Globalization and its impact on labour relation in the Indian economy

*Dr. Santosh Tiwari, (Assistant Professor of Law NGBU, Allahabad, **Sadhana Tiwari, (Research Scholar, Faculty of Management Studies, BHU Varanasi)

Abstract: This paper examines the impact on labour markets in developing country India, with the liberalized global economy. The integration is taking place under current globalisation, which consists of free trade, free capital movements and domestic labour market flexibility (instead of free international movement of labour). Taking into account the positive, the negative, the direct and the indirect effects, the most up-to-date research suggests that globalisation has a small overall effect on output and employment in the India that is just as likely to be favourable as being unfavourable, depending on the time period and the countries considered. Introduction: Globalisation has occurred at different speeds in different countries and has often been an uneven but cumulative process. Nevertheless, in most advanced economies, globalization in the above sense of near free trade with very low tariff barriers and almost free capital movements was achieved by the first half of the 1980s and in many developing countries by the early to mid1990s. Multinational corporations are one of the main actors in this globalization drama. A relatively small number of these companies have a disproportionate share in world trade and world production and, together with large financial corporations, are deeply involved in international short- and long-term capital flows (Epstein(2005), Dunning (2004)). The process of globalization and integration has accelerated its pace and transformed its character under a confluence of forces embracing trade, technology, tariff and investment flows, enabling it to transcend the geographical and political barriers. In fact globalization over the last three decades as so has been associated with greater intra-industry and intermediate goods trade, reflecting more intense global competition. It has also been characterized by increasing share of services in world; increasing asymmetry in the international mobility of labor and capital; and unregulated mobility of international capital as opposed to domestic capital. The phase of globalisation was widely anticipated to bring with it substantial benefits in terms of higher growth rates and greater convergence of incomes across and within regions and countries. However, this expectation has largely been belied, both for the world economy as a whole and for most of its constituent member economies. For some time now, it has been evident that strategies of liberalisation, deregulation and privatization of a range of goods and services that were earlier in the public domain, have not delivered higher growth rates of output or employment. Nor have they implied greater convergence of incomes. In fact, they have not even meant higher rates of employment generation for developing countries which were expected to gain substantially at least in this regard. One important result that the greater freedom accorded to capital mobility was supposed to deliver, was the greater flow of investible resources to those developing countries in greatest need of it. But this has not happened either.

Indian Economy: When we speak of globalisation, we refer to pressures by global institutions rather than the economic aspects of globalisation (e.g., trade, capital flows, and migration). With respect to labor, these pressures are of two main kinds. One is the demand for better labor standards, while the other is a demand for greater labor flexibility. It would appear that the two policy sets are contradictory in intent and impact, although advocates of both claim that they want to improve conditions for workers. Since discussions of the two sets of policies have generally taken place in different arenas, we do not know which has made more inroads in different countries or why. We also have little understanding of how they interact. Nonetheless, the resultant characteristics of labor markets are potentially of great importance to workers incomes and well-being, and thus to societies and economies of developing countries as a whole. Historically, Indian economy has been characterized as agrarian economy with a small manufacturing sector and hence an overwhelming share of agricultural employment in the total works force. This share remained static over a long period despite the fact that the structure of the GDP underwent a transformation resulting in the share of agriculture in GDP declining consistently over the years. Combined with the limited growth of the manufacturing and services sectors and preference for a capital intensive technology by the organised manufacturing sector, the opportunities for generation of productive employment could not get expanded beyond a point. Despite a near Zero employment elasticity in the agriculture sector, additions to the labour force (surplus labour) had to wily nilly fall back on this sector thereby swelling the ranks of the disguised unemployed and the underemployed. These processes resulted in low productivity and low income levels of the agricultural labourers. Doubts were also expressed on the employability of the labour force in the organised sector due to lack of appropriate skills necessary for their productive absorption in value added subsectors of manufacturing and services sector. Employment-Unemployment: Considering the present employment unemployment scenario in the country, the Eleventh Five Year Plan strategizes rapid growth in employment opportunities along with improvement in the quality of employment. It recognizes the need to increase the share of regular employment in total employment and a corresponding reduction in casual employment. The employment generation strategy of the Eleventh Five Year Plan has also envisaged reduction in underemployment and a movement of surplus low wage labour in agriculture sector to higher wage and more gainful employment in the non-agricultural sector. Agriculture sector is projected to generate no additional employment during the Eleventh Plan period. Employment in manufacturing is however expected to grow at 4 per cent while construction and transport & communication are expected to grow at around 8.2 per cent and 7.6 per cent, respectively. The projected increase in total labour force during 11th Plan is 45 million. As against this, 58 million employment opportunities are targeted to be created during the Eleventh Plan. This is expected to reduce unemployment rate to below 5 per cent. The Eleventh Plan emphasizes that the growth in various sectors of the economy can be achieved only if supported by appropriate skill development programmes at various levels. The Eleventh Plan document has spelt out certain deficiencies in the skill development scenario in the country as it exists presently. The thrust of the plan therefore will be on creating a pool of skilled manpower in appropriate number with adequate skills, in line with the requirements of the ultimate users of manpower such as the industry, trade and service sector. Such an effort is necessary to support the employment

expansion through inclusive growth including in particular a shift of surplus labour from agriculture to non-agriculture. Labour force, Employment and Unemployment General Labour force refers to that segment of population which supplies or offers to supply labour for production and therefore, includes both employed and unemployed persons. In the present survey, various estimates of the labour force have been derived on the basis of usual principal status approach only. The estimates of the labour force according to the usual principal status indicate the number of persons who either worked or were looking/available for work for a relatively longer part of the reference period, which in case of the present survey is financial year 2009-10 (from 1.4.2009 to 31.3.2010). Estimation of various proportion Based on the survey results, the proportion estimates(per thousand) of labour force, worker population ratio, proportion unemployed, unemployment rate etc have been derived for different age groups as well as by sex. The results are presented in the form of proportions (per 1000 persons) for the States/UTs as well as at the overall level. At overall level in addition to the proportions the number of persons has also been estimated and presented in the tables. Worker population ratio At overall level, the worker population ratio is estimated to be 325 persons which implies that at overall level of the States/UTs covered, 32.5 per cent of the population is employed. In absolute terms at overall level the employed persons are estimated to be 384 million. Further while analyzing sex wise worker population ratio, it is observed that per thousand population, 495 males and 140 females are estimated to be employed at overall level. The survey results further reveal that the sex ratio of the employed persons is 259 at overall level indicating that 259 females are employed for every 1000 employed males. In the rural and urban sector, the worker population ratio is estimated to be 329 and 314 respectively. The sex ratio of the employed persons is 278 and 204 respectively in rural and urban sector. Labor force participation rate: At overall level, the LFPR has been worked out to be 359 thereby implying that 359 persons are either employed or available for work per 1000 population. At overall level, the LFPR of males and females is estimated to be at 538 and 163 persons respectively. The sex ratio of the labour force, at overall level is estimated to be 279. In the rural and urban sectors, the LFPR is estimated at 365 and 340 respectively. The sex ratio of the labour force in rural sector is 299 at overall level whereas for the urban sector the same is 222. Unemployment rate: The unemployment rate is the ratio of the number of unemployed persons in the labour force per thousand. At overall level the unemployment rate is estimated at 94, which imply that 9.4 per cent of the labour force is unemployed and looking for jobs. In absolute terms about 40 million persons are found unemployed based on the survey results at overall level of the State/UTs surveyed. For male and female persons the unemployment rate at overall level is 80 and 146 respectively.

Employment main cause of migration in 2007-08, says NSSO report The majority of households in urban as well as rural areas migrate because of employment opportunities, according to a new government survey. Nearly 55 per cent of households in rural areas and 67 per cent in urban areas migrated for employment-related reasons in 2007-08, says the National Sample Survey Office report (64th round) released today. The survey, conducted between July, 2007 and June, 2008 and covering a sample of over 5.72 lakh people, also indicated that the magnitude of male migration was far lower than female migration in both rural as well as urban areas. In rural areas, about 48 per cent of females were migrants, while the migration rate for males was just five per cent. Similarly, in urban areas, the migration rate for females was higher at 46 per cent, compared to 24 per cent in the case of men. During the oneyear period, migration of households from rural to urban areas was higher than from urban to rural areas. About 57 per cent of migrant households in urban areas were from rural areas, while 29 per cent in rural areas were from urban areas. A large chunk of migrants remained within their states. The last place of residence of about 78 per cent of the migrant households in rural areas and 72 per cent in urban areas was within the state. The study also indicated that the most prominent reason for female migration in both rural as well as urban areas was marriage. 91 per cent of rural female migrants and 59 per cent of urban female migrants moved because of marriage. Among the male out-migrants from rural areas who were residing abroad, about 82 per cent had sent remittances during the year, while only 58 per cent of those residing in India had sent remittances. Among male out-migrants from the urban areas, nearly 69 per cent of those residing abroad had sent remittances, compared to only 41 per cent of those residing in India. On an average, during the year, a male out-migrant from rural areas residing abroad had sent four times the amount of remittances sent by an out-migrant residing in India. On average, nearly Rs 52,000 was remitted by migrants residing abroad, compared to nearly Rs 13,000 from those residing in India. Migrants from urban areas residing abroad remitted a higher amount during the year to their former households compared to those from rural areas. On average, a male migrant from urban areas residing abroad remitted about Rs 73,000 during the year, which was Rs 21,000 higher than the average amount remitted by a male migrant from rural areas Indias unemployment rate stands at 9.4%: For the first time ever the Labour Bureau of the Government of India has conducted a survey on employment unemployment, and has come up with an unemployment rate based on that. National Sample Survey Organization (NSSO) also calculates unemployment rates, but these surveys are done with a gap of 5 years, so there is a dire need to have unemployment numbers in between. 0 Million Unemployed with an Unemployment Rate of 9.4%: The survey was conducted in 28 States/UTs spread across the country in which about 99 per cent of the countrys population resides. It estimates that the population of the country is 1182 million with 63.5% in the working age of 15 59 years; however, not everyone who is in the working age is interested in joining the work force, so the worker population ratio is much lower. There are an estimated 238 million households, of which 172 million are rural and 66 million are urban. Out of the total population of the States/UTs covered, 872 million persons (73.8 per cent) live in rural areas and 310 million persons (26.2 per cent) live in urban areas.

The overall unemployment rate is 9.4%, and it is split out as 10.1% in rural areas, and 7.3% in urban areas. Now, a key thing to remember about unemployment rate is that it is calculated as a percentage of labor force, and not the total population. So, this means that 9.4% of that part of population which is interested in working is unemployed, and not 9.4% of the entire population is unemployed. In the Indian context, 359 persons per 1,000 are either working or interested to work, and this is called the Labor Force Participation Rate. So, out of an estimated population of 1,182 million 424 million persons are either employed or are interested in working. The unemployment rate of 9.4% means that out of those 359 persons per thousand, or 424 million people there are 9.4% or about 40 million who were unemployed. Here are the numbers in millions.

For males, the unemployment rate is 8%, whereas for females the unemployment rate is 14.6%. The rural unemployment rate is 10.1% and the urban unemployment rate stands at 7.3%. One thing to be noted about this unemployment rate is that the report states that compared to the NSSO survey the unemployment rate is quite high probably due to under-estimation in the agriculture sector employment Globalisation And Its Impact On Indian Labour System

International Mobility of Labour: The migration of labours across international boundaries is one of the most striking features of globalisation worldwide. Since Independence, migration from India has been characterised by movement of persons with technical skills and professional expertise to the industrialised countries, and flow of unskilled and semi-skilled workers to the oil exporting countries of the Middle East. During the 1990s, however, there has been a clear shift in the pattern of labour demand in the Middle East away from unskilled and semi-skilled categories towards service, operations and maintenance workers requiring high skills. Besides, there has been a runaway growth in exports of IT and software services from India - both on-site and business process outsourcing (BPO) in the 1990s. One direct benefit for the employees in the IT sector is in the form of Employee Stock Option Plan offered by the employers which has led to the growing attractiveness of.the sector. All these have enhanced the employment opportunities for the Indian labour, particularly when the country boasts to have very large pool of English speaking people as well as the second largest pool of scientific and technical manpower in the world. In the process, sustained remittances from the Indian Diaspora, which is in fact the largest in the world, have imparted an element of stability in the countrys balance of payments. Woman Labour: Globalisation is found to have led to greater feminisation of the workforce both in the developed and developing world. The issue has assumed considerable importance in view of the acute gender disparity in the country. Here, however, the signals are not unequivocal with evidence of increased youth unemployment rate among rural females coupled with a reverse tendency among urban females in 1999-00 over 1993-94. Nevertheless, the coincident increase in youth unemployment rate among both rural and urban males points to a possible feminisation of the workforce at least in short duration urban informal activities. Increased flexibility in the labour market may be needed if the country is to engage women in the work force fully and compete better in international markets. Child Labour: Child labour, though undesirable, persists primarily in rural and agricultural activities on account of socio-economic compulsions. One of the positive features of the recent employment growth has been the definite decline in the participation of children aged five to fourteen years in the workforce. One fall-out of the decline in child labour has been the substitution effect, which favours the employability of adult females. While the existing literature often identifies poverty as a major determinant of child labour, evidence across Indian states indicates that the correlation between poverty and child labour is very weak. Therefore, one should possibly go beyond the poverty issues and look at areas such as quality of schooling and spread of primary education. Industrial Relation: The phase of globalisation has witnessed silent and significant metamorphosis of the labourmanagement relations despite the institutional inertia on the front of labour laws and regulations. The erstwhile centralised and tripartite industrial relation (IR) system has slowly given way to many local bipartite IR systems. Increasingly, consultation, co-operation and consensus are taking the place of coercion and confrontation. This is reflected in the reduced number of man days lost at 210 million during 1991-2000 as against 402 million during 1981-90. One of the striking features during this period is that more man days were lost in lock-outs on the initiatives of the management than strikes effected by the employees. The new industrial climate has also encouraged the employers to right-size the workforce by way of closures, technological change and restructuring. Thus, the process of globalisation has set in motion myriads of forces, which

are operating at multiple channels to transform the landscape of labour in the country beyond recognition. Let me now turn to the emerging challenges for Indian labour in a globalised world and the appropriate agenda for action. Conclusion: Clearly, globalisation stands for challenges and opportunities. The onus is now on all of us to demonstrate the resolve to turn the challenges too, into opportunities for the progress and prosperity of the nation. It is known from the pages of history that global competitive games are favourable neither to developing countries nor to weaker sections in developed countries as the rules and policies largely shaped by powerful countries and powerful players. Most developing countries still have very limited influence in global negotiations on rules and in determining the policies of key financial and economic institutions. Similarly, workers and the poor have little or no voice in this governance process. The World Development Report 1995 (World Bank, 1995) points out that lives of workers around the world are increasingly connected through international trade, capital flows, and migration. This expands opportunities, but it also raises fears that international competition and freewheeling capital will cost workers jobs or impairs their standards of living, and that some groups of workers or countries will be left out of expanding international markets altogether. Clearly within a decade the World Bank (2005) stresses that Governments must intervene in workerfirm relations on three main fronts such as in the wage-setting process, regulating working conditions, and controlling the hire and fire system of workers. Then the efficiency arguments stress information problems and a need to improve the matching of labor demand with supply. There may also be equity arguments if there is unequal bargaining power between employers and workers, discrimination against vulnerable groups, or incomplete or imperfect insurance of workers against risks. The new work environment demands a high degree of adaptability and flexibility in the Labour market. In this situation only the government is competent and responsible enough to ensure that this flexibility is compatible with employment security, including protection against arbitrary loss of employment, arbitrary reductions in income and unhealthy work practices. References: 1. Jayati Ghosh Macroeconomic reforms and a labour policy framework for India January 2002 2. Barbara Stallings Globalization and Labor in Four Developing Regions: An Institutional Approach Published online: 5 May 2010 , Springer Science+Business Media, LLC 2010 3. Devin Finn Bonded Labor in India TOPICAL RESEARCH DIGEST: HUMAN RIGHTS AND CONTEMPORARY SLAVERY 4. Ajit Singh Globalisation, Industrial Revolutions in India and China and Labour Markets in Advanced Countries: Implications for National and International Economic Policy International Labour Organization 2007 First published 2007 5. Pillai, Rajasekharan Transformation of Labour Relations Munich Personal RePEc Archive 6. Report on Employment & Unemployment Survey (2009-10) Government of India, Ministry of Labour and Employment, Labour Bureau, Chandigarh October10