Información patronal

Interestingly despite the high degree of similarity in economic and institutional framework among the selected states labour market outcome appears to diverge. As mentioned, existing scholarship has pointed out significant differences in the extent of labour market flexibility across states of India. Besley (2004) in their study based on the amendment of ID Act consider West Bengal, Gujarat, and Andhra Pradesh as pro labour states.

In a comprehensive analysis of labour market, Shyam Sundar (2008) suggests that West Bengal is the most regulated state where as Gujarat and Uttar Pradesh are the least regulated state. The states of Maharashtra and Kerala are fairly regulated positioned at 3 and 4 with Andhra Pradesh and Rajasthan on the lower side of regulation positioned at 7 and 8 out of 10 states considered. The analysis of Shyam Sundar (2008) based on labour judiciary, number of trade unions, workdays lost due to work stoppages, number of scheduled employments under the minimum wages acts, average minimum wage, number of inspections of shops, average labour cost per man days worked and state industrial relations laws is more inclusive than that of Besley (2004) which evaluates only amendments to Industrial disputes act.

Analysis of labour market condition across the states as per the proposed index of flexibility reveals that Andhra Pradesh and Gujarat have comparatively flexible labour market than Maharashtra and West Bengal. The graphical representation of the different measures of labour market flexibility makes the point abundantly clear.

Table 4.7State wise comparison of wage as a proportion of net value added, 1980- 2005

Source: Annual Survey of Industry (various issues), Government of India

0 0.1 0.2 0.3 0.4 0.5

Andhra Pradesh West Bengal

0 0.1 0.2 0.3 0.4 0.5 Gujarat Maharashtra

The data on wage share i.e. wage as a proportion of net value added reveals that labour share is higher in West Bengal compared to all the other states. In terms of relative position, the share of wage is greatest in West Bengal beginning at nearly 47 percent in 1980 and declining to nearly 30 percent in 2004-2005. The wage share in Andhra Pradesh begins at nearly 30 percent and declines to 19 percent during the same period. Wage share in Maharashtra and Gujarat during the same period decline from 28 percent to 12 percent and 29 percent to 9 percent respectively. The graphical representation on wage share presents comparative picture of the states across 5 year over the entire period.

Interestingly all the states show a declining trend in labour share which indicates operation of market forces such as increasing capital intensive production and increasing productivity of labour. However importantly the rate of decline appears to be lower in the states of West Bengal and Maharashtra compared to Andhra Pradesh and Gujarat.

Similarly, the data on the proportion of contractual workers employed in industry reveals a picture of variation. Like in the case of wage share decrease indicating greater flexibility, share of contractual employment also reveals an upward trend indicating greater flexibility.

The data on proportion of Contractual worker reveals that Andhra Pradesh employs highest proportion of contractual workers which hovers around 50 percent of all employment, followed by Gujarat where contractual workers increase from around 15 percent to nearly 35 percent between 1996 to 2005. In Maharashtra the share of contractual worker witnesses, a sharp increase during 1998-99 and steadily increases to around 30 percent. West Bengal employs the least proportion of contractual workers which increases from marginal levels to around 15 percent during 1997-2005. Thus, extent of contractual workers reveal that

Andhra Pradesh and Gujarat are more flexible compared to Maharashtra and West Bengal.

Table 4.8 State wise comparison of proportion of contractual worker, 1996-2005

Source: Annual Survey of Industry (various issues), Government of India

Similarly, the data on implementation reveals a secular declining trend in inspection across the states since 1991 with Andhra Pradesh leading the way, followed by West Bengal, Gujarat and Maharashtra.

Table 4.9 State wise comparison of implementation of labour laws, 1985- 2005

Source: Indian Labour Statistics (various issues), Government of India

The data on inspection, however, should be read with caution because of the inconsistency in the data. Also, states have implemented different norms for

0 0.050.1 0.150.2 0.250.3 0.350.4 0.450.5 1990-95 1995-2000 2000-05

West Bengal Andhra Pradesh

0 0.050.1 0.150.2 0.250.3 0.350.4 0.450.5 1990-95 1995-2000 2000-05 Gujarat Maharashtra 0 0.2 0.4 0.6 0.8 1 1.2

industrial monitoring such as self-certification scheme that may lead to incorrect assumptions. Nonetheless, the data represents an important trend of decreasing state monitoring of the industrial sector.

In terms of labour regulation amendments at the state level, calculations confirm the conventional understanding with West Bengal making most pro- labour amendments, followed by Andhra Pradesh, Maharashtra and Gujarat.

4.10 Table of Labour Law Amendments across sub-national states, 1980-2005

Party wise

amendment Andhra Pradesh Gujarat Maharashtra West Bengal

Congress TDP Congress BJP Congress

NCP BJP-Shiv Sena Left Front Pro Labour 0 8 0 1 9 0 22 Pro Employer 0 4 0 3 6 0 0

Source: Authors classification from P.L. Malik ‘Handbook of Labour and Industrial Laws’, Eastern Book Company, Lucknow, 2009

The construction of the composite index broadly follows the index constructed by Besley (2004) with pro labour amendments marked -1 and pro employer 1. Thus interpretation of the composite score suggests that considering all the state level amendments overall West Bengal has made 15 pro labour amendments, Andhra Pradesh 5 pro labour, Maharashtra 3 pro labour and Gujarat neither pro labour nor pro employer. However such a composite score cannot indicate the exact nature of changes which have been elaborated in the appendix.

As the data reveals, all the pro-labour amendments in West Bengal and Andhra Pradesh were brought by the Left Government and the TDP government respectively in the 1980’s. In 1980, the Left Front brought 9 pro labour amendments, followed by 1 in 1983, 3 in 1986-87 and 2 in 1989. In 1987, the TDP government brought 6 pro labour amendments, but the same TDP in 2003 brought 2 pro employers amendments facilitating labour flexibility.

In contrast, Maharashtra signifies both pro worker and pro employer amendments since the 1980’s. Although during the 1980’s pro labour amendments dominate, since liberalisation increasingly pro employer legislations were brought forward to increase flexibility of labour market. Interestingly both the pro-labour and pro employer legislations were largely brought by the Congress party and one can find a certain pattern of balanced legislation whereby the government sends signal to both employers and employees about its concerns. Gujarat, on the other hand, has relatively low amendments and most of the recent ones have been towards increasing labour market flexibility. The Government of Gujarat under the BJP has not only sought to increase contractual employment but also put termination out of scope of Industrial Disputes.

Thus, evident from the graphical representation of wage share, contractual workforce and implementation of Factories Act is a secular increase in labour market flexibility across the states since economic liberalisation. Labour is intrinsically a part of the productive process like capital and under conditions of globalisation it is subject to forces of domestic and global market that cannot be completely constrained by governments or domestic interests. Hence significant pressure for policy convergence under conditions of globalisation may appear to be valid as labour flexibility increases secularly across states.

However, the data also suggests significant variations in the extent of flexibility across states. Such a finding corroborates large number of studies that argue significant variation in labour markets across sub-national states. As revealed from the analysis of labour conditions in the states Gujarat and Andhra Pradesh have more flexible labour market compared to Maharashtra and West Bengal. In fact if we hypothetically arrange the states in terms of flexibility, Gujarat appears to come out on top, followed by Andhra Pradesh, Maharashtra and West Bengal.

Such an evaluation is endorsed by the regulatory classification of Shyam Sundar (2008) and contemporary research on labour situation which position West Bengal as an employee friendly state and Gujarat as pro employer state. The data on the percentage of workers retrenched reaffirms the remarkable sub-national variation.

The data on proportion of workers retrenched reveals that work reorganisation through retrenchment has been most pronounced in Andhra Pradesh and least in West Bengal. Although data on retrenchment is hugely under reported in government records, the data reveals significant sub-national trends. Since retrenchment is potentially a very sensitive issue for trade unions and business, the variation suggests a crucial role of political variables in influencing regional divergences in labour policy and outcome.

4.11State wise comparison of proportion of workers retrenched, 1980- 2005

Source: Indian Labour Statistics (various issues), Government of India

6. Conclusion

The elaboration of case study makes it apparent that the four states represent variations in labour market policy and outcome with Andhra Pradesh, Gujarat being more flexible compared to Maharashtra and West Bengal. To be

0 0.01 0.02 0.03 0.04 1980-85 1985-90 1990-95 1995-2000 2000-05 Andhra Pradesh Gujarat Maharashtra West Bengal

precise although Maharashtra and West Bengal might exhibit increasing labour flexibility, such a development is relatively less than that of Gujarat or Andhra Pradesh. A careful reading of the legal amendments seems to confirm the classification of Aghion (2008) about the former states being pro-employer and Maharashtra, West Bengal pro-employee respectively.

Gujarat has been one of the most liberal market friendly states in India and has emerged as one of the foremost locations for investment with business friendly attitude. The Government of Gujarat policy document explicitly states privatisation, disinvestment, labour reforms and establishment of Special Economic Zones with flexible labour laws as the achievements of the Government. Similarly, Andhra Pradesh was the first state in India after liberalisation to negotiate loans form World Bank and undertake massive privatisation of electricity and transport sectors. In contrast, contemporary research on labour situation considers West Bengal as an example of employee friendly state (Nagaraj 2004).

Interestingly the position of Maharashtra is eclectic. Maharashtra has been market friendly and has liberalised some of the labour norms over the years such as Factories Act 1948, Trade Union Act 1928 and liberalising labour inspection. However, the extent of liberalisation of labour market is somewhat lower compared to that of Gujarat or Andhra Pradesh. Given the structural and institutional similarities, the apparent divergences in labour market flexibility across the states suggest important political dynamics at play.

In conclusion, it is essential to mention the time frame for the research as political and economic developments are constrained by spatial and temporal factors. The research broadly covers the time period between 1980 -2005 with 1991 as the point of break with economic liberalisation in India. The significance

of the period under consideration is not merely in terms of economic changes but also political developments in India.

The period of 1980-85 broadly correlates with the reign of Indira Gandhi and constitutes the last phase of absolute state control when the public sector would constitute the commanding height of the economy. At the sub-national level, it marked the assertion of regional parties such as TDP in Andhra Pradesh, Left Front in West Bengal.

The period 1985-1990 roughly corresponds to the period of partial liberalisation of Rajiv Gandhi, but the state continued to control the economy. The entire period can also be viewed as the last phase of one party dominant rule in India by the Congress party. In terms of industrial restructuring this period is important as Mill strikes in Western India came to an end with outcome decisively in favour of employers. The event marked widespread industrial restructuring.

The period of 1990-1995 is the period of formal and sweeping economic liberalisation and political instability. Political instability and coalition governments became a reality during late 1980’s as India was rocked by communal and sectarian political agendas. The trend towards regionalisation of politics became crystallised as regional parties became key players and politics at the sub-national level increasingly shaped political dynamics.

The period 1995-2000 can be branded as the period of steady reforms when the actual effects of economic liberalisation could be felt in real terms. During this period, BJP emerges as an alternative to Congress rule at the national level, but not without coalition partners. Finally the period of 2000-2005 is the latest and most recent phase of liberalisation for which data is available.

The period under study allows us to consider economic variations given the time lag between policies and their outcome, but also allows comparison of economic outcomes with politically distinct periods for political-economic analysis.

Part II

Chapter 5

Interest group: Business as a socio-political category

The following section attempts to explain the variations in labour market across sub-national states through political actors, specifically business interests, trade unions and political party in power.