Employment, Unemployment And L

Employment, Unemployment And Labour Laws in India-
Emerging Issues and Challenges

DR. TARUN DAS, Economic Adviser, Ministry of Finance, India.

Abstract

Despite various studies done in India indicating tangible benefits from liberalisation of labour markets, Indian labour laws still remain highly restrictive due to political economy constraints. India has not achieved remarkable improvement in manufacturing growth. Although industrial output has grown at a faster rate than before, employment growth has decelerated in the recent years. This suggests that labour reforms are necessary to allow for larger investments in manufacturing. Manufacturing growth is crucial for the absorption of semi-skilled and unskilled workers and to reduce the dependency of labour on agriculture, which employs 58% of labour force but contributes only 20% of GDP.

1. Labour Force and Unemployment

India’s labour force is estimated to be approximately 375 million in 2002 and is expected to increase by 7 to 8.5 million per year in the first decade of this century and will increase by a total of about 160-170 million by 2020, i.e., 2.0 percent per annum. Approximately 35 million persons in 2002 are unemployed of which approximately three-fourth of the unemployed is in rural areas and three-fifth among them are educated. (Planning Commission: Vision 2020).

As per the estimates made by the Planning Commission on the basis of NSSO surveys, overall unemployment rate declined from 8.3 percent in 1983 to 6 percent in 1993-94 but increased to 7.3 percent in 1999-2000 (Table-1). There were similar trends in both rural and urban sectors with urban unemployment rates being higher than rural unemployment rates every year. During 1993-2000, the rate of increase of unemployed persons in the rural areas at 5.3 percent was significantly higher than that at 3.5 percent in urban sector. This was due to basically stagnation of agricultural employment during this period.

Table-1: Past and present macro-scenario on employment and unemployment
(CDS Basis) (Person years) (Million) Growth per annum (%) 1983 1993-94 1999-2000 1983 to 1993-94 1993-94 to 1999-2000 All India Population
Labour Force
Workforce
Unemployment Rate (%)
No. of unemployed 718
261
239
8.3
22 894
336
316
6.0
20 1004
363
337
7.3
27 2.0
2.4
2.7

-0.1 2.0
1.3
1.1

4.7 Source: Planning Commission
Persons employed are categorized into three main groups viz. self employed, regular wage/ salaried and casual labour. Table-2 indicates that more than half of the employed in the rural areas are self-employed, and the proportion of self-employed in the rural sector increased for both males and females in 1990-2000, while casual employment remains more or less invariant. In the urban area, the proportion of self employed slightly increased for males but decreased appreciably for females. On the other hand, the proportion of the regular wage earners decreased for the males but increased for females.

Table-2 Percentage distribution of usually employed by status of employment Males Females 1990-91 2000-01 1990-91 2000-01 Rural Self-employed 55.7 58.9 58.6 59.3 Reg.wage/ salaried 12.8 9.5 3.8 3.2 Casual labour 31.5 31.6 37.6 37.5 Total 100.0 100.0 100.0 100.0 Urban Self-employed 40.7 41.4 49.0 44.4 Reg.wage/ salaried 44.2 41.1 25.9 31.5 Casual labour 15.1 17.5 25.1 24.1 Total 100.0 100.0 100.0 100.0

2. Open unemployment and underemployment

Open unemployment is not a major problem in India. Out of a labour force of 406 million, 397 million were employed leaving 9 million openly unemployed in 2000. However, employment is characterized by very low quality of employment and low levels of productivity. About 31 percent of the employed live blow the poverty line. There is no significant growth of regular employment. Organised employment as a proportion of total employment declined from 9 percent in 1993-94 to 7 percent in 1999-2000. Significant employment is taking place in services sectors and small and medium enterprises. Main growth was observed in casual or contractual employment. Self-employment has not also increased significantly during 1993-2000. Educated unemployment at 14.7% is much higher than normal unemployment at 2.2%.

3. Sectoral composition of employment

As per the results of the latest full survey (55th Round in 1999-2000), the rate of employment growth decelerated from 2.7 percent per annum in 1983-1994 to 1.1 percent per annum in 1994-2000 (Table-3). The decline in the employment growth rate in the 1990s was associated with a higher growth in GDP indicating a decline in the labour intensity of production. Some of the important findings emerging from the 55th Round (1999-2000) are:
(a) The decline in the growth rate of employment was associated with a sharp decline in the growth rate of the labour force.
(b) As in the past, the share of casual labour in total employment went up.
(c) The number of unemployed increased from 20 million in 1993-94 to 27 million in 1999-2000.
(d) The decline in the employment growth in 1994-2000 was attributable to a stagnation of employment in agriculture, resulting in a drop of the share of agriculture in total employment from 60 percent in 1993-94 to 57 percent in 1999-2000.
(e) On the other hand, employment growth in all the sub-sectors within services, such as trade, hotels, restaurant, transport, storage, communication and financial and business services, (except community, social and personal services having negative growth rate) exceeded 5 percent per annum (Table-4). This refutes criticisms by some economists that the substantial growth of the service sectors have created unemployment. In fact, services are not only fastest growing, but also more employment generating. Consequently, the share of service sectors in employment increased from 21 per cent in 1983 to 26 percent in 1999-2000.

Table-3: Employment growth rates in 1972-2000 (percent)

Average Annual Growth rate (percent) Employment Elasticity w.r.t. GDP Period Population Labor force Employment GDP 1972-1978 2.27 2.94 2.73 3.9 0.71 1977-1983 2.19 2.04 2.17 4.0 0.54 1983-1988 2.14 1.74 1.54 4.9 0.31 1987-1994 2.10 2.29 2.43 5.6 0.44 1994-2000 1.93 1.03 1.07 6.0 0.18 Source: Planning Commission, Government of India.

Table-4 Sectoral Employment in 1983 to 2000

Employment (percent to total)
Annual growth rate (%) Sector 1983 1987-88 1993-94 1999-00 1983
to
1987-88 1987-88 to
1993-94 1983
to 1993-94 1993-94 to
1999-00 Agriculture 63.2 60.1 60.4 56.7 1.8 2.6 2.2 0.02 Mining & quarrying 0.7 0.9 0.8 0.7 7.4 1.0 3.7 -1.9 Manufacturing 11.6 11.9 11.1 12.1 3.6 1.2 2.3 2.6 Electricity, gas, water 0.3 0.3 0.5 0.3 2.9 7.2 5.3 -3.6 Construction 3.0 4.4 3.5 4.4 12.1 -1.4 4.2 5.2 Trade, hotels, restaurant 7.6 8.3 8.5 11.1 4.9 3.0 3.8 5.7 Transport, communication 2.9 3.0 3.1 4.1 3.2 3.5 3.4 5.5 Financial, real estate 0.9 1.0 1.1 1.4 4.7 4.5 4.6 5.4 Community/social services 9.8 10.1 11.1 9.2 3.6 4.1 3.6 -2.1 All Sector 100 100 100 100 2.9 2.5 2.7 1.1 Source: Planning Commission, Government of India.
4. Causes and Consequences of Unemployment
4.1 Factors responsible for unemployment

Any strategy to improve the condition of the poor hinges on improving the labour market, since income from work and quality of work are the main determinants of the living conditions of the poor (World Bank 1996). India is endowed with an abundant and technologically skilled labour force, and is ranked first for both these criteria in the Global Competitiveness Report (GCR). However, India’s labour market has low degree of labour market flexibility in terms of deployment of human resources, work practices, and wages. Various studies (Anant 2005, Debroy 1997; Fallon and Lucas 1993; ILO 1999; OECD 1995; Surendra Nath 2005) suggest that such rigidities constrain the effective redeployment of labour during the process of industrial restructuring and changes in demand and technology, and act as a disincentive for employment creation. An industry survey and discussions with industrialists also identify labour regulation as the second highest obstacle to the operation and growth of business (World Bank 2000).

Average labour intensity in unregistered manufacturing increased from an average of 59.3 percent over 1988-9 to 1990-1 to 62.4 percent over 1993-4 to 1995-6 (World Bank 1998). Hence, had labour markets functioned more flexibly, pensions been more mobile, and legislation been more conducive, the organized sector might have occupied a more prominent share of the work force. Formal sector employees might have grown more rapidly and been more mobile, and the benefits of more formal employment shared across a larger number of employees, including women, who have been unable to participate fully in the labour market.

Rigid labour laws and high protection of labour encouraged increasingly capital-intensive industries (Gangopadhyay and Wadhwa 1998). Labour legislation and public sector employment gave employment protection and relatively high wages to the few employed in the formal sector, which constitutes only 8 percent of total labour force. In addition, labour mobility across sectors was hindered by the pension system in the formal sector, pensions are not mobile across jobs and many years of work are needed before an employee becomes eligible for a pension.

4.2 Wage rate and employment

Wage is a vital factor determining employment. Although wage rate and employment are inversely related (Table-5), rise in wage is necessary for growth in a developing economy as higher wages increase purchasing power of workers and thereby enhance effective demand for goods and services, which in turn pushes up employment. Several studies have indicated that low employment elasticity in India is due to relatively high wage rate, low productivity, shift in factor price in favour of capital and labour market distortions caused by both government regulations and private institutions. Table-5 indicates that the growth in wages was very high across industries in the pre-reforms period than in post-reforms period.

Table-5 Real wage growth rates and Employment elasticity
Sectors Real wage growth rates
Elasticity of employ-ment to wage rate Elasticity of employ-ment to output 1983
to 1993-94 1993-94 to
1999-00 1993-94
1999-00 1993-94
1999-00 Agriculture 14.3 1.4 -1.36 -1.35 0.93 1.06 Mining & quarrying 8.0 6.1 -0.17 -0.67 1.04 0.55 Manufacturing 12.4 7.4 -0.85 -0.97 1.08 0.99 Electricity, gas, water 8.9 8.3 0.23 -0.92 0.71 0.73 Construction 4.4 0.8 -0.72 -0.61 1.05 0.88 Trade, hotels, trans-port, communications 13.9 4.5 -1.73 -0.56 0.77 1.10 Community/social/ Financial ser. 2.6 5.5 -0.41 -0.82 1.08 1.10 All sectors 13.5 6.5 -0.66 -0.57 0.99 1.02 Source: Bhattyacharya and Sakthivel (2005)

4.3 Organised manufacturing and employment

Manufacturing has played a major role for improving economic growth in the East Asian countries. For example, the share of manufacturing in GDP in Malaysia improved from only 9.8% in 1970 to 29.2% in 2000, whereas that in India increased from 7.2% to 9.6% in the same period. Consequently, the share of organised manufacturing in employment increased from 4.6 percent to 14.1 percent, whereas that in India declined from 2 to 1.8 percent over the same period (Ghosh 2005). Other East Asian countries had experienced similar trends as in Malaysia and also sharp reduction of poverty. India has not only slower growth of output but also lower employment elasticity and higher wage rate and lower productivity than those in selected East Asian countries (Ghosh 2005).

4.4 Women and Child Labour

Women in the workforce

Women constitute significant proportion of the labour force. Eighty-eight percent of women workers are engaged in the rural areas, primarily in agricultural activities, and related sectors such as animal husbandry. In the urban areas, a significant proportion of women workers are employed in the unorganized sectors in household industries, petty trades and services, building and construction activities, etc. Most of these activities are low paid or unpaid. According to National Institute of Public Finance & Policy (NIPFP) study on Gender Budgeting the average female wage is almost 80 percent of the male average in urban areas, while it is less than 60 percent of the corresponding male rate in rural areas.

The employment of males and females depends not only on their levels of education but also on their socially defined roles in the households. Indian boys are generally brought up and educated with the expectations that they be main bread-earners. But girls are viewed as future housewives and homemakers rather than paid workers in labour markets. The educational levels of the labour force by sex indicate very high incidence of illiterate female workers in both rural and urban areas, although the incidence has a declining trend over time. The illiterate women are crowding into unskilled and manual labour jobs that are low paying and sometimes hazardous to their health and safety. To some extent, this is due to desperation and poverty induced compulsions that women are forced to enter paid labour markets. However, one positive outcome is that better educational attainments are providing women with the opportunity to undertake jobs hitherto not accessible. In fact, the gap between male and female graduates in urban areas has almost vanished in 1999-2000.

In the Unorganised sectors, bulk of the women’s labour about 72 percent is engaged in agriculture activities. In the organized sectors, there is excessive concentration of women employment in community, social and personal services and in manufacturing. Even these are at the lower range of the job hierarchy implying lower incomes and relatively low status. In rural areas, women are better paid than men in public utilities, construction, while in urban areas they are better paid in construction, trade and hotels, transport and communications and financial services. (Table-6).

Table-6 Percentage distribution of female workers in organised sectors
Sectors

1991

1998

% Change during 1991-98 Female/Male wage ratio in 1999-2000 Rural Urban Agriculture 10.3 9.8 -4.3 0.70 0.42 Mining & quarrying 1.5 1.4 -1.4 0.31 0.58 Manufacturing 21.8 21.0 -2.8 0.50 0.75 Electricity, gas, water 0.9 0.9 2.3 1.12 0.85 Construction 1.4 1.6 11.8 1.06 1.05 Trade, hotels, restaurant 0.9 0.9 0.0 0.92 1.32 Transport, communication 3.6 3.7 2.9 0.82 1.19 Financial, real estate 4.7 4.8 3.1 0.58 1.04 Community/social services 54.9 55.8 2.5 0.97 0.77 All Sector 100 100 0.7 0.90 0.83

Child Labour

The problem of child labour is a major social concern. The number of working children in the country declined from 2 percent of the total population and 6 percent of the total labour force in 1981 to 1.34 percent of the population and 3.59 percent of the total work force respectively in 1991. The estimated number of working children in the country as per the 55th Round of NSSO Survey (1999-2000) is 10.4 million. Children continue to be employed in the unorganized and home-based industries and domestic services. The State with the highest child labour population in the country is Andhra Pradesh, which had 1.66 million working children. Other States having a child labour population of more than a million (as per 1991 Census) are Madhya Pradesh, Maharashtra and Uttar Pradesh.
4.5 Labour laws and labour markets

Labour is highly protected and Indian labour laws do not allow hire and fire policy. As per existing laws under the Industrial Disputes Act 1947, no employer cannot close an establishment or declare lock out or retrench any labour without taking prior approval of the concerned government authority if the establishment employed more than 100 laborers on permanent basis in the previous 12 months. Various researchers in the past had concluded that this clause stood in the way of further organised employment and led to growth of more capital-intensive industries. Therefore, this protection is counter-productive and acts against the overall interest of the workers.

Labour figures in the Concurrent List (for both Centre and States) of distribution of legislative powers in the Constitution. As both Centre and States can legislate in this area, India has perhaps the largest number of legislations on labour in the world. There are over 165 labour legislations including 47 labour related laws enacted by the Central government (Debroy 1997) dealing with industrial relations, social security, industrial safety and health, child and women labour, minimum wages and bonus, labour welfare, emigration, employment exchange and miscellaneous issues. There is a considerable degree of overlap among these acts, and there are wide variations as regards basic concepts such as employee, workman, wages, factory, child labour and industry. For example, the term ‘wage’ is defined in 11 different ways in 11 different labour laws. Court case laws also differ among different states causing further confusion. Many studies have suggested simplification of rules and procedures, harmonization and rationalization of acts, and grouping these acts under five or six broad and comprehensive acts dealing with basic issues.

Labour regulation has been identified by many researchers (Stern 2001 and Sachs et al. 1999) as an important factor influencing the investment climate in India. As Besley and Burgress (2004) show, policy choices of the Indian state governments as regards labour legislation strongly affected manufacturing performance. The study by Besley and Burgress (2004) based on state level panel data for the period 1958-1992exploits two important facts: (a) labour regulation only applies to the registered manufacturing sector and (b) the Indian constitution empowers the state governments to amend central legislation. The principal central legislation is the Industrial Disputes Act of 1947. This Act has been extensively amended by the state governments since 1950s. Besley and Burgress (2004) read the text of each amendment and classified these as pro-worker (+1), neutral (0) and pro-employer (-1).

Besley and Burgress (2004) then show that pro-worker labour reforms are closely associated with an increase of urban poverty but do not affect rural poverty. This is due to the fact that labour legislation applies basically to the registered manufacturing units, which exist primarily in urban areas. Moreover, they observe that the adverse affects are large. For example, the state of West Bengal, which is ruled by the communist parties for the last three decades, had passed large number of pro-worker amendments during his period. Had it not taken these labour policies, its urban poverty ratio would have been 11 percent lower in 1990. These results suggest that attempts to redress the balance of power between capital and labour can end up actually hurting the poor in the medium and long term.

Besley and Burgress (2004) further observe that a pro-worker labour legislation is associated with lower per capita manufacturing output. This is due to the fact that pro-worker legislation led to less output in registered manufacturing sector. States with more pro-worker labour regulation tend to have less investment in the registered manufacturing sector, and larger informal manufacturing sectors. As organised trade unions are able to extract more wages and benefits in the registered sectors, capitalists prefer to remain in the unorganised sectors where labour has no power.

These results on labour regulations are mirrored in the relationship between urban poverty elasticities and labour regulation. States that had more pro-worker legislation had been less effective in reducing poverty at a given level of growth. States, which enacted pro-employer labour legislation, achieved significantly higher growth rates.

5 Government Policy responses
5.1 Active labour market policies

Growth with social justice had been primary objective of Indian planning since its inception in 1951, and several anti-poverty measures are in operation for decades focusing the poor as the target groups. These include welfare programs for the weaker sections, women, children, and a number of special employment programs for self- and wage employment. Ongoing economic reforms since 1991 strengthened these programs to generate more employment, create productive assets, impart technical skills and raise the income levels of the poor.

Government relied mainly on two approaches for poverty alleviation: the first based on the anticipation that economic growth will have a “trickle down effect” on the levels of living of all groups; and the second that direct anti-poverty programs are also required. Government shifted public expenditure away infrastructure and industry towards social sectors, and improved targeting of subsidies through changes in the public distribution system. Central government expenditure on social sectors (comprising education, health, water supply, sanitation, housing, slum development, social welfare, nutrition, rural employment and minimum basic services) as a ratio to total expenditure increased from 7.7 percent in 1990-91 to 11.7 percent in 2005-06, and as a ratio to the GDP increased from 1.3 percent to 2 percent over the same period.

As unemployment is the root cause of poverty and the population growth in India is very high, there should be more emphasis on family planning. For an urban family a child is born by parental planning and family size is limited to the necessary minimum. On contrary, in rural India a child is regarded as an asset and is expected simply because of normal life cycle progressions.

Government is trying to change this environment by suitable public policy on education, health and family welfare, and economic incentives for micro families. But these measures have marginal impact on the net reproduction rates and the family size as socio-cultural-religious environment put a constraint on the effectiveness of family planning. Female education, awareness and better standard of living would create the required consciousness among the people that smaller families are desirable. If the needs for health and family welfare services are fully met, it will be possible to achieve substantial decline in the family size and enable the families to improve quality of life.

Low productivity of small landholders leads to poverty, low energy in-take and under nutrition, which in turn prevents the development and creates a vicious circle. In most of the States, non-farm employment in rural areas has not grown very much and cannot absorb the growing in labour force due to high population growth. Those who are getting educated specially beyond the primary level do not wish to do manual agricultural work. They would like better opportunities and more remunerative employment in rural areas. This can be done by developing agro-based and rural resource-based enterprises.

Government provides several fiscal and monetary incentives for the small-scale industries, which help employment generation. But these industries suffer from lack of modern technology, adequate bank credits and efficient network of markets. It is imperative that programs of skill development, vocational training and technical education are adopted on a large scale to generate productive employment in rural areas. The entire gamut of existing poverty alleviation and employment generation programs may have to be restructured to meet the newly emerging demand for employment.

Most evaluations of the poverty alleviation programs, done by the government or others, conclude that these programs are not very effective in reducing poverty. They suffer from ill defined and multiple objectives, limited targeting, under-funding, complex administration, high administrative costs and leakage, lack of proper accountability and adequate monitoring. A recent study of the Public Distribution System (PDS) suggested that only 25 percent of food grains actually reach the poorest 40 percent of the population, and administrative costs account for 85 percent of total expenditure and therefore far outweigh the income gains to the poor.

5.2 Protective safety nets

In India, positive discrimination in favour of the weaker sections as an instrument of social justice has been accepted both socially. There are job reservations in the public sector for scheduled castes (SCs), Scheduled Tribes (STs), Other Backward Classes (OBCs), women, handicapped, minority ethnic groups etc. Social security is listed in the Concurrent List of the Constitution placing responsibility on both the Centre and the States. However, the provision of effective social security continues to be a challenge in view of financial constraints, high incidence of poverty, unemployment, illiteracy and the large size of labour force in the unorganized and informal sectors.

The permanent social security benefits provided through legislative measures like Minimum Wages Act, Industrial Disputes Act, Workmen’s Compensation Act, Employees State Insurance Act, Employees Provident Fund & Miscellaneous Provisions Act etc. cater to mainly organised urban labour comprising only 8 percent of the total labour force. Most of the states have pension schemes for the old and disabled, but due to eligibility criteria of income and age, only 9 percent of old-age population gets the benefit of pension. Most of the States have the Minimum Wages Act, but implementation and coverage are poor. Some special employment Programmes are also being implemented by some state governments like the Employment Guarantee Scheme in Maharashtra and the self-employment Scheme for Registered Unemployed in West Bengal.

5.3 Gender specific issues

Despite significant progress, indicators of human development, such as life expectancy, literacy, school enrollment and medical care, in India lag far behind those of most East Asian countries. Still more than 35 of the adult population are illiterate. Wide gender disparities also exist in India with regard to economic, health and educational attainment. More than 40 percent of India’s illiterates are females. The incidence of infant mortality and child malnutrition is more pervasive for females; however, female life expectancy at birth improved in 1990s and now exceeds male life expectancy. The generally poorer health of women is caused by dual work burdens in production and reproduction tasks and skewed pattern of intra-household food allocation in favour of male members. Regional variations also exist in gender disparities correlated to poverty incidence.

5.4 Labour market reforms

At present, amendments to 13 acts are being examined by all stakeholders. Even amendments of simple issues relating to definitions and scope have taken much longer period than expected due to existing parliamentary procedures for amendment and lack of political consensus. While China drastically reformed its previous employment relations pushing the workers to a more insecure regime and transferring substantial bargaining power to the employer within a decade of reforms, India virtually did nothing to change its labour laws even after 14 years of reforms (Saha 2005). In the absence of labour reform, the only avenue of downsizing was voluntary retirement schemes (VRS), pursued both by the private and the public sector, which resulted in high costs and long adjustment period. This led to dualism within firms, slower growth of employment and high share (92 percent) of Unorganised employment in total labour force.

China made significant reforms in labour markets within a decade of initiating reforms. As for the labour relations within an enterprise, the reform went deeper by transferring the bargaining power mostly in favour of the employer, while the enterprise union and the state machinery are expected to protect the workers’ interest under the general guidelines for labour welfare and protection. The employer has freedom in hire and fire and to make his employees work according to a mutually agreed contract. This particular provision of allowing firm-specific contracts to govern the employment relation has reduced the state’s role drastically. In practice, things can go wrong, if the state agencies do not play their roles properly and workers are forced to accept unfair terms.

China’s long history of extreme employment security might have compelled them to reverse almost all the previous provisions. In the absence of domestic private entrepreneurs, liberalised labour market was perhaps necessary to attract foreign investors (Henley 2004). But it has made redistribution of surplus within the Chinese enterprises biased in favour of employers (Ostrovisky 2003).

China was successful in creating a new labour market, which enhanced mobility of labour. Although this led to mass layoffs and open unemployment, sustained high industrial growth especially in the coastal regions helped their redeployment. In spite of harsh working conditions led by competition, workers seemed to have benefited from wage growth, significant new job creation and opportunities for self-employment (Saha 2005). In sum, China’s manufacturing sector experienced a sort of industrial revolution, which reduced people’s dependency on agriculture.

The different courses of reforms taken by India and China can be explained partly by their policy history, political institutions and industrial relations framework. In the case of China, the history of extreme employment security compelled a complete reversal of labour policy to attract foreign capital, which was very important, as there was very little entrepreneur class within the country. Political institutions and one trade union policy further restricted the Chinese workers from conducting true collective bargaining. Hence, they suffered on the redistribution front (Chen et.al.1996, Kanbur and Zhang 2005).

Currently the median age of the Indian working population is, at 24.3 years, one of the lowest among the large nations. India is likely to add 83 million to its working age population of 675 million by 2010 according to the estimates by the United Nations. However, existing restrictive labour laws have been a deterrent to employers forcing them to prefer capital-intensive options for production, even if they would have otherwise preferred labour-intensive options due to low wages in India (Ahya and Sheth 2005). Despite various well-researched studies, which recommended initiating a structural approach to labour market reforms, the government has avoided confronting the issue of unemployment head on (Aya and Sheth 2004). Politicians’ efforts to protect labour in the public sector add to inflexibility in the labour market.

Only 8% of Indian labour force are employed in the organised sector and almost 60% of manufacturing output comes from unregistered companies. A large number of factories remain outside any regulations. Although certain industries took the advantage and grew in terms of size, profit, skill and technology, most others existed for bare survival. A prolonged regime of import substitution damaged their business instincts. While the organized sector provided too much of job-security for too long, the unorganised sector provided too little to too many. Unfortunately, political parties preferred retaining this dualism in order to preserve their vote banks in organised labour force. Consequently, good research works and policy prescriptions on labour reforms remained on paper leading to poor uptake of research by the policy makers (Das and Virmani 2005).

Selected references

Ahya, Chetan and Mihir Sheth (2004) Rising unemployment and need to fire on all cylinders, JM Morgan Stanley, 17 November 2004.

Anant, T.C.A., K. Sundaram and S.D. Tendulkar (1998) Employment Policy in South Asia, International Labour Office.

Besley, Timothy and Robin Burgess (2004) Can Labour Regulation Hinder Economic Performance? Evidence from India, Quarterly Journal of Economics, 91-134.

Das, Tarun and Arvind Virmani (2005) Bridging Research and Policy- A case study for India, Global Development Network.

Debroy, Bibek and P.D. Kaushik (2005) ed. Reforming the Labour Market, Academic Foundation, New Delhi.

Gangopadhyaya, S. and W. Wadhwa (1998) ‘Economic reforms and labour’, Economic and Political Weekly, 30 May 1998.

Ghosh, A.K. (1999) ‘Current issues of employment policy in India’, Economic and Political Weekly, pp.2592-608, vol.34, no.36.

Gupta, S.P. (1999) ‘Globalisation, economic reforms and role of labour’, International Labour Office, New Delhi.

Nath, Surendra (2005) ‘Labour policy and economic reforms in India’, pp.173-234, in Debroy, Bibek and P.D. Kaushik (2005) ed. Reforming the Labour Market, Academic Foundation, New Delhi.

Saha, Bibhas (2005) A Comparative Study of the Labour Laws and the Labour Markets of China and India, a Report prepared for the Ministry of Finance, Government of India.

Sharma, Alakh N. (2004) Globalisation, labour markets and poverty: emerging perspectives in India, DT Lakdawala Memorial Lecture at the 87th Conference of the Indian Economic Association, Benaras Hindu University, Varanasi, 21 December 2004.

Warner, Malcolm (2000) Changing Workplace Relations in the Chinese Economy, Macmillan press Ltd., UK.

World Bank (2004) India Development Policy Review, Oxford University Press, New Delhi.
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