Whose Side Was I On?

In the summer of 2011, when India was preparing its 12th Five Year Plan (which turned out to be its last one because the Planning Commission was closed sine die in 2014), the Principal Secretary for Labour and Employment in the Government of Maharashtra asked me to chair a meeting of heads of labour unions and industry associations in Mumbai.

I had been appointed a Member of the Planning Commission in 2009 by the then Prime Minister, Dr Manmohan Singh, who is widely acclaimed as the father of India’s path-breaking pro-market reforms in 1991. He had asked me to prepare a plan for creating more industry, manufacturing and jobs in the country. Indian industry had been stifled by a rigidly controlled system of industrial licencing until the late 1980s. Bureaucrats in Delhi determined what had to be produced, who would be permitted to produce it, and how much of it they could produce. There was a huge pent-up demand for many things but insufficient production and limited options. For example, only two makes of cars were available, and even though they were of shoddy quality, customers waited for many years to get an allotment because they had no other choice. Telephone connections from the government controlled monopoly and took many years to materialize, with a lot of palm greasing required to expedite them a bit.

The 1991 reforms abolished the system of industrial licencing. Investors and producers became free to meet the pentup demands. International trade was thrown open. Foreignmade goods, which Indian consumers had been yearning for, began to flow in. Many models of TVs, electronic goods, home appliances and cars, produced in Japan, Korea, Europe and the US, were now on offer. Indian consumers had never had it so good. From their perspective, the economic reforms were a great success.

The overall economy grew well in the years following the economic reforms. However, the growth was fuelled by a remarkable growth of the service sector and not manufacturing.

There was speculation that India may have leap-frogged the historical growth pattern of developing economies, which transitioned from a dominance of the agricultural sector to growth of labour-intensive manufacturing to absorb labour displaced by improvements in productivity in agriculture, and only then to expansion of the services sector as manufacturing productivity also improved. China, the other billion population developing economy, had followed the historical pattern, and had become the factory of the world and, consequently, had achieved a remarkable reduction in poverty.

India’s manufacturing sector, which had contributed to about 16 per cent of India’s GDP in 1991, remained moribund, despite growth and reforms, whose principal thrust was to release the brakes and remove controls on the growth of India’s industrial and manufacturing sectors. This had resulted in a slower growth of jobs and employment in spite of high overall growth. There was a great concern that India was beginning to experience ‘jobless growth’, the implications of which had begun to worry the PM and India’s economic policy-makers. India had the largest population of young persons (under 30 years old) in the world that, according to economists, would provide the Indian economy with a ‘demographic dividend’. However, for these young persons to contribute to the demographic dividend, they must be employed and earn incomes. Otherwise, by their underemployment, and their inability to acquire the consumer goodies that were becoming available to Indian citizens with the opening up of the economy, and to which they aspired, their dissatisfactions could lead to a demographic disaster. Indeed, signals of an impending disaster were appearing in various parts of the country, with unemployed youth participating in political protest movements, some turning violent.

India needed to create more jobs. Indian policy-makers would have to go back to the drawing board, to understand the factors crimping the growth of India’s manufacturing sector. The PM expected me to understand the constraints on growth of the manufacturing sector from its stakeholders.

Amongst these constraints, a principal one, according to investors and employers, was the tangle of Indian labour laws. There were too many, several were antiquated and generally badly administered, with government inspectors harassing employers, especially small entrepreneurs. Therefore, employers were reluctant to employ more people and invest in the growth of their enterprises. They demanded a greater freedom to ‘hire and fire’, which, they said, would encourage them to take risks by investing more in their enterprises.

The unions also demanded improvements in the administration of labour laws. They insisted that the laws did not provide sufficient social security to employees, which would become even more necessary if employers were to be given more freedom to hire and fire employees. Moreover, they complained, employers were circumventing the laws, by hiring workers through labour contractors, and were not providing these workers with fair wages, statutory benefits and even the required safety equipment in many cases.

There was a stand-off between unions and employers in reforming the labour laws. The government was unable to get them to agree. The Indian states have a large, constitutionally granted role in the framing of and the administration of labour laws. As the largest manufacturing state in India, Maharashtra was expected to play a leading role in the reframing of labour laws. Hence, the state’s Principal Secretary for Labour and Employment, Dr Kavita Gupta, invited me to chair a meeting between the heads of labour unions and industry associations to agree to an agenda for the reforms.

The Meeting
I arrived early for the meeting before all participants. Dr Gupta took me into the meeting room and sat with me at the head of a long, large conference table. There she briefed me about who she anticipated would attend the meeting. She expected about a dozen representatives each from unions and industry associations. She knew them and had met them in many meetings, both separately and together.

I asked her about her expectations from the meeting. She said she wanted them to support some changes that she sought to make to improve the effectiveness of labour regulations. I then asked her about her thoughts on my role in the meeting. She said I was a very senior person in the Central government—at the level of a minister of state and the participants were keen to hear my views. I should convey that the government was very sincere in bringing about reforms in labour regulations. I should also urge the unions and industrialists to work together to improve industrial relations so that the economy could grow faster. ‘Say the same blasé things that senior government officials say,’ I thought to myself. ‘They must have heard these platitudes hundreds of times.’

The participants entered the room soon afterwards through the single door opposite the head of the table. As they came in, the union representatives were ushered towards one side of the table and the industry representatives to the other. Participants on each side shook hands with each other, and some even hugged each other warmly. They smiled and waved politely at participants on the other side. The setting of the room had already divided the participants into two sides.

Dr Gupta commenced the meeting with a welcome to all and especially to me. She said the agenda was to obtain stakeholders’ support for the improvements being made by the labour department, and to discuss wider cooperation amongst stakeholders and the government. She had invited me to chair the discussions. She asked the participants to introduce themselves and make very brief opening comments if they wished to.

The union side went first. Some spoke very briefly, others longer. Then the industry representatives spoke. Since they were going second, some of them reacted to statements made from the union side, which provoked some union leaders to respond. Very soon, mere introductions were in danger of slipping into a tense debate even before the meeting could get to its stated agenda.

I had been taking notes of the names and what each person had said. The introductions had gone around the room from Dr Gupta on my left, and had come back to me from the other side. It seemed it was my turn to say something and Dr Gupta asked me if I had any opening remarks to make.

I turned to the union side and said, ‘I have heard and noted what you have said. I want to ask you how many times before this meeting have you said the same things to industry representatives at other meetings?’ The answer was, ‘A hundred times! We keep saying these things but “they” do not hear us!’ Then I asked the industry side the same question. The answer was the same, ‘A hundred times, but “they” are unwilling to hear us!’

I posed a question to all. ‘What then have you achieved by saying the same things yet again if you are not being heard?’ ‘Moreover’, I said, ‘I don’t think you have really listened to what others are saying. Let me read from my notes of what I have heard so far.’

I pointed out that amongst rhetorical flourishes from some on the union side about exploitation of labour; there were other serious comments too. For example, some union leaders had said that industries in India must become competitive with foreign producers so that jobs would be created in the country. Some had said that employers must invest in their employees’ skills and welfare so as to improve the productivity of the workforce.

From the employers’ side, I had heard some say that unions were only interested in protecting the high wages and job security of their own union members. Whereas, I pointed out, many union leaders were talking about the need to improve working conditions and wages of casual workers who were not members of their unions. I pointed out to the union side’s observations made by some on the employers’ side about the need for better cooperation amongst employers and unions to improve productivity and skill levels.

As I narrated what I had heard each side say, I noticed something quite interesting. When I mentioned that the unions were not focused on their own members only, contrary to the widespread view, some industry participants looked alarmed.

‘Whose side was I on?’ they seemed to question. When I said that many industry participants seemed genuinely interested in the welfare of all their workers, some union leaders, it seemed to me, silently said to themselves, ‘We knew he was always on the side of industries.’ The question was—whose side was I on?