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Introduction
In an important theoretical paper, Erickson and Kuruvilla (1998) examine the many
meanings of industrial relations system transformation. They discuss the various
definitions and aspects used in the literature to identify and characterise this
transformation. The authors not only distinguish between transformation and non-
fundamental change, but also sharply differentiate between incremental
(evolutionary or adaptive) and discontinuous (revolutionary or punctuated
equilibrium) change. Discontinuous change occurs only when there are fundamental
changes in what they call the deep structure, with the latter partly constituting
attitudes towards and definitions of property rights in the workplace,
employer/employee relative status, individualism versus collectivism, and the nature
of exchange in the labor market (1998: 18).
Using the above framework in a subsequent paper on industrial relations trans-
formation in Asian countries, Kuruvilla and Erickson (1999) argue that the binding
constraint in Asian industrial relations, primarily as a result of recent globalisation,
has changed from one of maintaining labour peace and stability to one of enhancing
competition through increased labour market flexibility. With reference to India, the
Blackwell Publishers Ltd. 2001, 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main St., Malden, MA 02148, USA.
1
See the exchange in this journal between Gall (1998) and Kuruvilla (1998) on the political economy
of industrialization and industrial relations.
2
For a considerably longer and a more detailed analysis with time series data, see Bhattacherjee
(1999).
3
Statistically, there are three types of trade union in India: those that do not register and are statisti-
cally invisible, those that register but do not submit returns to the Registrar of Trade Unions on
membership size, and those that register and submit returns on membership figures.
4
For a complete listing of all these statutes governing employment and employment security, see
Annexure 1 in Mathur (1992).
Commentary: The second phase reflected two crises: one, a crisis of accumulation in
industry under the state-led industrialisation regime, and two, a crisis of legitimacy
of the state pluralism model in the industrial relations system. This mode of regu-
lation precipitated the fractionalisation within the union movement as well as within
capital; indeed, the growth of the left unions reflected alternate voices, and in many
cases, employers found them easier to deal with in spite of their greater militancy.
The Emergency Regime represented a failed attempt by the state to impose from
above a Latin American-type of corporatism in labour-management relations.
Whereas in the growth sectors, the labour-management relationship increasingly
turned to an informed decentralised bargaining mode, in the declining sectors, the
government and the large centralised unions found themselves enmeshed in the web
of the state pluralism mode.
Rudolph and Rudolph (1987) characterised the Indian industrial relations regime
as one of state domination and involuted pluralism, using the term as a metaphor
for a decline or loss of vigor that results from a replication of units whose increase
in number is accompanied by a decline in effectiveness (1987: 269). They refer to
the massive multiplicity of unions in India: in 1950/51 there were 2002 registered
unions, whereas in 1979 there were 10,021 such unions, all this while the average
size of these unions increased only marginally (Bhattacherjee, 1999). According to
them, this debilitating process tends towards entropy, so that even though unions
increase in number, union density keeps falling. Organised labour has not been able
to challenge Indias centrist ideology and politics and to mount or support a left
class party (Rudolph and Rudolph, 1987: 259).
From an neo-institutional perspective, one could argue that changes in collective
bargaining practices in the growth sectors of the economy represented attempts by
both unions and capital to arrive at new governance and institutional structures so
as to minimise transaction costs. The fractionalisation of unions into smaller groups
could then be interpreted as an efficient solution to organisation in a changed econ-
omic environment. In the public sector sites, economic crises created considerable
uncertainties in erstwhile stable internal labour markets. In terms of industrial
relations strategy, employers and unions in the growth sectors maneuvered with
some strategic choices at their disposal.
Towards the end of this phase it became apparent that there were some troubling
union monopoly effects, especially in the public sector. Public sector employees
received considerable fringe benefits that were administered in relatively insulated
internal labour markets, whereas in the private sector, unions had to intensely
bargain over any such benefits in a competitive economic environment. Inflexible
contract provisions, especially those relating to deployment and retraining and to
seniority rules, increased costs substantially in the public sector. Overall, fractured
union voices searched for a collective mode of expression as this second phase
witnessed maximum industrial strife (compared to the other three phases) both in
terms of the number of disputes and the number of workers involved
(Bhattacherjee, 1999).
5
The discussion of macroeconomic trends for this phase relies heavily on Joshi and Little (1994).
6
Trade union membership data in India is notoriously unreliable, as there is a politics to its collection
and presentation. In addition, the only union membership data that are available are from those
unions that submit returns. Assuming that these are the large, centralised, politically-affiliated unions,
and assuming that the biases do not change significantly over the years, Bhattacherjee and Datta
Chaudhuri (1994a) estimated trade union growth for the period 196284. Some of their findings were:
increased money wages increased union membership (but not so for real wages), the unemployment
rate negatively affected union membership, and union density (of unions that submit returns) nega-
tively affected membership growth.
7
For an analysis of labour contracts that uses region as a proxy for union and employer preferences
for the type of bargaining structure, see Bhattacherjee (1992).
8
The gross inflow of foreign direct investment rose from Rs.5.3 billion in 1991 to Rs.141.9 billion in
1994 (Chaudhuri, 1995).
Conclusions
Indias experience with the setting up of labour institutions that are compatible with
pluralistic industrial relations has been mixed. Though the government kept extolling
the virtues of industrial pluralism and bilateral bargaining during the early years,
the institutions within which all this was to take place were largely controlled by
the state. This state-dominated pluralism, coupled with ambiguous labour laws
regarding union recognition and industrial disputes, eventually led to the multi-
plicity of party-based unions that weakened the political power of the labour move-
ment as a whole, although in some strategic sites in the public sector, centralised
unions had considerable bargaining power. Though unions could impose severe costs
to the economy in key sectors, the labour movement was not strong enough to
impose a cooperative solution at the national level. The latter continues to be true
today.
With the opening up of the economy, competitive forces affected the structure of
the union movement. In several enterprises in the private sector, independent
rank-and-file led unions came into existence and engaged in informed and militant
bargaining with employers, securing substantial wage and non-wage gains in the
process. As these unions traded off increased wages at the cost of employment
growth, and as employers shifted to outsourcing to non-union sites, the traditional
party-based unions found their potential recruitment terrain both challenged and
curtailed. More recently, since the liberalisation process officially began in 1992, many
of these centralised party-based unions have frequently united under a common front
to resist governments attempt at both privatisation and decentralisation in the pub-
lic sector.
In terms of the monopoly versus voice framework, the years after independence
witnessed the state acting as the collective voice of workers for the purpose of rapid
industrialisation with minimum industrial strife. Potential monopoly effects were
minimised, especially in the growing public sector enterprises where wage and work-
ing condition outcomes were administered rather than collectively negotiated. An
implicit incomes policy kept the union wage markup in check. With time, as both
inter and intra industry differentiation began to take place, especially in private sector
firms, more radical union voices emerged and effectively challenged the states hold
over the labour movement. In the private sector, efficient productivity bargaining
with informed unions kept monopoly effects within the firm in check while voice
effects increased. In the public sector enterprises and service sites, union voice over
time led to rigid and inflexible contract provisions, and with pay increases being
unrelated to increases in productivity, union monopoly effects increased.
Kuruvilla and Venkataratnam (1996) characterise Indian industrial relations as a
politicised multi-union model, where organised workers are protected at the cost
of workplace flexibility and efficiency. The above historical analysis suggests that
while this characterisation possibly describes the first two phases of industrial
relations, it does not capture the complexities and nuances of the latter two phases.
I have taken up Erickson and Kuruvillas (1998: 19) invitation to research the extent
and determinants of incremental versus discontinuous change in national indus-
trial relations in the Indian case. My findings suggest that the evolution of industrial
relations institutions in India has been incremental and adaptive. Change has been
driven more by the endogenous forces of party politics, government policy, class
segmentation, demography and geography, rather than simply by the exogenous
Acknowledgements
Some of the ideas in this paper were earlier presented in various forms at the 11th
and 12th World Congresses of the IIRA at Bologna (1998) and Tokyo (2000) respect-
ively, and in a seminar at the School of Industrial and Labor Relations, Cornell Uni-
versity (1999) while I was a Visiting Fulbright Fellow. I am grateful to two anony-
mous referees, Annapurna Shaw and Pam Arksey for comments, and also thank
Sarosh Kuruvilla, A. V. Jose, and P. K. Sett for discussions.
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