The labour fault lines in India’s growth story

India’s IT services sector has been a star performer. It has turned raw engineers into seasoned professionals and seized contracts and opportunities across the globe. On the other hand, India’s small and medium enterprises (SME) sector is the silent backbone of the Indian economy. If IT is about fewer firms with millions of employees, the SME sector is all about millions of firms, each with a smaller number of workers. Together, they offer two lenses on India’s growth story. Both contribute to making India the world’s fourth-largest economy – a point of fact that has been fashioned into a matter of pride.

But this happy story has a twist. Seen through the lens of layoffs that are now in the news, the big and the small both offer a picture that is less pretty, and in part may be downright ugly. In the IT services sector, where the workforce is being trimmed, regulators can no longer ignore the allegations of forced resignations, downright threats, and abuse of due process. Not all that is being alleged is true, but equally, the complaints are not without substance. Protests and social turmoil have come faster than expected.

If this is one side of an India story that takes a stand against layoffs, there is a lesser-known story of workers who want to be laid off and freed of their horrible work burdens but are not allowed to go home. Last week, 13 migrant workers from Jharkhand’s East Singhbhum district, harassed by their employers, were allowed to leave for home only after an intervention from the state government. PTI reported that a company in the Morbi district of Gujarat denied them food and other facilities and refused salaries when they wanted to leave. The 13 had to be “rescued” after the Jharkhand government’s labour department intervened, not only to let them return home but also to get their dues: a total of Rs 68,000 for the 13 workers. The company is now reported to be under investigation in Gujarat.

Yet, this is not the first time that migrant workers, notably tribals seeking employment away from home, are forced to work virtually as bonded labour. News reports abound of how companies in small units have brought in labour and exploited them for work at low wages and with little regard for their health, working conditions, or even the willingness to serve.

Forced exits in the IT sector and forced work in smaller shops and factories are two worlds that make one story of India’s growth trajectory. Both contribute to growth but also raise questions on work standards and serve to reinforce the traditional Indian suspicion of the private sector.

This anti-market sentiment limits trust in the private sector and sets political limits to the agenda of privatisation and liberalisation. Crony capitalism and the rise of a favoured few place further burdens on the trust capital, eroding the faith of the large mass of people in the capacity of the private sector to do good for people and society while doing well for shareholders.

When companies see they can get away with a violation of labour laws, erode the dignity of workers, or do worse with their workforce, more violations of this kind will follow. The only antidote is to impose exemplary costs on businesses that have little regard for people and to send the message that violations will be met with firm and swift action. Such a resolve will help the citizenry see that while the private sector is all-powerful given its resources, it will be held to the same standards of law as ordinary workers.

A punishing work culture

If a sacking is masked as a resignation, as is being alleged in the case of IT layoffs, this is a serious violation of the laws of the land. If people are brought from remote areas through brokers and employed as slave labour, as alleged in the case of the manufacturing unit in Gujarat, the hirers ought to be put out of business for life and sent to jail. Yet, the slide to today has come from a slippery slope where labour rights have been eroded bit by bit in the name of liberalisation, and worker contractisation has reached a new level. A paper in the Indian Council for Research on International Economic Relations noted: “Firms appear to be using contract workers to their strategic advantage against unionised directly hired workers to keep their bargaining power and wage demand in check.”

In the IT services sector, for example, it is not uncommon to make software engineers work for more than eight hours a day while paying them only for eight. This is brutal and illegal, but has been normalised. Just as working time less than the required is recorded and accounted, time more than usual needs to be recorded and paid for. But such is the state of affairs that this simple point of morality has been ignored by companies that file their accounts in compliance with International Financial Reporting Standards, or IFRS.

None of this is to argue that companies cannot lay off workers or retrain or re-assign them. The trouble is with a work culture that in India has led to a top-down approach of a commander-in-chief in the role of a CEO and a rigid hierarchy at a time when worker unions have been robbed of their clout. Managements work without meaningful oversight that comes from the shop floor.

This, then, is a valuable example of systems at work – a change thought to be better turns out to make matters worse. Unions were seen as stumbling blocks to growth and vibrancy. Regulation is seen as limiting business. But without active and vibrant unions, and with a pliant officialdom ready to please business, business may be less vibrant and secure than ever.

(The writer is a journalist and faculty member at SPJIMR; Syndicate: The Billion Press)

(Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.)

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