IASbaba’s Daily Current Affairs – 20th February, 2016

IASbaba's Daily Current Affairs Analysis, IASbaba's Daily Current Affairs Feb 2016, UPSC

IASbaba’s Daily Current Affairs – 20th February, 2016

ECONOMICS

TOPIC:

General studies 2:

Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
Welfare schemes for vulnerable sections by the Centre and State and the Performance of these schemes; Mechanisms, laws, institutions constituted for protection and betterment of these vulnerable sections

General studies 3:

Indian Economy and issues relating to mobilization of resources, growth, development and employment.
Inclusive growth and issues arising from it.
Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.

Labour in the 21^st century

In spite of labour laws been widely studied for almost a decade and various recommendations to re-invent/evolve labour laws in the current leg of globalization, the issues pertaining to welfare of labour and flexibility of the firms to grow in sync with market conditions for better industrial relations, persists even today.
There have been recommendations by the government to reform labour laws in India by highlighting the need for flexibility in Indian labour laws that would give appropriate flexibility to the industry that is essential to compete in international markets.
But the overall attitude has mainly been towards skill enhancement and focus on flexible labour markets rather than assessment of
- Proper enforcement of the laws
- Situation of different categories of employers
- Coverage of the social protection system

Three main labour laws—Major point of debate

Industrial Disputes Act (1947),
Contract Labour Act (1970)
Trade Union Act (1926)

Constitutionally—

Under Article 246 of the Indian constitution, issues related to labour and labour welfare come under List –III that is the Concurrent List
Exceptional matters related to labour and safety in mines and oilfields and industrial disputes concerning union employees come under Central List
In all there are 47 central labour laws and 200 state labour laws

India’s ‘labour problem’

Out of the eight core ILO Conventions against forced labour (slavery)—India refuses to ratify:

C87 (Freedom of Association and Protection of the Right to Organise Convention);
C98 (the Right to Organise and Collective Bargaining Convention);
C138 (Minimum Age Convention)
C182 (Worst Forms of Child Labour Convention)
C131, or the Minimum Wage Fixing Convention

The Annual Global Rights Index (by the International Trade Union Confederation (ITUC)—

Rates 141 countries on 97 indicators derived from ILO standards with rating being on a scale of 1 to 5-plus, based on the degree of respect accorded to workers’ rights
2015:India had a rating of 5, the second-worst category, thereby denoting “no guarantee of rights”

Concerns shouting for Attention—

FICCI (Federation of Indian Chambers of Commerce and Industry) and AIOE (All India Organisation of Employers)—

Pointed out that India’s obsession with an archaic labour policy… is keeping investors away, hindering employment growth and making Indian enterprises uncompetitive
It is the multiplicity (44 Central and 100-odd at the State-level) of labour laws that is pushing workers to the informal sector, as companies seek “to circumvent the rigorous labour policies”

ILO—“labour market flexibility is as high as 93 per cent in India”, meaning that 93 per cent of India’s workforce anyway do not enjoy the protection of India’s 144 labour laws

Industry’s solution to the labour problem: Dilution of these laws so that the mass of informal workers can be employed formally, but without legal protections

Note: There is no nationwide law that recognizes trade union and also there is no compulsion for the employers to enter into a collective bargaining so even though there is a right to form an association or form a trade union, it is not mandatory for an employer to recognize it (Anant et al, 2006)

CTUOs& their display of strength—Mere Tokenism?

Maybe—

In a globalised Indian economy, the centre of gravity has shifted from manufacturing to services
Even in manufacturing, the advent of global supply chains has meant a mass informalisation of employment as multinational enterprises break up the production process and sub-contract to suppliers in different parts of the world

The fatal flaws—CTUOs’ Weaknesses

Political party affiliation: Of the Big Five unions, with a combined claimed membership of over 79 million with the Party affiliations entailing three things:

a restriction of the CTUO’s ability to expand, as it will put off those who do not like its parent party;
Party interests often trump union/labour interests;
Disunity between the differently-affiliated unions

Leadership: Marked by the “bureaucratic mentality” of a labour aristocracy; prefer policy analysis to on-ground organising and have failed to extend their reach to the growing mass of informal workers

But—Unions are unanimous on two points:

Regularisation of contract workers engaged in perennial work
Equal pay for contract workers performing the same job as permanent workers

(sufficient wages, job security, and worker security)

Counting Challenges—

Entry into the IT services sector, marked by little union presence despite demanding work conditions;

Why-

Instant termination of workers involved in unionising activity, creating fear in the minds of the workers
Mind-set of the worker— More payment and good standard of living don’t let them think of themselves as workers

Aim of the Industry:

to legalise and expand contract labour
to develop in-house unions which will dance to the tunes of the management and stay away from CTUOs

The core economic issues are varied:

the capital intensity of Indian industry,
the employment elasticity of economic growth,
the exchange rate strategy,
the level of skills on offer in the labour market,
the ease of doing business,
the structural impediments faced by informal enterprises

Employment in the Indian Manufacturing Sector

The fundamental Disconnect—

Eighty per cent of Indian manufacturing output comes from enterprises in the formal sector while a similar proportion of manufacturing employment is generated by enterprises in the informal sector
Therefore, one set of enterprises accounts for most of the output while another set of enterprises accounts for most of the employment
Has created a labour aristocracy that seeks to protect its privileges but in effect keeps the majority of industrial workers trapped in informal enterprises

Therefore, the government needs to—

Create conditions that encourage large enterprises to take on more workers while making it easier for informal enterprises to grow in scale
The inability to create jobs that allows workers to exit the overcrowded farms has to be taken care of

According to Dr.Rangarajan (2006)—

In order to achieve faster growth rate emphasis should be laid on labour intensive sectors by skill development of the labour force and flexibility of labour laws
Flexibility should not be just related to ‘hire and fire strategy’ and that business units will have to function under legitimate restrictions

IASbaba’s Views:

Challenge—the only viable way to break the cycle of distress is through labour-intensive industrialization, as was done in so many other Asian countries, including China.

Opportunity—

China has begun to make the transition up the value chain by exiting the low-value manufacturing it dominated for nearly two decades.
Chinese wages are rising, the exchange rate could strengthen and the government wants to shift the economic model towards a greater dependence on domestic consumer demand.

India cannot have a more flexible labour market unless the trade unions are taken into confidence and therefore, a discussion and a proper road ahead need to be charted out by taking into confidence the major stakeholders of the economy.

In the wake of international competitiveness and the need for flexibility in labour markets, it becomes increasingly essential to accommodate social security concerns in reform movements. But the sector is marred with lack of appropriate planning, inappropriate coverage, the applicability depends on wage ceilings, number of employees in an establishment, type of establishment, etc. which needs to be taken care of by the government so that there takes place an interaction with changes in other areas of industrial regulation so that factory employment begins to rise in tandem with output.

Connecting the Dots:

What are the serious impediments that bleak the possibility of a proper labour framework to be developed for India? Suggest the way ahead

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