The Gurgaon riots call for faster labour reform

No time like now to clean up India’s labour laws

In most parts of the world where they operate, banks do not employ thuggish individuals to encourage credit card defaulters to settle their outstanding balances. In India they do. This creates situations that can go easily out of hand. Should a credit-card defaulter claim that he attacked the ‘debt collection executive’ in self defence it would be believable. Should the thug claim that he returned the compliment, again in self-defence, that would ring true too. In such circumstances, pinning down the guilty party becomes a rather tough task. But as long as India’s legal framework does not provide an efficient avenue for recovering credit, banks will be forced to use measures that should ideally have no place in civilised society.

So is it with labour laws. That is why it is unfortunate that after the recent riots at the Honda motorcycle factory in Gurgaon, an unedifying and certainly unrepresentative example of India’s labour relations, some analysts predict that India’s much awaited labour reforms are likely to be stalled, yet again. That would be a grave mistake. If anything, the Gurgaon incident is a wake-up call to the Indian government to speed up labour reform. The existing maze of labour legislation only encourages bureaucratic rent-seeking and cynical trade-unionism and comes at the cost of greater employment and economic growth. And it also ends up creating the conditions for that occasional riot to break out.

More than a decade ago, as finance minister, Dr Manmohan Singh used another moment of adversity to unshackle the Indian economy. Now, as prime minister, he has an opportunity to do the same with employment. Instead of reacting like yet another cynical Congress party leader, Sonia Gandhi would do well to emulate the example of Dr Singh’s former boss, P V Narasimha Rao, and provide political cover as the good economist gets on with his job.

15 thoughts on “The Gurgaon riots call for faster labour reform”

  1. Agree with you on the importance of labour reforms.

    If India has to progress, then Trade Unions have to be put in place.

    But, I am sure it won’t happen during this government.

    I am also amazed with your confidence in Manmohan Singh, who is a dummy prime minister at best.

    Also, Sonia Gandhi can not be compared with PV Narsimha Rao, if not for Gandhi tag, she would be serving pizza.

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  3. Best way to reform labor laws is to delegate them to the state-level and remove them from the Union Government. I bet even Communists will be hesitant to enact such a draconian laws in West Bengal or Kerala.

  4. In terms of labour laws, nothing has moved in India and it is not likely to change in the coming days. The damage to the economy is incalculable.

    It is true that low wage rates in a developing economy are exploitative. Different countries have used different routes for tacking the problem. Korea, for example, went for a two-pronged approach, universal education and fast growth (something China is trying to do now) without bothering about minimum wages etc. True, workers suffered for a while, but higher growth brought by highly flexible policy absorbed the entire labour force (during 1965-1975) and wage rates rose at a much faster rate than GDP growth afterwards till 1997.

    India chose a different policy, a distributive justice. In simpler words, how to grab a larger share of the pie instead of growing the pie. The result has been that the entire economy was held hostage during the “Hindu Rate” period by bureaucrats and a few million organized sector workers, while the unorganized sector labour suffered. Organized sector wage rates rose faster than GDP growth rate during the entire period, a highly atypical scene for a country where large number of people were unemployed.

    You hit the nail bang on the head when you said that the stupid laws have created huge amount of rent seeking. But the nexus is still too strong to break. The nexus of the leftists, the bureaucracy and the organized sector labour is still too powerful and it will prevent any change.

  5. Neeraj above does a great dis-service to the Cha-cha of the nation by branding him implicitly as “Hindu” by declaring “Nehru rate” of economic growth “Hindu rate”. Nehru must be spinning in his grave (sic) to hear his economic policies declared as “Hindu.” Thank you for your kind consideration.

  6. The Gurgaon riots has started debates over Labour Laws, unruly Unions and Politicians taking advantage of the situation. However one basic fact is not being considered here. When HR fails, IR comes in the picture. Good companies, good HR managers realise this and create an environment of trust and transparency in their dealings with workmen. Every employee comes to earn a living and have a peaceful and happy family life. To create trouble is not their objective. Illeteracy, lack of information and knowledge creates problems. Good Managers educate workers, nurture them to increase productivity and their standard of living. Whatever changes in labour Laws will be made (if they are made, people will behave the way they do. It is creation of a transparent, understanding, learning and caring work enviornment that will lead to all round development, leading to a peaceful industrial scenerio.

  7. Yes, Iagree that there is an urgent need to reform labour laws. One must keep in mind that ” Work IS Worship”. Work increases productivity must for any nation to progress in this competitive world. We must also remember that in country like India where gap between haves and havenots is increaseing day by day any reform against the interest of working class will have a negative effect. Therefore point to ponder is to balance reforms and bridge the gap.

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  9. i do not know whether labour reforms means only allowing more and more contractual labour with freedom of the employer to hire and fire them whenever they wish and that too in an enviornment of total absence of social security like e.s.i., p.f. and gratuity. if it is so, we will not take much time to loose our family based socity. such a loss is sure to lead us to loose the advantage of cheap labour as the breaking down of family will result in a rise in cost of living.

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