Blog Symposium on Law & Political Economy after COVID

How Biased are Neoliberal Reforms: Examining Post-Covid Changes to Labour Regulations in India

Unnati Ghia


This post is part of our Symposium on Law and Political Economy in India After Covid.

In the face of a lockdown in the country, a contracting growth rate and rising unemployment particularly in rural areas, the response of several States is a retreat to the comforts of neoliberal ideology. Indian industries were left unprotected from the Covid-19 crisis, thereby becoming an immediate concern for State governments, in part due to the exodus of migrant workers resulting in labour shortage in some sectors and regions. To address the economic standstill, these States have introduced short term labour “reforms” that attempt to regenerate the industrial productivity and attract investment.

Across the diverse amendments made by the States, an almost ubiquitous alteration is an extension of the maximum daily and weekly working hours. States such as Assam, Goa, Haryana, Madhya Pradesh, Punjab, Puducherry and Himachal Pradesh have increased the daily maximum to 12 hours, with overtime pay. Gujarat has increased the maximum to 12 hours, but is paying overtime at a different rate as compared to the rate mentioned under Section 59 of the Factories Act, 1948. These notifications mean that the brunt of reversing the economic slowdown currently faced by the country’s industrial sector is being shouldered primarily by the workers. In contrast to these hours, the International Labour Organisation maintains an 8 hour per day maximum in its convention on industries, which India has ratified and is therefore in violation of.

In addition to increasing hours, a few States have whittled away at the protections encapsulated under law. Labour is a subject in the Concurrent List under the Seventh Schedule to the Indian Constitution, permitting states to create their own laws subject to Central occupation of the field. This power has been abused by states such as Madhya Pradesh, which has exempted certain industries from its labour laws completely, while also suspending provisions on collective bargaining and strikes for other factories. These measures place workers at an increased risk of exploitation by employers without necessary protections, and can now only be corrected by judicial review or Central legislation.

However, certain Central legislations also provide for the ability to grant exemptions. For instance, Section 5 and 65 of the Factories Act, 1948 both provide grounds for the grant of an exemption. Section 5 permits an exemption on the grounds of a public emergency, but these notifications are only valid for 3 months. Section 65 allows exemptions to deal with an “exceptional press of work”, however, the weekly maximum is still 60 hours under the Act. The State governments have relied on the Covid-19 crisis to invoke special provisions, which is plausible, however, they have gone far beyond in their disproportionate requirements of the workers.

Given the current environment, where avoiding contact is advised and public transportation is limited, why is the brunt of reversing economic slowdown and industrial stagnation being borne by the workers? In contrast, the government seems reluctant to demand more from those with capital. For instance, in 2019, the Centre backtracked on 25% surcharge on foreign portfolio investors just after a month of its imposition. Even during Covid-19, the Centre seems fixed on its long term agenda of attracting investment and capital, while simultaneously advocating for self-reliance and ‘Aatmanirbhar Bharat’.

These developments indicate an entrenched belief in neoliberal policies as the panacea of all economic and social issues. A central plank of the neoliberal agenda is competition as a means of maximizing profit and economic growth, achieved through increased deregulation and the opening up of markets. The neoliberal emphasis on competition and deregulation here is directly related to the relaxation of labour laws and protections. The insistence on introducing ‘greater flexibility’ to the labour market is timeworn — strong labour laws are characterized as a disincentive to private investors and employers alike. These ‘relaxation’ policies are created under the guise of generating investment and employment, but do little to actually benefit the workers themselves or increase numbers in the workforce. In fact, Atulan Guha argues that the neoliberal proposition that increased labour flexibility leads to greater output and absorption does not hold true for Indian manufacturing industries. Moreover, given the rising unemployment in India and scarcity of jobs in proportion to the surplus of labour, the decision to retain a job requiring one to work long hours is made in a coercive paradigm created by the neoliberal state. Worker welfare seems to have been relegated to the backseat in this regard, with little consideration for their safety and well-being in the pandemic. In this manner, workers are reduced to an “abstract labour force” that is only recognised to the extent of its use as a means of production and ability to generate profit and growth.

The reliance on hackneyed neoliberal policies to address slowdown and unemployment also disproportionately impacts minorities within the workforce. For instance, women are already underrepresented in the labour market in India, contributing to a low female labour force participation rate. Moreover, the unemployment crisis has impacted women far more than men, particularly during the lockdown. The relaxation of labour laws furthers this disparity by eliminating specific protections that were intended to reduce inequality in the workforce. The ordinance passed by the Uttar Pradesh State Government suspending all labour laws for a period of three years included the Maternity Benefit Act, 1971, which contains important protections for pregnant women and new mothers. Although this was challenged before the Allahabad High Court and subsequently withdrawn, the measure indicated a disregard for the difficulties faced by women in accessing opportunities in the workforce. While the patriarchal structure of families and society of course predates neoliberalism, Himani Bannerji argues that neoliberalism complements the patriarchal regulation of women and reduces them to ‘objects of consumption’ in and for the market. In this context, the most vulnerable sections of the labour market, often migrant and women, are subject to the constant manipulation of those in power, and their exploitation is rendered banal in the name of economic growth, efficiency and development.

Women and minorities are also excluded and underrepresented from the political and bureaucratic echelons of the state, where these policies are tabled and passed in the first instance. This exclusion ensures that neoliberal policies and agendas cannot be challenged at an institutional level, and they become camouflaged in a rhetoric of pragmatic public service once they enter the public domain. This is why policies such as the labour law relaxations are tone deaf to the unique impact of political decision-making on women.

Arguably, neoliberal policies may not be unequivocally bad for women, in that the neoliberal opening of markets and globalization may contribute to the empowerment of women in some forms. For instance, the relative increase of female workforce participation over decades is certainly a positive development, but it does nothing to change the unequal power relations in the society and economy. However, the premise of neoliberalism, much like classical and neo-classical models, remains production on the basis monetarily calculable goods and services, which is blind to the other forms of labour that are informally carried out by women as unpaid work. This ignorance is another reason why the labour carried out by women do not feature in the calculus of governments while making socio-economic decisions, despite their impact on women. The amendments by different state governments increasing the daily maximum to 12 hours without exception is in ignorance of the disproportionate burden already being placed on women during the pandemic. The unpaid work carried out by women at home in any case does not factor into the neoliberal’s conception of efficiency and output, but it has been exacerbated during the pandemic where responsibilities of care have increased.

At the core of the neoliberal ideology is the belief that economic efficiency leads to public welfare. This belief can be disparaged for both its emphasis on efficiency and its limited welfare potential. Efficiency here implies only a privileged upper-class male conception of work, output and responsibilities, and neoliberalism privileges this economic productivity over all other outcomes. Second, public welfare here is a misnomer which relies on a trickle-down argument to argue that neoliberalism eventually results in social and community benefit, while in actuality maintaining social inequalities. As is evidenced from the labour law relaxations, the welfare here excludes that of the workers, while exploiting them unabashedly in the name of economic progress and employment opportunities.

The State of Gujarat’s relaxation measure has recently faced a challenge before the Indian Supreme Court, but it remains to be seen whether the court is able to see past the neoliberal rhetoric to recognize the exploitation underneath.

Unnati is a Batch of 2020 graduate of NLSIU.

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