Category Archives: India

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), pp. 211-213:

The poor in India are a vast reserve army of cheap labour. Organized labour in the ‘formal’ sector of the economy is a comparatively small part of the total labour force. In 2003 the public and private sectors together employed 27 million workers. The private sector is the smaller one with 8.4 million but a greater share of the ‘manufacturing’ category with 4.7 million as against only 1.5 million in the public sector. According to the theory of W. Arthur Lewis, in a ‘dual economy’ (traditional and modern) there is a reserve army of labour in the traditional sector which supplies the modem one with a steady flow of new recruits. But the Indian economy is not a dual one: it consists of two parallel economies. Since the reform of 1991, employment in the formal sector has practically stagnated; there has been only a slight shift from the public to the private sector, the first losing and the latter gaining 1 million employees. These figures would confirm the frequent comments on the phenomenon of jobless growth. But, of course, this refers only to the formal sector; the actual growth takes place in the informal sector. In fact, from 1978 to 2000, the share of the informal sector in the total labour force increased slightly from 91.3 to 92.4 million, although one would have expected a decrease of informal labour in a period of steadily increasing economic growth. The wage differential between the two sectors is enormous. For employees in the public sector, official statistics show an average daily per capita rate of Rs 681. According to the National Sample Survey mentioned earlier, the daily wages for male casual labourers in urban areas are Rs 75 and in rural areas Rs 56; the rates for female labourers are Rs 44 and 36 respectively. The figure for the public sector would, of course, include the high salaries of the Class I officials, but they are a small minority when compared to the legions of humble Class IV officials who do manual work or errands for the higher-ups. Nevertheless, even these humble people are head and shoulders above the casual labourers in the informal sector. Moreover, their jobs are secure and permanent, unlike the ‘informal’ jobs, which are subject to the rule of ‘hire and fire’.

Subjection to the rule of ‘hire and fire’ has increased with the growing casualization of informal labour. New forms of contracting labour have developed which permit the employer to shift the onus of hiring and firing casual labour to agents who are told how many workers are needed at any given time. Casualization has particularly affected women workers who were previously not very active in the labour market but have joined it in recent years in increasing numbers. Concerned social scientists have coined the term ‘feminization of poverty’ in order to characterize this phenomenon.

The ‘informal’ proletarians are not protected by any trade unions, which for good reasons concentrate on the organized sector of the economy. Very few of the recognized trade unions can depend on regular fees paid by their members. Accordingly, union leaders must look for other sources of income. They usually squeeze the employers by threatening to stir up trouble. There is no collective bargaining in India: wages are set by officially appointed tribunals and there are also tribunals which try the cases of individual workers who have been made redundant or have not been paid the wages due to them. Therefore most labour leaders are lawyers who spend their time pleading before those tribunals. The informal proletariat has no contact with such tribunals or lawyers.

The usual staff of a workshop in the informal sector consists of the boss and fewer than ten workers. In small firms which operate as subcontractors for manufacturers, the boss may even be an engineering graduate. Capital investment in such workshops is minimal so very often they band together and help each other out. One has a lathe, the other a drilling machine, etc.; if the piece of work requires both, it is carried from one shop to the other. The ignorant observer may think that this cluster of workshops is a slum, but on closer inspection he will be surprised to see the quality and variety of their products. Bigger firms rely on such subcontractors for two reasons: first of all, they can keep the number of workers and the investment in machines limited; and, secondly, if there is a slack in demand they can cut the orders farmed out to the subcontractors. This explains the phenomenon of jobless growth in the organized sector. The huge number of subcontractors who have the reserve army of labour on their doorstep shield the organized sector against risks but can also respond very quickly to increased demand. There is, however, a growing gap between labour productivity in the organized and in the informal sectors. In 1983 labour in the organized sector was about six times more productive than that in the informal one; by 1999 the differential had increased to nine times. This would also account for the wage differentials between the two sectors.

The wages paid by subcontractors, particularly if they work for manufacturers producing cars or machine tools, have to be higher than the wages of casual labourers mentioned above, but they would still be much lower than those in the organized sector. The qualifications of the informal proletariat working for subcontractors range from those of skilled workers to that of untrained people. The skilled workers in workshops would be the ‘creamy layer’ of the informal proletariat and they would be above the poverty line. But the great majority of the reserve army of informal labour are quite poor, something that would be particularly true of the many landless labourers who are at the beck and call of the landowning peasantry. Earlier systems of permanent attachment of such labour to the households of their employers have long since disintegrated because the employer can always find casual labour and does not need to retain labourers in the off-season. Even at times when the harvest or other seasonal operations suddenly require additional labour, there are nowadays migrant labourers who make themselves available for seasonal employment. Workers from Tamil Nadu will show up in the Punjab or elsewhere at a distance of 1,500 kilometres from their home. Here, too, the informal proletariat shows its usefulness as a reserve army of labour. About 43 per cent of India’s rural population are landless. If one deducts from this about 8 per cent for traders, carters, and so on there would still be 35 per cent of labourers who depend on their daily wages.

Of course, ‘casualization’ is hardly limited to India or to informal sectors of large economies. One report last year estimated that 70% of the faculty in American universities now depend on part-time or limited-term contracts. So, to twist the clause that begins this passage: An oversupply of postgraduate degrees provides a vast reserve army of cheap labour for universities.

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), pp. 157-160:

Next to airports, India’s seaports require thoroughgoing modernization. The biggest and most famous of them all, Mumbai, has a notorious reputation for terrible delays and incompetent handling of goods. A few years ago, turnaround time was about eight days, regardless of the size of the vessel; this has improved somewhat but even now about four days are required to load or unload a ship. This is due to deliberate negligence as the port earns more by collecting demurrage charges than by any other means. The trick of this trade is the stranglehold which Port Authority labour has on the loading and unloading of goods. In most other ports around the world, the port authority is merely a landlord, providing berths and cranes, etc. but no labour, with loading and unloading done by labour hired by the shipowner or his agent. The port authority with ‘dedicated’ labour is a British legacy. In British ports it may have made sense to retain a labour force specialized in loading and unloading ships, particularly in the past when most of this work was not mechanized. Nobody would have thought that delay rather than speed would be the result of retaining specialized labour. Making money on demurrage charges is, of course, a flagrant example of being penny-wise and pound-foolish. No shipowner in his right mind would enter a port such as Mumbai unless he absolutely has to because it is his destination. Bulk breaking is taking place elsewhere in efficient ports like Singapore or Colombo. Many a ship with only part of its load to be delivered to India would rather call at those ports than enter an Indian port. Jawaharlal Nehru Port across the bay from the old port of Mumbai is supposed to be somewhat more efficient than the old one, but it is first and foremost a container port under the management of the Indian railways and is thus not a direct competitor of the old port. Although Jawaharlal Nehru Port is India’s largest container port, it handles only about 10 per cent of the freight handled by Hong Kong, the world’s largest port of this kind. The inefficiency of Indian ports is not only delaying imports, it is also harming the export trade. In the old days of ‘export pessimism’ this was ignored, but now when producers in India wish to export some of their production to achieve economies of scale, they may give up such plans as their goods get stuck in the port….

The story of Sunil Bharti Mittal, who is now the biggest private operator in this field, is a good example of the rise of the new type of Indian telecom entrepreneur. He is not related to the famous steel tycoon Lakshmi Niwas Mittal, and his rather unusual family name Bharti is made up. His father, who belonged to a caste of traders, married a woman of a higher caste. This inter-caste marriage was frowned upon at that time and the couple adopted the name Bharti. Sunil started making cycle parts in Ludhiana. In 1983 when many imports were still banned, he hit upon the idea of manufacturing push-button telephones and then launched his Airtel brand of mobile phones in 1995. From making phones it was only one further step to acquiring two mobile phone licences and one fixed net licence. Subsequently Mittal expanded his operations and now provides his services in all 23 mobile telephone circles of India in which field he has overtaken the public sector firm BSNL. In order to raise the capital for this relentless expansion he linked up with foreign investors. In 2001 the American firm Warburg Pincus acquired about 6 per cent of Bharti Televentures; later the Singapore firm SingTel and the British firm Vodafone also acquired shares in Mittal’s company, but they are all minority shareholders. Meanwhile Sunil Mittal dominates the Indian telecom scene and continues to win prizes both in his personal capacity as an exemplary entrepreneur and for his company as the best in its field. He has also pioneered broadband connectivity in various fields and is always a step ahead in adopting new technologies. Mittal had started from scratch as an innovative entrepreneur. As he has stated, he was inspired by Mahatma Gandhi’s words: ‘First they ignore you, then they laugh at you, then they fight you, and then they lose.’

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), pp. 100-101:

Tiruppur, a town near Coimbatore in Tamil Nadu, has emerged as a major centre of knitwear production and Sharad Chari has made a fascinating study of the mode of production in this town. He has described the emergence of ‘fraternal capital’ as a typical form of cooperation among small-scale entrepreneurs in this field. Most of the owners of the small workshops and even a large number of their employees belong to the Gounder caste of peasants who have made a successful transition to industrial production. The Gounder peasants are used to hard work in intensive agriculture where the landholder and his labourers are working together and this style of operations has been transferred to the shop floor where the owner is always present, usually controlling the stitching table where the cloth is converted into garments. Gounders who want to emphasise the special features of their work often make it appear as a kind of ‘work ethic’. Actually it helps them to justify the control of labour in their small-scale industry. They do not strive for economies of scale as these would be diseconomies under the official rules favouring small-scale enterprises. Accordingly, successful entrepreneurs do not invest their capital in expanding their production, but in setting up ‘fraternal’ enterprises run by other members of the Gounder caste, albeit these people are not necessarily related to them in terms of family ties. Total production has thus grown very quickly and whereas earlier only men worked in this industry, more and more women have been recruited in recent years. Most workers are paid by piece rate or they work under various types of contracts rather than receiving regular wages.

When production for export increased, a new elite of export merchants arose from the ranks of these small entrepreneurs. Smart young men in business suits, wearing sunglasses, can be seen chatting with their relatives on the shop floor who provide them with the material which they market in New York or elsewhere. Many of these exporters are assemblers rather than producers. The links of fraternal capital connect all these people and make it difficult for outsiders to penetrate this business. In this way fraternal capital provides horizontal and vertical linkages which are otherwise only found in big corporations. Decentralized supervision – and exploitation – of labour is an asset in this type of business organization. Contracting in and out enables the small entrepreneurs to respond to changing demand. Such an organization helps to defend the class of entrepreneurs against labour unions, which have a strong tradition in this area.

Another interesting example of the control of labour in this region is the putting-out system practised by a producer of rag carpets in the adjacent Erode District. He uses rags from the hosiery industry and gets carpets woven for the big Swedish firm IKEA. Initially it was traditional weavers who got involved in this business, but soon the putting-out system was extended to villages whose supply of labour was of a very different kind. In a Gounder village affected by water scarcity, the peasants took up carpet weaving in order to survive. In another village inhabited by migrant construction workers, the women who had also participated in this work shifted to carpet weaving, which they could do at home. Tapping labour resources of different kinds for export production is a characteristic feature of the informal sector of India’s economy.

Similar features of decentralized production and exploitation of labour can be observed in the garment industry of Ahmadabad, a city once famous for its large composite textile mills, most of which have long since closed down or are ‘sick‘. But in the 1990s hundreds of small workshops producing ready-made garments sprang up. Their production is supplemented by home-based women who stitch garments for entrepreneurs who operate a putting-out system. These women had been used to stitching petticoats and children’s wear; they own very simple sewing machines. When they were required to stitch more complicated garments for export their skills and their machines often proved insufficient for the new tasks. They usually earn piece rates which amount to about 2 to 5 per cent of the value of the articles they produce. With such low wages they can hardly afford to invest in add-ons to their sewing machine for new lines of production. Nevertheless, they somehow managed to get on with their work. This area of Gujarat is also famous for its embroidery, which has been successfully adapted to the requirements of export production, a line of production in which India is ahead of China.