The COVID-19 pandemic has triggered a devastating public health crisis and it has forced the government to put large-scale containment measures and lockdowns in place to mitigate the immediate disasters from the pandemic. The preventive measures have provided valuable time to governments to form critical health infrastructure to minimise future deaths, but social distancing measures have closed almost all factories and workplaces, and crippled global supply chains. Thus, the pandemic has pushed the global economy into a recession (the global economy is set to contract by 3% in the financial year 2020-21 according to the International Monetary Fund) and has adversely affected the livelihoods of almost everyone.
India’s Economic Woes and Vision/Dream
India has enforced one of the strictest lockdowns in the world since 24th March which has brought the manufacturing sector to halt. Hopes for swift recovery after the lockdown are dim as the businesses will suffer due to disruptions in the labour market and supply chains. An unplanned lockdown was announced merely 4 hours before it was enforced. The lack of clarity, vague government guidelines, lack of communication and abundance of misinformation caused panic among the working class, many of whom depend on daily wages. Wage payments were not ensured and there was a widespread fear of shortages. It also triggered a reverse migration of the migrant working population to the rural villages of the labour-surplus states of India like Uttar Pradesh and Bihar. While the industries in employer states such as Maharashtra, Gujarat and Karnataka fear a post-lockdown shortage in labour supply, the labour-surplus states will face the problem of providing a source of livelihood to the returnees. In April, manufacturing production has decreased by 20.6% and the unemployment rate has skyrocketed to 27%. The demand for services is also at an unprecedented low.
On May 12, the Prime Minister announced a stimulus package of Rs. 20 lakh crores (actual fiscal stimulus has been just around 11 lakh crores and the rest are in the form of liquidity injections by the Reserve Bank) for building an ‘Atmanirbhar Bharat’ or a self-reliant India. The bulk of the stimulus has been in the form of credit facilities, so the actual financial burden being borne by the central government is ridiculously low. Most of the package has been in the form of reforms and not immediate relief to the companies and the citizens. However, a more interesting agenda on the government’s list is to provide India as an alternative to China's investors, presuming that multinational companies wish to geographically diversify their production facilities after experiencing the massive disruption of supply chains in China.
On April 28, the Prime Minister urged the Chief Ministers to prepare policies to attract the investment relocating from China. With low tax rates and government incentives, India is an attractive option of the companies. India, according to the government, must compete with the South-east Asian countries to take advantage of this change. Thus, the states have been asked to address the problems of the foreign investors like the bureaucratic red tape, complex land laws, procedural delays and low productivity, to simplify the whole process.
States’ Onslaught on Labour Rights
As India is yet to formulate a policy for easing the nationwide lockdown, the circumstances are being exploited by the state governments to dilute labour rights in the name of reform and investment. The Uttar Pradesh State Cabinet cleared the ‘Temporary Exemption from Certain Labour Laws Ordinance’ to exempt the businesses from all but 3 labour laws in the state’s jurisdiction for 3 years, in the name of getting businesses back on track. Madhya Pradesh promulgated a similar ordinance for providing certain relaxations for the existing and new establishments for 1,000 days. Gujarat has sent a similar ordinance for President’s assent. Furthermore, as many as 10 states have proposed to extend the maximum working hours to 12 or 10 hours from the previous 8 hours, citing the manpower limit to reopen the industrial establishments.
The most disturbing fact of this perverse attempt to erase labour rights is that this idea is not new, but rather a continuation of previous attempts to dilute labour rights on the central level. The Prime Minister had announced, in 2015, a major labour reform by the amalgamation of all 44 central labour laws into 4 codes to boost India’s ease of doing business ranking and promote ‘Make in India’. These codes were identical in spirit to the state-level ordinances, that is, one of curtailment and erosion of labour rights. The codes set an arbitrary minimum wage and floor wages (the limit above which states are directed to set their minimum wage), make it harder for trade unions to negotiate in case of industrial disputes and weaken the industrial inspection process. The promulgation of such ordinances also provides legitimacy to and will act as a precedent for any such future dilution of labour rights.
Is our labour law ‘investor-unfriendly’?
Before forming an opinion on the present scenario of labour, let us take a step back and try to understand why labour law in India is the way it is. The labour legislation of independent India had 2 primary objectives: firstly, to prevent and protect the workers from the rampant exploitation the colonial administration by the loyalist employers and the authorities themselves, and secondly, to provide more bargaining power to the workers in a labour-surplus country since the market could not safeguard their interests, thereby ensure the ‘dignity of labour’.
Therefore, labour law was formed with a premise that businesses will exploit, and labour law seems restrictive to the employers because it provided them with little flexibility in decision-making. As the country matured, labour law grew increasingly complex and lack of flexibility of labour law disproportionately affected the new industrial enterprises. The Indian manufacturing sector remained underdeveloped and could not compete globally. Complex labour law ensured that the benefits of the 1991 Economic Reforms could not be fully reaped. Thus, there is consensus that some kind of labour reform is necessary which enhance the management of industrial workplaces to enhance labour productivity, instead of removal of crucial laws, which will jeopardize the livelihoods of tens of crores of Indian workers.
The Undemocratic Nature of the Removal
It is unclear whether the removal of labour law would increase employment or boost private investment. However, it is particularly concerning that the state governments promulgated these controversial ordinances in the most undemocratic manner. The ordinances were promulgated during the nationwide lockdown, so protests and demonstrations cannot be organized by the workers. The laws have been removed citing the attraction of foreign investment, which is extremely speculative. The governments have done away with the tripartite consultation for amending labour law (tripartite consultation is the discussion among the employers’ organizations, the workers and the government). Moreover, the statutory provision used to remove the protections (Section 5 of the Factories Act) was interpreted only for ‘national security threat’ and/or ‘external aggression’, neither of the conditions has been satisfied in the COVID-19 crisis.
Labour Laws do not need Oversimplification
Oversimplification of labour laws will prove counterproductive for the economy, but more importantly, it will tear the social fabric of the nation. By eroding the rights of the workers, the governments are enabling large-scale exploitation of workers. Erosion of procedural equality between labourers and employers would only lead to unrest in the working class. Removal of laws regarding occupational safety and security will have to reduce the productivity of the workers in the long run and compromise their health.
A crackdown on labour rights is also detrimental to India’s global competitiveness. In the 21st century, the Indian working class needs adequate investment by the government and the employers, to enhance their skills and improve productivity. Allowing employers to have a free hand on working condition and wages, complemented by a lack of adequate investment into the development of human resources (education and health) by the government, would undoubtedly stagnate, if not diminish, the labour productivity. In years to come if such policies gain traction, the socio-economic mobility of the poor workers will cease to exist.
Therefore, this onslaught on labour rights must stop in all fashion. To invite foreign investment, the government needs to focus on improving poor infrastructure, provide a stable business climate, formulate policies that focus on job creation and improve overall labour productivity, instead of an exemption to labour law. The states’ orders are undemocratic and indicate the resurgence of the colonial mindset by passing on the economic burden of the lockdown to the poorest of the poor.
The government is not doing a favour by providing basic rights to the workers, it is rather a part of the broad constitutional framework and its international commitments to prevent the abuse of the ‘health and strength’ of the working class. These laws are socio-economic goals for the advancement of citizens and to ensure the welfare of the people. An investor-friendly business environment does not have to be achieved at the cost of our working class. Ironically, the burden of the economic downturn is being passed on to the people who have already suffered the most from it.
- By Anubhav Mishra
References:
1. Sundar, K. S., & Sapkal, R. S. (2017). Labour law, governance reforms, and protests: Are they legitimate. Economic and Political Weekly, 52(38), 59-66. https://www.epw.in/journal/2017/38/special-articles/labour-law-governance-reforms-and-protests.html
2. Nileena, M.S. (January 6, 2019). Trade Unions protest against Modi’s “pro-corporate” and “anti-people” labour reforms. The Caravan Magazine. https://caravanmagazine.in/policy/trade-unions-against-modi-labour-policies
3. Roychowdhury, Anamitra. (May 18, 2020). Labour Rights are in free fall. The Hindu. https://www.thehindu.com/opinion/lead/labour-rights-are-in-free-fall/article31609817.ece
4. Vaigai, R. & Matthew, Anna (May 15, 2020). Stop the return to laissez-faire. The Hindu. https://www.thehindu.com/opinion/lead/stop-the-return-to-laissez-faire/article31585646.ece
5. Chaudhary, Archana. (May 7, 2020). India Looks to Lure More Than 1,000 U.S. Companies Out of China. BloombergQuint. https://www.bloombergquint.com/economy-finance/india-looks-to-lure-more-than-1-000-u-s-companies-out-of-china
6. Hebbar, Nistula. (May 12, 2020). Narendra Modi announces Rs. 20-lakh-crore economic stimulus package. The Hindu. https://www.thehindu.com/news/national/coronavirus-lockdown-narendra-modi-announces-20-lakh-crore-economic-stimulus-package/article31568822.ece?homepage=true
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