NEW DELHI — After two decades of unprecedented economic growth, India’s government wants to fix what many here see as an anomaly: The telecom and software industries have fueled the country’s rise, but manufacturing has never taken off.
Officials say that India will witness a massive field-to-factory migration of its young workforce in the next decade as education levels and aspirations soar, and that a failure to create low-end industrial jobs could result in social unrest.
Today, only 8.7 million people in this country of a billion-plus are employed in manufacturing. But the government says new regulations being finalized this month could turn India into a China-like manufacturing powerhouse by allowing the setting up of large factories in special industrial zones where labor laws will be more relaxed.
Officials say the zones will make it easier for companies to circumvent a web of more than 150 socialist-era labor laws that have prevented the growth of labor-intensive sectors such as the textile, footwear and toy industries.
“The new manufacturing policy is the unfinished agenda of India’s economic liberalization program, which began in 1991,” said R.P. Singh, an official with the Ministry of Commerce and Industry. “Some of the lingering issues, like labor laws, were considered too sensitive and controversial to touch.”
“While we delayed, China and other Asian economies, which were almost at par with us 30 years ago, have raced ahead. But the writing on the wall is clear. If we don’t do it now, we will be left far behind,” he said.
Domestic and international investors say India’s protectionist labor rules are among the biggest obstacles to setting up and running factories in the country, and they complain about laws that mandate frequent inspections and monitoring of workers’ protections, such as a minimum wage, leave and working hours. They say union rules create bottlenecks that slow production.
“Some of our labor laws date back to the time when the British ruled India, and others are a product of the Soviet-style socialist era when the government was deeply suspicious of private capital,” said R.C. Bhargava, chairman of the largest-selling car company in India, Maruti Suzuki, a subsidiary of Japan’s Suzuki Motor Corp. “Business was seen as an exploiter of workers. So we treated labor with kid gloves.”
Labor rights advocates say that regular inspections are even more important as India’s economy booms and that dismantling the labor laws could weaken unions and lead to exploitation.
“When the government says flexible labor laws for manufacturing hubs, what they really mean is the freedom not to implement labor laws of the land and very little government oversight,” said M.K. Pandhe, vice president of the Center of Indian Trade Unions. “With increased privatization in India, the need is to strengthen our labor laws, not weaken them.”
But even as investors and the government try to loosen laws, workers are pushing for more protections. The government says there were nearly 100 strikes in India last year.
About 800 workers demanding a new union went on strike for 13 days last month at Bhargava’s car factory in Manesar, a fast-growing industrial town outside New Delhi. Current law allows seven workers to register a new trade union, a rule that officials are seeking to change.
“We want longer tea and lunch breaks. We want more off-days,” a 28-year-old assembly line worker said on the condition of anonymity because he was not authorized to speak on behalf of the striking workers. “We want a second union that will ensure we get our rights.”
The company, which says it lost $9 million a day in revenue during the strike, said it would consider some of the strikers’ demands but would not recognize another union. But it took back 11 of the striking workers it fired after senior government officials helped broker a deal to end the work action.