debated and meted out. Leaving moral claims at the mercy of the market in a highly stratified society like India should, at the very least, evoke more debate and resistance.

The gravity of repealing labour laws or making them more ‘flexible’ is aggravated further by India’s abysmal expenditure on social entitlements as well as volatility of the global market. Under such conditions, it is inevitable for Indian manufacturers and employers to occupy a position of unprecedented power without much liability. Between global volatility and local decimation of laws, the ‘benevolence’ of Indian manufacturers and employers shall be the only factor left to sustain the needs of labour. A free market assumes symmetry between the participating entities. Any transaction between a systematically weakened and systematically favoured entity is, in fact, a market distortion of the highest order – this one being particularly against the labouring class and in favour of employers.

At this juncture, it is important to note that the societies from which ideas of market fundamentalism have been borrowed experienced social stratification to a different and possibly lesser extent than India. These countries also witnessed crucial movements for rights and dignity that preceded market fundamentalism, attempting to ensure respectable conditions for all, often holding a strong position at the negotiating table. India’s current context lacks these dynamics with the cards stacked against organised labour in many ways. In such a scenario, the need for progressive laws ensuring adequate protection to the labouring classes can hardly be overstated.

~ Kinjal Sampat is a researcher based out of Delhi, India and associated with Society for Labour and Development (SLD) and the Lokniti Network.

~ With inputs from Sunila Singh, who is a social activist.