Industrial restructuring and the working class in India

By S. Kumarswamy

S. Kumarswamy is a member of the Central Committee of the Communist Party of India (Marxist-Leninist) Liberation and working president of the All India Central Council of Trade Unions.


The new mindset and the high sales pitch

Beneath the gloss and shine

Excerpts: manifesto of All India Agricultural Labour Association

Indian work force: an overview

Unorganised sector workers

Onslaughts on labour

Restructuring: where, how and why?

Proletarian response



Globalisation is an integrated international process that unfolds differently in different nations through particular class agencies operating in specific socio-economic and political contexts, and thus evokes different modes of resistance. To understand and oppose this process, it is therefore necessary to complement our general global study with specific country studies. In this article we propose to examine one part of the story—that of industrial restructuring and its impact on the labouring classes in India, one of the most lucrative destinations of imperialist finance capital.

The new mindset and the high sales pitch

"I am here certainly to sell India", said Dr. Manmohan Singh, the Indian prime minister, in New York. "We have to explain to the rest of the world, what India is doing. We will seek to create in our country a climate, an atmosphere, an environment, conducive to greater flow of investment." He was addressing top CEOs at a business luncheon in the New York Stock Exchange boardroom in September 2004. In his passionate plea for foreign direct investment (FDI) to the tune of $150 billion, he dispelled any doubts about his government's capacity to stay the economic reforms course, despite the constraints of running a coalition government, even if it was backed by the left.

Earlier, in London, he had told chieftains of finance and captains of industry, the architects and beneficiaries of imperialist gobalisation, that "a new mindset is at work in India … It is a tribute to the Indian genius that the process of economic reforms that began in 1991 has survived a change of three governments. India is more open now than before."

True enough, the WB-IMF-WTO-sponsored strategic adjustment program (SAP) initiated by Dr. Singh as finance minister in collaboration with the commerce minister, P. Chidambaram (the present finance minister) under Narsimha Rao's Congress government in 1991 was religiously carried forward by the next, i.e., United Front (UF) government of erstwhile opposition parties (with Chidambaram as finance minister) and then the BJP-led NDA government. Interestingly, it was the parliamentary left that acted as a major prop of the UF government (with the CPI even joining the cabinet) and all along implemented essentially the same set of economic policies in the state of West Bengal, which has been under left rule for the last 27 years. There is thus a broad consensus along the entire spectrum of ruling parties (at national or state levels) on following the neoliberal policies peddled by the imperialist-dominated multilateral agencies.

So when doubts were raised about the support of the left parties, Singh was perfectly justified in replying that there was complete agreement between them, and that the language of the Common Minimum Program reflected this consensus. He made out a good case for US investment. India, as he put it, was an English-speaking open society with a highly developed rule of law, and there was an excellent potential base for research and development. India had one of the largest pools of trained technical labour power, a large domestic market and low operational costs. The economy itself was vibrant, demand was strong and growing and the government had set a target of 78 per cent growth. The manufacturing sector was emerging out of its protective shell and joining global competition.

Dr. Singh was at his selling best when he met Victor J. Menezes, a senior vicechairman of the CITI Group. "You form a group of 10 and come up with policy prescriptions in the next three months. Thereafter let the group come to India for a face to face discussion with myself and my ministers." He went on to persuade those who wanted to invest in China (because of a lack of incentives in India) by asking them immediately to draw up a list of dos and don'ts for the Indian government.

In New York, the plea for $150 billion of FDI was made; back in Delhi, Singh hosted a business dinner at which he gave the breakdown: $50 billion was required for airports and railways, $75 billion for power and $25 billion for the telecommunications sector.

The government's vision of a new India was unveiled in New Delhi also in the India-ASEAN Business Summit. It was observed that the Association of South-East Asian Nations (ASEAN), China, Japan, Korea and India should go in for an "Asian Finance Community" and this "arc of advantage" should surpass the European Union in income and NAFTA [North American Free Trade Agreement] in trade.

This is what they call aggressive marketing! Team Manmohan (the PM flanked by the finance minister and the deputy chairperson of the planning commission, Montek Singh Ahluwallia, who was recently called back from a lucrative position in the IMF), is running full steam ahead with the economic agenda, while the business of handling the political heat and dust such a mad rush is bound to generate has been left in the hands of Congress president and UPA (United Progressive Alliance, as the ruling coalition is called) chairperson Sonia Gandhi. Such an arrangement for insulating the economy from the vicissitudes of politics is not unique to India. In Brazil, for example, President Lula tries to maintain left postures while his finance minister and economic team carry on the neoliberal agenda. Pakistan too now has a PM of similar breed.

India is up for sale, but what is her net worth?

Beneath the gloss and shine

How modern is modern India? How has the economy fared in recent decades?

India's share in world exports has actually shrunk: from 3 per cent in 1938 to 2.2 per cent in 1950 to 1.1 in 1960 to 0.7 per cent in 1970 to 0.5 per cent in 2002. Now it is hovering around 1 per cent, while there is a spectacular growth in the newly industrialised countries like South Korea. Primary products still dominate in the composition of our exports. The share of manufacturing in India's GDP is only 17 per cent, whereas it is 33 per cent in China, 25 per cent in South Korea, 25 per cent in Brazil and 27 per cent in Thailand. The distribution of exports in manufactured products is: gems and jewellery 22 per cent, textiles 28 per cent, ready-made garments 17 per cent, chemicals and chemical products 8 per cent, leather and leather products 10 per cent and transport equipment 15 per cent. The lion's share is thus made up of low technology products. Within gems and jewellery, a large part is contributed by rough diamonds, which are imported, cut, polished and reexported.

Another point to note is that small-scale industries play a crucial role in the Indian economy. There were 2.08 million small-scale units in 1991-92; the number now stands at 3.20 million. They produce about 8000 items, ranging from food products to sophisticated electronic equipment. They account for 40 per cent of the total industrial output and 35 per cent of exports.

India's location in the international division of labour is clear enough: it remains a supplier of cheap raw materials, cheap labour and skilled labour for processing of knowledge-intensive products. Add to this the fact that it has an expanding and emerging consumer market, what with her fortune-favoured, upwardly mobile children of neoliberal reform.

The backwardness and lopsidedness of the Indian economy are revealed also by the fact that mass dependence on agriculture for livelihood stood at about 70 per cent of the population for half-a-century (only in the 1990s was a decrease observed, and this might partly be due to changes in census procedures), but the contribution of this sector to GDP steadily declined, from about 42 per cent in 198081 to 35 per cent a decade later, to less than 26 per cent in 200102. Not that this results from a corresponding increase in the share of industry, which has increased only marginally from about 22 per cent to 24 per cent over the same period (here again, the rise comes from mining, quarrying and electricity generation, even as the share of manufacturing stagnates at 16 to 17 per cent). By contrast, the service sector's share in the early 1980s was less than 37 per cent. By 2001-2002 it passed 50 per cent. But in India, the development of the service sector is not an indication of the development of productive forces, as in the case in developed countries.

The normal path of capitalist development is that the removal of feudal land ownership through the democratic revolution stimulates the free flow of capital into agriculture, promoting productivity and peasants' purchasing power and thus expanding the home market for manufactured goods. Industry gets a much needed boost, pulling up mining, transport and other areas of the economy. An agrarian society evolves into an industrial nation, with the lion's share of GDP coming from industries, and creates a solid base for the third phase, in which the service sector becomes the principal growth engine.

But in our country the middle stage of industrial predominance was never reached (largely because of the continuation of the semi-feudal grip on productive forces and the stagnant internal market for manufactured consumer items) before the service sector became the fastest growing. Whereas in China in 2000, services and industry contributed 33.6 per cent and 51 per cent respectively to that country's GDP, in India in the same year the corresponding shares were 49 per cent and 26 per cent. By the end of 2003, the contribution of the service sector rose to 56 per cent, mainly because agriculture and industry witnessed decelerating growth.

This means that, even as the basic material needs of the working people are not met, the country is flooded with various types of services—leisure, entertainment, tourism, a greater variety of shopping malls and restaurants, and financial services to cater to all these needs. Expenditure on all these items enters GDP calculations, inflates the figures and creates a statistical illusion of "India Shining". We thus have a model of growth without development, of jobless growth, with the service sector offering a fertile field for disguised unemployment. From petty vendors to floating computer operators—who, like rolling stones, gather no moss—the amorphous service sector gobbles them up without actually providing secure jobs in most cases.

The government has been trying hard to convey the impression that the growth of the service sector is accounted for by the information technology sector (that is, both software services and the IT-enabled sector—call centres and the like). No doubt the IT sector is growing rapidly, but from a very low base, so that it actually accounted for only 3.2 per cent of GDP in 200203, and less than 0.2 per cent of employment.

The unhealthy obesity of the service sector stands in crying contrast with stagnant manufacturing, nearly stagnant industry and declining agriculture. The last named is the prime sector of the Indian economy, the mainstay of her culture and civilisation, and the deepening crisis there constitutes the darkest cloud on the Indian horizon. The silver lining is that the rural proletariat—the largest contingent of the Indian working class—is rapidly getting organised to work out a revolutionary solution to the crisis. A look at the accompanying excerpts from the manifesto adopted at the inaugural conference (November 2003) of the All India Agricultural Labour Association (AIALA), the first such national-level class organisation developed by revolutionary communists, will make this evident.

Excerpts: manifesto of All India Agricultural Labour Association

An acute systemic crisis has engulfed agrarian India. The symptoms of the crisis can be seen most graphically and tragically in the surge of starvation deaths and farmers' suicides taking place even in the most advanced pockets of the much-trumpeted green revolution. While farmers suffer from distress sales, mounting debt burden and frequent crop failures, agricultural labourers reel under the burden of growing unemployment and falling real wages.

If the proximate cause of the crisis is to be located in the wto-dictated trade liberalisation package, on a more fundamental level it stems from the stupid strategy of trying to promote capitalist farming without first clearing the soil of the survivals of feudalism. While 60 per cent of rural households still have access to only 15 per cent of the agriculturally operated land, the top 20 per cent control more than two-thirds of the total land under cultivation. Rather than providing land to the tiller, which proved the key to democracy and development in socialist as well as developed capitalist countries, successive governments assigned the task of rural development to the reactionary forces of landlords and kulaks, providing them with all kinds of support. The "green revolution" was precisely such a strategy.

The official remedythe new agricultural policy wedded to liberalisation (removal of quantitative restriction on imports, withdrawal of subsidies etc.) and corporatisation (direct or contract farming by Indian or foreign monopoly houses coupled with large-scale entry of agribusiness corporations)has proved worse than the disease. Dependence on imported biotechnological products is fraught with dangerous consequences, while the encouragement of reckless switch-over from food crops to cash crops has already destroyed the nation's food security and exposed our farmers to the vagaries of international markets. While mountains of food grains rot, starvation deaths stalk large parts of the country. Huge reduction in public investment in infrastructure, notably in small irrigation projects, and criminal negligence in protecting our biodiversity from greedy patent-seekers from abroad, have irreparably weakened Indian agriculture.

We, agrarian labourers who have to bear the brunt of this crisis, have to fight back. We can and must not only defeat the attacks on our own lives and win and secure our inalienable rights but also lead the nation out of the current impasse. Under the leadership of the Communist Party, the revolutionary party of the proletariat and in close solidarity with the toiling, struggling millions, we shall eradicate feudalism, and defeat the emerging reactionary kulak power to march ahead to a new India, a democratic India, a socialist India.

Indian work force : an overview

Table 1: Industrial structure of work force, 1972-73 to 1999-2000
Industry % of work force engaged in the industry
1972-73 1977-78 1983 1987-88 1993-94 99-2000
Agriculture & allied 73.9 71 68.6 65 64.7 61.7
Mines & quarrying 0.4 0.4 0.6 0.7 0.7 0.6
Manufacturing 8.8 10.2 10.7 11.1 10.5 10.7
Electricity, gas & water 0.2 0.3 0.3 0.3 0.4 0.3
Construction 1.9 1.7 2.2 3.8 3.2 2.8
Trade 5.1 6.1 6.2 7.2 7.4 9.8
Transport & storage 1.8 2.1 2.5 2.6 2.8 3.8
Services 7.9 8.1 8.9 9.3 10.3 9.2

In the context of these typical structural features of the Indian economy, let us now briefly study the life conditions and social composition of the labouring classes before examining the real effects of industrial restructuring on the lives of the working people.

Table 2: Trends in distribution of employment
  Rural Urban
Year Self-
Regular Casual Self-
Regular Casual
1972-73 65.3 9.3 25.4 41.2 46.3 12.5
1977-78 62.6 7.7 29.7 42.4 41.8 15.8
1983 61 7.5 31.5 41.8 40 18.2
1987-88 59.4 7.7 32.9 42.8 40.3 16.9
1993-94 58 6.4 35.6 42.3 39.4 18.3
1999-2000 55.8 6.8 37.4 42.2 40 17.8
1972-73 65.9 12.1 22 39.2 50.7 10.1
1977-78 62.8 10.6 26.6 40.4 46.4 13.2
1983 60.5 10.3 29.2 40.9 43.7 14.6
1987-88 58.6 10 31.4 41.7 43.7 14.6
1993-94 27.9 8.3 33.8 33.8 41.7 16.2
1999-2000 55 8.8 36.2 41.5 41.7 16.8
1972-73 64.5 4.1 31.4 48.4 27.9 23.7
1977-78 62.1 2.8 35.1 49.5 24.9 25.6
1983 61.9 2.8 35.3 45.8 25.8 28.4
1987-88 60.8 3.7 35.5 47.1 27.5 25.4
1993-94 58.5 2.8 38.7 45.4 28.6 26
1999-2000 57.3 3.1 39.6 45.3 33.3 21

India has a 400 million-strong work force, which displays all the characteristics of an underdeveloped economy.

  • Organised sector employment is only 31.7 million. Out of this, the private sector employs 8.7 million and the public sector 19.47 million, the rest being accounted for by the joint sector. The breakup of public sector employment is: a) central government 3.31 million, b) state government 7.5 million, c) quasi-government bodies 6.4 million, d) local bodies 2.26 million. As for unorganised workers, their problems deserve to be discussed under a separate heading.
  • Table 3 shows that more than 75 per cent of the labour force is rural. Seventy-five per cent of them have not completed primary education. In urban India, two-thirds of the labour force have not passed that stage. A fine human resources development in 57 years of independence and two decades of globalisation!
  • India has the largest number of child labourers in the world. The national survey conducted in 1993-94 estimated the child labourer population at 13.5 million. The incidence of child labour is greater in rural than in urban areas: 90.87 per cent of working children are engaged in agriculture and in allied activities and in household chores. In 1995-96, there were 173 million children in the 6-14 age group. Among them, 110 million were estimated not to be in school. There are about 74 million children who are neither enrolled in schools nor accounted for in the labour force, who come under the category of "nowhere" children!
  • There are 0.4 million ailing enterprises in India employing 10 million people, and there is no move to rehabilitate them or provide relief to those employed in them. Sunset industries greatly outnumber sunrise industries.
Table 3: Education of workers (15 & over, %) 1999-2000
  Illiterate Primary Middle Share in work force
Rural areas
Male 39.6 27.3 33.1 49.7
Female 74 15.5 10.5 25.8
Persons 5.3 23.3 25.4 75.5
Urban areas
Male 16 22 62 19.7
Female 43.9 17.6 38.5 4.8
Persons 21.5 21.1 57.4 24.5
All areas
Male 32.9 25.8 41.3 69.5
Female 69.3 15.8 14.9 30.5
Persons 44 22.7 33.3 100

Unorganised sector workers

At 360 million, workers in the unorganised sector account for about 92 per cent of the Indian work force, and this figure is still growing under the impact of the economic policies of globalisation. Agrarian labour—the rural proletariat and semi-proletariat—forms the backbone, while other rural workers like power loom and hand loom workers and beedi (an Indian variety of cigar) workers also run into millions. Moreover, agrarian workers do not find agricultural work on the fields for a large part of the year and then have to take up other jobs, often in far-off places. One such huge section is brick kiln workers. They work with families in semi-bondage conditions. Others take up construction work.

This huge working population is denied social security such as unemployment, sickness, maternity, death or old-age benefits or emergency expenses. The beedi and construction sectors have central welfare laws. In beedi, millions of women are employed. It is more of a home-based industry. But these workers do not even get work for five days a week. Poor quality materials are given to them, and they are penalised for that. There are hundreds of thousands of beedi workers who have not claimed millions of rupees lying in their provident fund accounts.

There are 20 million construction workers in India. Central trade unions and ngos campaigned for them and got central welfare legislation passed in 1996. But the majority of Indian states have not set up the welfare boards or funds envisaged under the act. Even the leftruled West Bengal government is only now thinking of setting up a state board. In Tamil Nadu, a board has been in existence since 1994; there are 2 million construction workers, but only 600,000 of them have been enrolled as members of the board. In the eleven years of existence of this board, only 16,000 persons have been able to claim benefits. The board has accumulated funds of 750 million rupees and so far has doled out relief worth only 300 million rupees. This is the real face of social security in India.

In the era of globalisation, an international restructuring of the labour market has taken place. The number of educated unorganised white-collar workers in the IT, telecom and media sectors has increased greatly. Many an old factory has ceased to exist and many a regular job has gone. On the other hand, "it is raining temporary jobs". Temporary staffing is a $140 billion worldwide industry. Though relatively new in India, it is rapidly gaining ground. According to estimates, 14 million Indians will land in temporary jobs in the next few years. Temporary jobs are projected as a viable solution to the burning problem of unemployment.

The previous central government constituted the Second National Labour Commission in December 1998 to propose umbrella legislation for the welfare of the unorganised workers. The commission made its report in June 2002. It rejected its subcommittee's recommendation for a monthly minimum wage of Rs.4500 [approximately $104]. This is to be seen in the context that in India the average minimum wage in agriculture is much less than Rs.2000, which is below the official poverty line income. Instead, it recommended certain worthless schemes. When the then Vajpayee government tabled a draft bill, the central trade unions opposed it and gave their own suggestions. Then came the elections and a new government. It proposed the same bill. Once again the central trade unions reiterated their earlier suggestions, which include: separate comprehensive legislation for the welfare of agrarian labour; the government to bear the administrative expenses of the welfare boards proposed in the bill for the first five years; schemes for minimum welfare benefits and pensions; 3 per cent of GDP to be allocated for social security. But the present dispensation, like the previous one, does not care a straw for all this. Its attitude towards social security is marked by rhetoric in policy and abdication of responsibility in practice.

Onslaughts on labour

That globalisation is, at its core, an offensive of capital against the toiling masses has been forcefully driven home in recent years. Governments of all hues are trying to make cities attractive to the global elite and are launching socalled "beautification" drives. Hawkers are being evicted from Kolkata and Chennai (formerly Madras), shops and houses are being demolished in Hyderabad, industrial units are being forced to vacate to interior rural areas in Bombay so that the industrial land can be turned into real estate. When the central and state governments balance their budgets, social expenditures are the first to be hit, and the poor are the victims.

Casualisation/informalisation of labour is proceeding at a pace even faster than would appear from Table 2. Subcontracting, ancillarisation and employment of nonregular work forces have become the order of the day. The lower the wages, the greater the profits. Jobs are created only in narrow fields such as information, communications, entertainment, telecommunications and informal sectors involving low technology. Organised sector workers and employees are subjected to one blow after another, the most recent being the reduction in the rate of interest payable to them under the Employees' Provident Fund scheme. At the strategic level, the offensive has been launched along three major lines.

Privatisation: Using privatisation as a lever, FDI is being invited in a big way into all strategic sectors. As in other countries, this has led to massive retrenchment. The UPA government has gone back on its pre-election and early post-election promises not to open up sensitive sectors like telecommunications, insurance, banking and civil aviation, which had been largely under state ownership and control, to foreign capital. Workers and employees in these sectors are anxiously awaiting attacks like increased workloads, downsizing and hostile work culture.

Downsizing: Private and public sector enterprises, as well as government departments at central and state levels, have been undergoing these processes without a break since the early 1990s. "Voluntary retirement schemes" are voluntary only in name. Especially in the private sector, a fear is created among the workers that the company is making losses and will be closed down, thus forcing workers to leave "voluntarily".

Antilabour laws and rulings: Regressive revision of labour laws is a necessary corollary of industrial restructuring. The Industrial Disputes Act is being modified to allow closures, layoffs and retrenchments in industrial units employing up to 1000 workers without the government's permission. This is tantamount to giving the employers the right to hire and fire at will in units covering 90 per cent of the industrial work force. The Trade Unions Act 1926 has been amended to change, among other things, the minimum statutory requirement for registration of trade unions. This makes it difficult for emerging militant streams to form unions and challenge the entrenched bureaucracy.

The "neutral" judiciary has also stepped forward to do its bit in the promotion of neoliberal ideology. To illustrate this, we shall cite just one from among a series of recent judicial pronouncements against labour.

In protest against cuts in pensions, government employees and teachers in Tamil Nadu launched a general strike in 2003. The state government had prepared itself six months earlier by amending the ESMA (Essential Services Maintenance Act) and enacting TESMA (its Tamil Nadu version). When the strike was on, the government invoked TESMA and arrested thousands of employees in midnight raids and, in a historically unprecedented move, dismissed 170,000 employees. The Supreme Court, while suggesting that the government take the employees back into service, observed that "government employees have no fundamental or moral right to strike". At one stroke, the top court sought to nullify the right to collective bargaining and ban tens of millions of government employees all over the country from going on strike.

Justice V.R. Krishna Iyer (retired) recalled that in 1978 a high-powered, seven-member bench of the Supreme Court exhaustively considered the definition of "industry" and ruled that it included government departments, except those performing sovereign functions such as the police, military and justice administration. The right of industrial workers to collective bargaining is protected by Article 19(1) of the constitution. Earlier, in 2000, the Supreme Court, in a worse move, evicted 100,000 industries and workers from Delhi in the name of pollution control.

Restructuring: where, how and why?

Restructuring is sweeping across the whole horizon of industry and finance. A few case studies covering old and new sectors give an idea of who suffers and who benefits in the process.


Restructuring has hit the textile industry like a tornado. This largest employer in the manufacturing sector has witnessed substantial changes in the last two decades. Mumbai, Ahmedabad, Kanpur and Coimbatore are no more the same old famous textile cities. B & C Mills of Chennai is now a container yard. The millionaires and billionaires of Mumbai come in their sleek shining cars to play bowl where the textile mills once stood. There are shopping malls and high-rise towers on the graves of the old textile mills. The wheels have come to a grinding halt. The sirens sound no more. The few mills that went in for state-of-the-art technology are a minuscule minority. For the rest, problems are glaring and galore.

The industry is lagging in economies of scale. The average investment in machines in Indian textile units is a mere $27,690, whereas it is $2 million in China and $2.5 million in Hong Kong. India's textile units have an average of 119 machines each. This is pathetically low compared with China's 605 and Hongkong's 698. India has a much higher proportion of manually operated machines. Technology-wise, Indian textiles are two generations behind, and there is no question of this gap being bridged in the near future. A glance at the power looms in western Tamil Nadu will tell us which way the winds are blowing.

Western Tamil Nadu, consisting of Salem, Namakkal, Erode and Coimbatore, is one of the largest power loom zones in India. In Namakkal and Salem districts, there are 150,000 power looms. A worker can operate two such looms in a shift of eight hours, produce forty metres of cloth and earn on average Rs.60 [about $1.40] per day. Now a big textile park named Kaveri is coming up in Komarapalayam. One thousand to 1200 shuttleless looms will be installed there. An existing ordinary loom costs between Rs.7000 and Rs.15,000. An automatic loom costs Rs.100,000, while a secondhand shuttleless loom costs anything from Rs.0.5 to 1.5 million.

In one shuttleless loom, 350 metres of cloth can be produced in a shift of eight hours. One worker can operate eight such looms. Each day a single worker can produce 2700 metres of cloth. For this workers get a wage of Rs.80 per day.

So the difference between the old and the new boils down to this: on the old machine, one worker produces forty metres of cloth a day for Rs.60 in wages; on the new machine, one worker produces 2800 metres of cloth for Rs.80 in wages. It is obviously advantageous for the capitalists to use the new machines. The huge investments required for this will not be made overnight, but labour replacement caused by new technology is clearly in the offing.

A more immediate danger is that the Multi-Fibre Agreement lapsed and the quota regime ended on January 1, 2005. The power loom industry and its workers face the biggest threat to their employment and livelihood. AICCTU-led unions are demanding a relief allocation for the workers from the Rs.250 billion textile upgrading fund created by the government.


Significant changes are taking place in the automobile and auto components industry. Foreign car companies have made deep inroads in India. Even foreign trucks and large commercial vehicles are making their presence felt. The industry is expecting an offshore outsourcing wave. Exports for them are not a diversion to tide over a domestic downturn but a long-term strategy.

The story of TVS is instructive and interesting. Sundaram Fasteners, a unit of TVS India, set up a production unit in Zhenjiang, Haiyan county, in China with an initial investment of Rs.230 billion. It has a capacity to manufacture 6000 tonnes of high tensile speciality fasteners. Mr. Suresh Krishna, the chairperson of TVS, says, "Labour costs, i.e. wages and pension fund contributions, account for as much as 32 per cent of sales in the West, whereas it is only 5 per cent in India. The outsourcing wave which has now started is not one of choice but one of compulsion."

Sunrise Sectors

The third generation economic reforms are targeting the financial, telecoms, power and infrastructure sectors. Banking and insurance have already been opened up to the private sector and the multinationals. Foreign institutional investors have entered the Indian stock markets in a big way. Panic buttons pressed from Dalal Street (in Mumbai, India's equivalent of Wall Street) reverberate in the corridors of power in Delhi. The PM listens, the finance minister rushes and reassures. Bank mergers are the latest craze.


Enron's India story points to the shape of the future in the power sector. The government of Maharashtra signed a fast track power project with Enron. Enron's influence over the ruling politicians of India was so enormous that it was able to extract a guarantee contract from the government (all in the name of free trade and enterprise!). The price of electricity produced by Enron was so exorbitant that the state government later decided not to buy it, but to pay the guaranteed charges for the electricity that would have been generated if the contract had materialised. The massive fraud of Enron collapsed. Its Indian venture also went down in a heap. IDBI lost tens of millions of rupees that had been given to Enron. India lost because the venture did not take off. But still Bechtel and GE, which took over Enron, are able to force India to shell out $220 million to them every year. Now they are suing the Indian government for $5.6 billion, claiming damages for a failed contract. A nice concoction of neocolonialism and neoliberalism !

Telecoms and BPO

Since IT (including IT-enabled sectors) is too vast a field to be covered here, we will focus on only two areas, which are pulsating with intense restructuring activities.

The tenth five-year plan report says that an investment of Rs.1600 billion is needed to modernise the telecoms sector, so that density can be increased and a network coverage of 70 per cent can be achieved—as against the existing 20 per cent. According to the government, domestic capital, even if available in the needed amount, cannot be invested here at the cost of other sectors where it is needed and where FDI is not likely to come. The central government washed its hands after corporatisation of the telecoms department into Bharat Sanchar Nigam Ltd. But there is a deliberate conspiracy on the part of the government not to invest in BSNL, not to modernise it, to render it unable to face competition and ultimately allow the multinationals and their domestic collaborators to gobble up the mammoth national wealth accumulated in it. BSNL's profits are dwindling: from Rs.100 billion in 2000, they dropped to Rs.15 billion in the first half of 2003. On the other hand, Videsh Sanchar Nigam Ltd. (a PSU [public sector undertaking] handling international telecommunications) has already been handed over to the Tatas on a silver platter. Reliance is making a big push to grab the market. The Tatas have taken out on contract the BSNL's call centre in Chennai.

Coming to the BPO (business process outsourcing) and KPO (knowledge process outsourcing) sectors, winds of change are blowing strongly here. From mere data entry, the focus has shifted to transaction processing to knowledge process outsourcing like intellectual property or patent research, R&D in pharmaceuticals and biotechnology, data mining, database creation and a range of analytical services such as equity research, competitive intelligence and industry reports. Several Fortune 500 companies—such as Mckinsey, Goldman Sachs, Reuter, IMS Health, Harris Interactive IPSOS, Maritz, A.C. Nielson and the WPP Group—have started using India as a remote base.

Thanks to the spurt of activities in IT and related sectors, a veritable cyber army is emerging in India. Every year, there are 5000 new IT graduates in Germany. In the US, the number is 25,000. The huge Indian education machinery, the inheritor of the colonial Macaulayan system, is churning out 120,000 IT graduates every year to serve global capital. It is estimated that the total number of jobs created as a result of offshore outsourcing, primarily call centre operations, is 180,000. The US and UK together have an 80 per cent share in this. The educated English-speaking youth who work nights are paid a pittance of Rs.2500 [$58] a month. The official minimum wage in the US is $5.15 dollars an hour. In the corporations which are going offshore, the salaries are higher. Here lies the motivation for offshore outsourcing. According to the National Association of Software and Service Companies (NASSCOM), "The primary driver of cost savings is labour cost arbitrage. The differential in wages between the parent location in the US or UK and India is more than 7080 percent for offshorable processes. However, interaction costs increase by 10-20 percent because India is a remote location, resulting in net savings of 4060 percent for the offshored processes." And as Hugh Davies, the director of Prudential of India, says: "Eighteen months ago, we opened a call centre and back office operation in India. Because of the processing centre, we have much higher quality of products and we have effected a cost saving of £60 million, though it resulted in a job loss of 900 in the UK … Without this moving, my company would have been in dire straits … India is going to be the intellectual capital base." (Incidentally, Prudential now has 86 outlets in 65 cities in India. Forging a partnership with ICICI, it has become second only to UTI, an Indian financial giant, and emerged as the top company in the private sector in providing life insurance.)

Now, who leads this most lucrative sector, and in whose interest? Multinational corporations (MNCs) account for about 45 per cent of total BPO units in India. The rest are Indian-owned or jointly owned units serving the MNCs. The latter dominate this industry both as customers and as owners of firms. GE, a MNC with $131.7 billion revenue, alone accounts for more than $500 million in IT services, close to 10 per cent of the entire industry. It not only has several wholly owned units but has joint ventures with Satyam and Birlasoft. Tata Consultancy Services (TCS), Patni Computer Services (PCS) and Satyam get most of GE's business. Besides the MNCs, big Indian companies—old ones like TCS and new firms such as Infosys—play a major role in this industry. With revenues of more than $1 billion they have become major firms but look small when compared to MNCs. The Indian state has massively subsidised this industry. The software technology parks provide cheap infrastructure, the Export-Import Bank provides rebates, and the government provides income tax exemption and cheap credit.

Public sector undertakings

Restructuring of the public sector is another major part of the ongoing reforms. It is shamelessly and recklessly used as a fiscal instrument to meet budget deficits. There were times when the public sector was put on the commanding heights of the economy. And these "secular temples" (as Jawaharlal Nehru put it) were expected to guide India on the road to socialism. Now the national wealth in the public sector is subjected to systematic looting and plunder. There is a deliberate conspiracy to project the entire public sector as loss-making. But this is far from the truth.

Profits of public sector enterprises in India for the year 2000-01 were Rs.156.53 billion. They rose to Rs.260.45 billion in 2001-02. They filled the coffers of the exchequer in 2001-2002 with Rs.624.13 billions towards excise, custom duties, sales tax and interest.

Forty-four of the public sector undertakings (PSUs) listed in the stock exchanges were valued at Rs.1500 billion in March 2003. At the end of the year, it was Rs.2790 billion. The appreciation in the value of just two of them—Oil and Natural Gas Corporation and Steel Authority of India Ltd—amounted to Rs.750 billion. In the face of widespread opposition, the Manmohan government promised to limit privatisation to loss-making units, but in practice it has already started. The government has announced that it will disinvest in 35 PSUs, including the Navartna (nine jewels) companies, up to 49 per cent. The facile argument is that, with 49 per cent, the government will still have control.

Proletarian response

Right from the initiation of neoliberal reforms in the 1980s, workers and employees raised the banner of resistance through a number of all-India general strikes and other movements. But there is no denying that in an overall sense the working class remains in a phase of defensive struggle. The number of industrial disputes dropped from 1825 in 1990 to 555 in 2001, the decline in the number of strikes being much greater than that of lockouts. The share of strikes in total work stoppages, which was 80 per cent in 1990, came down to just 53 per cent in 2001. The total number of strikes, which was as high as 1459 in 1990, went to a low of 293 in 2001. The decline in the case of public sector units—from 606 to just 87—is remarkable, the corresponding figures for private sector being 853 and 206 respectively. The number of workerdays lost in lockouts is almost four times more than the number lost during strikes in 2001. Curiously, workers find themselves at the receiving end more in left-ruled West Bengal than in other parts of the country. In 2003, there were only 33 strikes and 399 lockouts. The corresponding figures for 2002 were 30 and 346 respectively. In both these years, strikes were responsible for less than 6 per cent and lockouts for more than 94 per cent of the workdays lost due to industrial disputes.

The new century, however, has witnessed a certain spurt in movement. The united strike action of Uttar Pradesh power workers, the historic 67-day strike of BALCO (Bharat Aluminium Corporation, a state-owned unit in Madhya Pradesh) workers, the week-long all-India strike of postal workers, a 38-day strike of government employees in Kerala, a three-day strike of coal workers and several all-India strikes of bank employees have been major landmarks of working-class struggle in the last four years or so. All these struggles have had a high degree of class unity, cutting across various grades and transcending the barriers of trade union rivalry. Some of these have ended in partial victories in the sense that certain changes have had to be deferred or diluted by the government.

But the problem lies in the compartmentalisation and segmentation of struggles. Dynamic and vibrant industrywide struggles that have a policy-challenging nature have not been integrated with the national movement. The BALCO example is particularly instructive in this regard. In spite of the fact that disinvestments had become the biggest common threat to all public sector units, no effective mass solidarity action was organised in favour of the historic strike in this PSU. This is yet another instance of the sectarian, formalistic, trade unionist mentality of the dominant left parties, which control big trade unions. These parties never make any attempt to rouse the working class to political action against hated components of economic reform (e.g., privatisation and commercialisation of essential services and withdrawal of subsidies) and their fallouts like price rises and corruption. On many of these issues, conflicts of interests often emerge among different ruling class parties/governments/ministries on pragmatic or tactical grounds, broad strategic consensus notwithstanding. During NDA rule, for instance, an open quarrel broke out between the disinvestment ministry and the petroleum ministry on the question of disinvestment of profitable public sector oil units. Left parties and trade unions could and should utilise such conflicts to intensify and politicise the working-class movement. But the opportunist left has always preferred to tail behind this or that bourgeois party, and now, with unconditional support extended to a government of unbridled reform, noone would except them to lead the toiling millions along the path of independent class assertion. On the contrary, it is only in the course of a dialectical negation of their positions and practices that a revolutionary working-class movement can emerge and take on the challenges posed by neoliberal reforms.

The parliamentary left appears to be satisfied with its considerable hold on the unionised workers and neglects work among the unorganised workers. Or at best it takes a reformist position to help these toilers with relief rather than organising them as a social and political force. Revolutionary communists, while trying to overcome their weakness in the organised segment, put the stress on tapping the vast potential of the other part, of the overwhelming majority of the Indian work force. These sections cannot be organised from the safety and institutional comforts of trade union offices. Communists have to reach out to them—not the other way round—and carry on sustained political work in extremely inhospitable conditions both in urban slums and dalit (most oppressed social outcasts) neighbourhoods in villages.

The dominant left ignores differentiation of the peasantry under the impact of capitalist development in agriculture. In the name of broad peasant unity, it accepts the domination of rich peasants and kulaks in peasant activism. The radical left strives to build a revolutionary peasant movement strictly under the leadership of the emerging class of rural proletariat (and semi-proletariat), the worst sufferer from the reform process, against the alliance of imperialism, survivals of feudalism and kulak reaction. For it, proletarian class consciousness in the Indian context consists chiefly in the urge to march towards socialism via the anti-feudal, anti-imperialist people's democratic revolution. And this consciousness is what it tries to arm the working class with.

Lacking confidence in the masses and in itself, the opportunist left has joined the Congress bandwagon on the pretext of keeping the communal wolf at bay; just as it had once allied itself, if indirectly, with the communal BJP to keep the authoritarian Congress out of power. Revolutionary communists, by contrast, opt for an independent and assertive left bloc in the parliamentary arena opposed to both the Congress and the BJP. This they believe to be one of the necessary preconditions for clearing up the political confusion and inertia that has gripped the working class.

The reformist left never tires of saying that trade union activity is a united front activity. This is not enough. We must fight for the hegemony of revolutionary proletarian ideology in the united front. This means that, in addition to waging struggles to establish control over the production process in the workplaces, the proletarian vanguard must strive to lead the workers in the democratic movements of the day. While waging immediate battles, they will prepare the class for the final overthrow of capitalism.

These are all basic ideological positions. But unless fundamentals are set right, no amount of trade union militancy can defeat the neoliberal offensive, which is as much ideological as it is material. For example, a section of liberal intelligentsia welcomes globalisation and greater integration with the world economy and penetration of imperialist capital, with the fond hope that this will weaken feudal survivals. Within the trade union movement we find an echo of this view, which supports the labour standards argument and hopes that the working conditions of Indian labour can be improved through such collaboration. The vanguard of the industrial proletariat must oppose this view and emphasise the model of "backward integration" with unorganised workers and the rural poor to carry the democratic revolution through to the end and thus strike at the root of the unequal exchange and pillage of the Third World that is going on in the name of globalisation.


The tables and most of the data are from the report of the Second National Labour Commission published in June 2002. Much of the data on the it sector is from "IT Industry in India as Panacea: Illusions and Reality" by P.B. (ML International Newsletter, May 2004).