Liberalisation and the Growth of Unemployment

N. Bhattacharyya

The end of the twentieth century is showing the symptoms of collapse of capitalism which has failed to contain its inner contradictions. British imperialism declined by the 1940s and it became subordinate to US imperialism. The G-7 countries destroyed the USSR and other East European countries but a majority of the people of these countries are still in favour of socialism. With the inclusion of Russia in their club, the countries which have specialised in exploiting the third world countries are now known as the G-8 countries. China is no longer a democratic country and its autocratic ruling elite is the friend, philosopher and guide of the world imperialist forces.

In the last decade of the twentieth century lakhs of working population of the G-7 countries are on the streets demanding the restoration of lost jobs and increased social insurance benefits. In Russia the market economy has destroyed developed economic institutions without guaranteeing any alternative employment opportunities for the working people. The brave people of Russia who sacrificed everything to bring the proletarian revolution of 1917 are asked to wait for the help promised by their arch enemies the IMF and the World Bank.

We were told by the professional touts of the world imperialist forces(the IMF and the World Bank) that the market economy can create miracles and that this had been demonstrated by the economic development of South Korea, Indonesia, Malaysia and the Philippines during the last two decades. Their GDP growth was kept artificially high during the last two decades and now their economies have collapsed. During the last two years we know what is happening in these countries --- not a single one of the countries which were called Asian Tigers by the G-7 countries is in a mood to accept any dictate of the IMF and World Bank. Lakhs of students and workers are on the streets demanding immediate change in the Governments and their economic policies. A serious struggle is going on in Indonesia even after the removal of President Suharto. The balloon of export-led growth which has been popularised by world capitalism stands punctured and the worst sufferer is the spokescountry of the G-7 countries in Asia Japan. In Japan every day unemployed workers in larger numbers stand in queue in front of the dole distribution centres. This is a normal scene in the capitalist countries of the world at the end of the twentieth century!

In a world scenario where the developed countries are engaged in a desperate search of markets for their industrial and agricultural products, the third world countries are facing a lot of restrictions in the export of their products to the developed world. At the same time the MNCs are spreading like locusts in large numbers to exploit the vast natural resources and the cheap skilled semi-bonded labour of the third world countries. In Latin America, Africa and South Asia employment in the organised sector is traditionally very small, and due to the capital intensive production processes of the MNCs even that small percentage of employment is dwindling. An attempt is made here to understand the lessons of structural reforms from 1991-92 onwards for the working population in India in particular and in the rest of the world in general.


The BJP led coalition government in its National Agenda for Governance (1998) promised inter alia that it will make labour, both organised and unorganised, an equal partner in the production of the nation's wealth and in its progress. Laws relating to equal pay for equal work for men and women shall be strictly implemented. On unemployment, it continues, that the main thrust of the new Govt. will be: Berozgari Hatao (removal of unemployment).As against the present trend of jobless growth, this government will measure growth by the generation of gainful employment.... Thus this National Agenda for Governance admits that structural reforms created only jobless growth!

We do not have an accurate estimate of our work force. Parliament was given a figure of 314.13 million on the basis of the 1991 census (in the Lok Sabha in unstarred Question No. 5038, May 7,1997). The Economic Survey 1997-98 estimates the labour force as being 367.4 millions in 1994 and 397.2 millions in 1997. Though the government does not separately categorise the number of people working in the organised and unorganised sector, in the said Economic Survey, workers in the public and private sectors in 1994 and 1996 are shown as 27.35 millions and 27.94 millions respectively i.e. 7.4 per cent or less of the total workforce was in the employment of the organised sector as against 8.5 percent in 1991. In other words the national policy of 'Globalisation, Privatisation and Liberalisation' which has been followed as per the conditionalities of the structural reform measures have marginalised the labour force of that organised sector which is supposed to enjoy a little protection under the labour laws. It is a matter of shame for any civilised country that virtually the entire labour force is without the protective umbrella of the state. The 7 or 8 percent of workers who are organised face the constant threat of retrenchment and pauperisation.

The growth of Gross Domestic Product (GDP) is supposed to indicate the health of the economy. It is a fact that developing countries must show higher growth rate in the industrial sector. In both growth of GDP and industrial production during the reform period our performance chart shows satisfactory achievements but when it comes to the question of employment, the captains of industry have no satisfactory answer. They complain that labour laws are too rigid so that workers cannot be thrown out of their jobs as and when management wants. Table I shows the annual growth in major sectors of industry and the corresponding growth of employment and the annual growth of GDP and that of employment since 1990-91.

Annual Growth Rates in Major Sectors of Industry,
Employment and GDP
Period 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96
Mining (11.46) 4.5 0.6 0.5 3.5 7.5 7.4
Employment 3.19 -0.46 -0.10 2.1 0.26 -0.70
Manufacturing (77.11) 9.0 -0.8 2.2 6.1 9.8 13.6
Employment 0.09 1.48 -0.49 0.28 0.77 4.99
Electricity (11.43) 7.8 8.5 5.0 7.4 8.5 8.1
Employment 0.85 1.16 1.35 0.92 -0.31 1.33
GDP 5.2 0.5 5.3 6.2 7.8 7.2
Employment 1.48 1.2 0.44 0.72 0.54 1.51

Source: Economic Survey 1997-98. Figures in brackets show weights.

It is amply clear that despite a reasonably high rate of growth in GDP especially in 1995 and 1996, employment growth in the organised sector was very low in 1993, 1994 and 1995 and it slightly improved in 1996, but the subsequent figures of the Directorate General of Employment, government of India, show that there was fall in employment growth in 1996 as compared to that of 1995. Productivity in manufacturing, mining and in the generation and distribution of electricity improved substantially during the post-reform period but employment growth in 1996 over 1995 in mining was negative, it was hardly 0.6 percent in manufacturing and a negative 2.1 percent in electricity etc.(Economic Times 4.1.99) Capital intensive growth process in a labour surplus country is virtually pushing labour against the wall. Labour in the organised sector increased from 26.3 millions in 1990 to 27.9 millions in 1996 i.e. an addition of hardly 16 lakhs during the last six years against an increase in the total number of labour force by more than 80 lakhs during the same period.

In a developing economy the public sector has an especial role. But as a consequence of accepting the conditions of the international moneylenders employment in the public sector remained constant around 19.5 millions and in the private sector it hovered around 8.5 millions. The worst affected sector in the public sector is the construction industry which employed around 1.2 million workers in 1988 and was reduced to 1.15 millions in 1996. In the private organised sector the number of workers in the construction industry also went down from 78 lakhs in 1992 to 53 lakhs in 1996, a retrenchment of 25 lakhs from only one out of nine organised sub-sectors in India. This happened because in the unorganised sectors the builders lobby can earn more by depriving the workers of their statutory rights.


One major assurance given by the international moneylenders to their friends in India was that after the implementation of reform measures more foreign direct investments would flow into India and the approximate amount suggested was around 10 billion US dollars per annum. It was also promised that the products produced by these MNCs would be exported. No one is surprised that the actual FDI inflow started with 129 million US dollars in 1991-92 and increased to 3.2 billion US dollars in 1997-98. Most of these foreign investors refused to export their products which is contrary to their agreements. Their manufactured products are mainly designed to satisfy a very small section of the Indian consumers. These foreign investors instead of competing with their Indian counterparts were more interested in the acquisition and absorption of Indian business. The result is that the Indian economy came more and more under the control of foreign monopoly houses. The sword of Damocles is kept hanging over the head of the Indian working class in the form of retrenchment.

After reform the MNCs refused to bring in FDI which it was argued would upgrade Indian technology so that India would become self-sufficient in Research and Development and compete in the world market. Instead they favoured their own industries and shifted their production base to India to exploit the cheap skilled labour and to satisfy a microscopic local population who desired foreign goods. The majority of the Indian population has nothing to gain from the activities of the MNCs. With the introduction of product patents and Exclusive Marketing Right (EMR) hundreds of small and medium Indian manufacturers will be closing their shutters and Indian workers will be unemployed. The poverty-stricken Indian cultivators do not know anything about WTO, IPR and so on. The permission given by the Government to MNCs to introduce 'terminator' seeds is challenged by the cultivators as they are threatened that they will not be able to reuse the same seed year after year which is the common practice throughout the country.

The country is declared bankrupt by international moneylenders and our organised Trade Unions have already withdrawn from their professional duties. The BJP-affiliated trade union, Bharatiya Mazdur Sangh (BMS) claims the support of the largest number of workers in the country. They are conspiring with the Central government to bring in the Private Insurance Companies and Product Patent laws. By agreeing to these measures there will be immense harm done to the Indian working class. The organised trade unions who are the front organisations of the mainstream political parties are actively helping the political parties to sell out the country to imperialist forces.

During the last 5 years the number of industrial disputes went down from 1393 in 1993 to 1134 in 1997 i.e. by 19 per cent and the consequential man-days lost went down from 20.3 million in 1993 to 14.9 million in 1997 i.e. by 26 per cent. In 1995, 1996 and 1997 the percentage change in man-day loss declined by 22.4, 24.5 and 26.4 respectively. Due to the changed scenario almost all the mainstream political parties are now holding state power in one state or the other and that has compelled their political trade unions not to agitate against the violation of labour laws in the specific states where they are in power. It is a fact that job security is non-existent, the erosion of real wages is taking place very fast and there are greater attacks on the gains that workers achieved after untold sacrifices. The number of strikes and lockouts is going down. Man-days lost due to lockouts in 1997 were 9.903 million against man-days lost by strikes which were 5.024 million. The largest number of loss of man-days due to lockouts was registered in West Bengal which is ruled by the CPI(M). It was 7 million in 1993 and was reduced to 5.1 million in 1997. This was around 50 per cent of the all-India loss of man-days due to lockouts in 1993 and 1997 in one state alone. The workers of our industrial units may be tired of strikes and lockouts and may feel cheated by the political parties, but they have not given up hope of fighting against injustices and exploitation perpetuated by the capitalist management which is supported by the ruling parties.

The history of the fighting spirit of the workers of Kanoria Jute Mill in the district of Howrah, West Bengal may be cited as an example. The workers of this factory under the banner of their Sangharsha Samiti (Struggle Committee) decided to keep the national trade unions outside the factory gate and the workers of all political shades joined together and fought in court and outside for the survival of their factory. Their long struggle was sustained with the help of thousands of men and women in West Bengal and other states. The West Bengal Government did not help the workers' movement. After the Kanoria experiment many units in West Bengal and elsewhere are trying to organise themselves without the help of any national trade union. Rather they base themselves on the help of smaller trade unions who have established their credibility in fighting for the cause of the workers. There is no dearth of genuine revolutionary trade unions in different parts of the country.


Keeping in mind the efficiency, productivity and commitment of our skilled and unskilled workers, India is having a vast network of productive work centres outside the capital intensive production system. The British Raj tried their level best to destroy such industries in order to promote the sale of goods of their own production system and later on this strategy was pursued through the Central government after 1947 by Indian big business. Even then nobody could destroy our small scale industry, handloom and cottage industry, fishing industry and so on. If they can survive the onslaught of both foreign and local money power, it is certain that the number of these units should increase.

An attempt is made here to find out the conditions of labour in some of these labour intensive industries after the reforms. As soon as reforms were introduced the Government opened up the small scale sector to the big houses. Committees were appointed and recommendations were made to reduce the areas of operation of both the small and tiny sector. The motive was clear the Government was ordered gradually to allow the MNCs to enter in the areas specified for the small scale sector. However the BJP government made some cosmetic changes to retain their vote bank among the small scale industrialists. Investment in small scale industry was increased to Rs 3 crores from Rs 60 lakhs. For the tiny sector it was increased to Rs 25 lakh from Rs 5 lakh. Some paltry concessions on excise was announced in their first budget. Table II explains the vitality of the sector in the Indian economy during the post reform period.

Performance of the Small Scale Industrial Sector
1991-92 1994-95 1996-97
No. of Units (millions) 2.08 2.57 2.86
Output (Rs. 000 crores) 178.60 293.90 412.60
Employment (millions) 12.98 14.66 16.00
Export (Rs. 000 crores) 13.88 29.60 39.25

Source: Economic Survey 1997-98.

The government claims that the small scale sector contributes 40 per cent of the gross turnover in the manufacturing sector, about 45 per cent of manufacturing exports and 35 per cent of total exports. These figures are not totally creditworthy because the small and tiny sector is widely spread in different parts of the country and the government does not have any worthy data collection mechanism for the entire small and tiny sector. What has to be kept in mind is that after the reform process institutional finance became scarce for the independent small scale units as there are a large number of units in this sector which are owned, operated and managed by big houses in benami to take advantage of various sops offered by the government Moreover, after the reform measures the demand from the erstwhile public sector units and Indian big manufacturing units declined substantially resulting in the closure of a large number of small units in different parts of the country. Genuine organisations of small scale industries have demanded positive steps to see to it that in the name of quality and/or economy the Centre should not succumb to the pressure of either the Bombay Club or the World Bank to weaken the small scale sector.

In Delhi a large section of slums (jhuggis) dispersed in different parts of this metropolis provide shelter to the workers of Delhi's small scale industries. The executive and judiciary under the pretext of the Delhi Master Plan is bent upon uprooting the people from these jhuggis without any alternative place of settlement and a large number of industries have already closed down under the pretext of providing a clean environment for the Delhi elite. Thus the hands of the IMF and World Bank are long and in the capital of the country it was demonstrated how under their direction both the highest court of the country and the Central government joined together to uproot millions of workers from their source of income. The recent change in the government in Delhi is no satisfaction for these unorganised workers because it was the Congress government which invited the World Bank to take charge of the Indian economy in 1991-92. This demands more united action among the workers and genuine small scale industrialists against the oppression of the reforms.

It is claimed that the construction industry has yet to develop in our country and that the government should give top priority to this industry as it develops infrastructure. This industry also provides employment to both men and women, skilled and unskilled in large numbers. It is quite surprising that in the organised sector workers in the construction industry have kept declining since 1993. There were around 12.29 lakh workers in the construction industry (organised sector) in 1992 and by the end of 1996 it went down to 12.12 lakhs i.e. a reduction of 17,000 workers in 4 years. The exact number of persons employed in this industry is not known. The annual report 1996-97 of the Labour Ministry, Government of India puts the figure at 5.54 million. Unconfirmed reports suggest a higher figure of between 10 to 15 million construction workers both seasonal and temporary, of which 50 per cent are women. A majority of these workers are themselves the victims of 'development'. Under the Land Acquisition Act, 1894 the government acquired the land of many of these families, paid little monetary compensation and employed some of them as daily labour on construction sites. Big national projects are shown to the world as an achievement for a developing country, but the people on whose land these projects are standing are now homeless and destitute. The men are either rickshaw pullers, beggars or antisocial elements in the neighbouring towns. The womenfolk are either prostitutes or working as domestic help in the towns. The Centre has brought a bill in Parliament to make the existing Land Acquisition Act more simple and to give all powers to the village level bureaucracy to acquire land and dispose of all complaints. After a long struggle by labour unions and social activists the Centre has passed a law called the Building and other Construction Workers (Regulation of Employment and Conditions of Service) Act 1996. But the conditions of construction workers deteriorate day by day because the labour contractors know that their workers are virtually bonded labour and that the workers' interest is not protected by the law enforcing agencies of the country.

About 5 to 6 million workers are involved in inland and marine fishing. Our fishermen and women are as poor as their counterpart : the landless agricultural labourer. However, the marine fishermen and their livelihood was challenged by foreign trawlers licensed by the Government of India. In order to conserve their own marine resources almost all the developed countries have put restrictions on the exploitation of marine resources along the coastline of their own countries. The Indian coastline became a lucrative area for the exploitation of all types offish whose demand is increasing in the international market. To stop such destruction of our resources by the imperialist forces and the consequent steep fall in the catch of our own fishermen in their traditional boats, the National Fishworkers' Forum with the help of the national trade unions carried on successful agitation to stop foreign trawlers in deep sea fishing. They even had to burn some of the foreign trawlers to discourage them from anti-national activities. The struggle of the fishworkers was successful after six or seven years when the United Front Government at the Centre agreed in 1997 not to renew the licences of the MNCs. This clearly indicates that if the trade unions get united the resources of the country can be conserved and the MNCs may be prohibited from entering these areas. However, the economic conditions of workers in the Indian fishing industry are much below expectations and the business houses who are earning huge profit now due to the lack of competition from foreign business must look to the interests of their workmen and the National Fishworkers Forum' has to look into labour exploitation of all kinds.

The handloom weavers in the villages of the country are still fighting for their existence along with the small and marginal farmers. The suicide deaths of cultivators is news when it happens to the cotton growers in AP, Maharashtra, Karnataka or to the cultivators of Punjab. But death due to starvation of landless cultivators or the small or marginal farmers or our handloom weavers hardly get any space in the national dailies. The government has no time to take corrective steps. It is shocking that government committees point out the pitiable conditions of our weavers and the corruption and exploitation that is going on in the bureaucracy which is responsible for the supervision of the handloom sector. The Swadeshi Jagaran Manch of the RSS is in the news for reviving the spirit of swadeshi in the country. Can this organisation do something to assure the supply of inputs and credit to the handloom sector and eliminate the middlemen who are thriving on the wealth created by the hapless handloom weavers of the country. The government is not ashamed to print in their report that the average wage of a handloom weaver is between Rs. 14 to Rs. 15 per day (Government of India, The Textile Industry in the 1990s: Restructuring With Human Face). Powerloom and machine made cloth have failed to close down the handloom sector in the country and around 5 million handloom weavers and their dependent family members are still surviving despite the naked exploitation of the middlemen and the anti-handloom sector policies of the government.


Although it is known that the precondition for the improving of productivity in agriculture is land reform save for one or two almost all the state governments have refused to carry it out. Land ownership is concentrated in the hands of selected families throughout the country. The result is that despite costly inputs the growth of agricultural production is totally unsatisfactory and this is demonstrated in Table III.

Agriculture and the GDP Growth Rate

Percentage changes over the previous year
Period 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98
Agriculture 6.1 3.7 5.1 -3.1 7.9 -2.0
Total GDP 5.3 6.2 7.8 7.2 7.5 5.0

Source: Economic Survey 1997-98

The GDP growth rate has varied between 5 to 8 percent in the post-reform period but agricultural production has shown negative growth in 1995-96 and 1997-98. No one can blame the failure of the monsoons because it has been more than satisfactory continuously for the last 10 years. People living in rural India and who depend on agriculture were around 77 percent, 74 percent and 73 percent in 1980, 1990 and 1995 respectively. Around two-thirds of the work force are dependent on land related activities but the share of agriculture in the GDP has gradually declined from 39.6 percent in 1980-81 to 32.9 percent in 1990-91 and 27.86 percent in 1996-97. The failure in agriculture and the lack of alternative occupations has caused the virtual pauperisation of our rural population. The government admits that number of persons living below the poverty line in the rural area increased from 231.9 million in 1987-88 to 244 million in 1993-94 (Economic Survey 1997-98). Every year the number of landless agricultural workers is increasing due to the alienation of land by the moneylenders. No state government has the political will to implement the minimum wage laws for agricultural labour.


In a backward country such as India purchasing power has to be enhanced for the common people so that the demand for goods and services can revive recession-hit industries, stop retrenchment and lockouts. As two-thirds of the working people are still in the villages and their main work is based on cultivation, so land reform in the rest of the country can be delayed only at the cost of changes in the economy. The introduction of cultivation by corporate bodies employing labour saving devices should face the same fate as foreign trawlers in deep sea fishing. A minimum wage for rural labour is urgently needed and labour organisations have to get it refixed and implemented without further delay. Panchayati Raj institutions should be compelled to supervise its implementation.

The announcement of the appointment of the 2nd National Labour Commission may be a move to avoid discussion of the immediate problems of the Indian workers but this opportunity should be taken to demand radical amendments to the existing labour laws of the country. These are never implemented seriously due to many loopholes which are intentionally inserted to save the employers. The liberal resort to Voluntary Retirement Scheme (VRS) or exit policy has created unprecedented unemployment in the country. According to a rough estimate 2.17 lakh employees were sent out from their jobs in the public sector organisations by 31st March,1997 and the Govt. spent Rs 2373.37 crores on VRS out of the National Renewal Fund which was meant for the training and rehabilitation of retrenched workers affected by the reform process. The government policy on the disinvestment of shares without any upper limit will cause huge unemployment in those units which are profit earning. At the same time the government has decided to close down sick industries in the public sector. The Fifth Pay Commission on the revision of the salaries of central government employees recommended a 30 per cent reduction in the staff strength of central employees. This has been delayed but fresh appointments in central government offices has been stopped due to the increase in retirement age.

The trade unions who are supporting the mainstream political parties have to decide whom to support the anti-labour policies followed by their governments or the millions of workers who are left with no other option than to challenge the foreign-funded and controlled 'national' government. The end of the twentieth century will decide which way the country will go --- whether the sovereignty of the country will be handed over to international speculators or whether the path taken in the past will be corrected, the people taken into confidence to start development strategy afresh keeping in mind the needs of one billion people, national dignity and the fighting spirit of millions of workers to radically change the feeling of despair into new hopes and success. History tells us that the workers' struggle is always successful : even the mightiest governments have had to surrender to the just demands of the toiling masses.

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