From Baghdad to Bolangir – Labour Laws in India: Saba Sharma

Guest post by SABA SHARMA

From the crisis in Iraq, a story is emerging of 40 construction workers in Mosul who have gone missing, some reports claim because they were trying to escape from the city and were captured by militants in the process. Many of these workers, feared kidnapped by ISIS, refused both their employers’ and the Indian government’s help to evacuate, as many have not been paid up to five months’ wages. Another report reveals that a group of 46 nurses from Kerala, working in a hospital in Tikrit, have refused to leave despite an offer from Delhi to help them evacuate. They need the money, as do their families back at home, so they would rather move to a safe zone in Iraq than return. Two nurses in the same hospital, who are on holiday in India, told the BBC that they would return despite the travel advisory issued by India advising citizens not to travel to Iraq. For them, failing to return means defaulting on loans taken to pay recruitment agents.

A few days before, on June 16, the NDA government announced that it was looking at liberalizing labour laws, primarily to make easier the retrenchment of workers. The UPA, and former PM Manmohan Singh in particular, also had labour law reform as an agenda, propelled by constant laments from industry saying ‘obsolete’ labour laws hindering growth and holding back the economy. The Vansundhara Raje government is already amending some state-level acts in Rajasthan to ‘liberate the corporate sector from the shackles of stringent requirements of the laws’, as one report put it.

As the story slowly shifts from the workers to the impact of the crisis on our supply of oil from Iraq, it is an important moment to examine why so many Indians go to the middle east for work, and why they continue to stay despite the widely reported abuse and exploitation of many unskilled and semi-skilled workers in the region, including non-payment of wages. This is not the story of well-travelled businessmen and corporate employees who have the opportunity to live and work in countries like Dubai and Kuwait in conditions of their choosing, it is the less acknowledged and far more prevalent tale of domestic workers who have their passports taken away, and construction workers who would rather risk their lives than come home without nearly half a year’s worth of wages.

In the India Exclusion Report, an examination of labour rights in India (written, among others, by Coen Kompier of the ILO), paints a very different situation of the regulation of working conditions in India than what is imagined and portrayed by industry and governments. To begin with, labour laws, however ‘obsolete’, primarily apply to those in the formal sector, and a vast majority of workers, 86 per cent (or 400 million workers), are in the informal sector, and have little protection under existing labour laws. Most of these workers, if not self-employed, work as casual labourers or on a contractual basis, often going through middlemen who negotiate the terms of their engagement. Even in the formal sector, however, there are new employment practices that reduce the security of a formal job. Over half (51 per cent) of workers in the formal sector do not have tenured employment but are employed on a contractual basis, implying a high degree of ‘informality’ in their employment. Among those employed on a contractual basis, employers often artificially diminish working hours, or move workers from one location to another so that they fall outside the scope of legislation.

Among the Rajasthan government’s amendments to labour laws is the provision that increases the percentage of workers needed for the formation of a union from 15 per cent to 30 per cent. Trade unions in Rajasthan have protested this move, alleging that these moves have been undertaken without their consent. At present, only one in every five workers in India have trade union membership, reasons for which are the high rate of migration, as well as the preference of employers for outstation workers, which dampens chances of collectivization. Labour authorities often refuse to register unions, without which they have no bargaining power with employers, who are not bound by the law to recognize such unions, even though it is not a prerequisite for their establishment. Because of definitional issues, informally employed domestic workers or home-based workers, among others, do not have the legal status of ‘employee’ to form recognized unions.

Despite the constant bad press that ‘stringent’ labour laws have received, facts reveal that not only are they implemented poorly, but that even where law and judiciary do act, it is in favour of employers, not workers. Conviction rate for violation of labour laws is under 2 per cent, as employers lobby against compliance with law terming it ‘inspector raj’. Since 2001, a series of court judgments, beginning with SAIL  (Steel Authority of India Ltd and Ors. v. National Union Waterfront Workers and Ors.), did away with many entitlements of contract workers, allowing employers to have more ‘flexible’ workforces. Further court judgments ruled that workers employed for long periods did not have to be made permanent, employers were not obliged to keep employment records, the right to strike was restricted, and workers terminated illegally were not entitled to reinstatement. In essence, employers are freed from most responsibilities towards employees within the framework of the law. Since the emergence, in particular, of middlemen to handle contract labour, not only are many administrative costs driven down, but employers also do not have a direct relationship with employees, effectively creating uncertainty about who is ultimately responsible for workers’ rights.

It is not hard to imagine why working in Iraq is as good as or preferable to trying one’s luck in the labour law lottery of India. Even where provisions for workers exist in the law, such as the Minimum Wages Act, or the Inter-State Migrant Workmen Act, which makes it mandatory for workers to be registered when migrating across states, they are rarely enforced. There is a very low conviction rate for violating laws, and protesting, unionizing, and striking is more likely to result in imprisonment or being branded Maoists and terrorists, than it is grievance redressal. For those who can, the payoff from going abroad, often in massive debt, and living amidst, war, hardship, and exploitation is higher than experiencing diminishing security from labour authorities and courts at home, while continuing to be deemed an obstruction to economic growth.

For more data and details of court judgments, see the India Exclusion Report 2013–14, to be released on 25 June 2014.

Saba Sharma is a researcher with the Centre for Equity Studies in New Delhi.




7 thoughts on “From Baghdad to Bolangir – Labour Laws in India: Saba Sharma”

  1. Informative article. Indian Labor law or lack of it may be responsible for the forced migration of many. However, was just not able to Understand the title. Why Use Bolangir, when there is no connenction in the article with this western orissa town…Why use it’s name; hope it is not to glamorize ‘backwardness’…


  2. Almost anything that can be done to speed up industrial development will be dubbed as anti-poor, capitalist etc. So there will be more Indians working in Mosul and such places. Good Luck!



  3. Restrictive labour laws ensure that businesses remain in the informal/unorganized sector because if they grow they come under the Industrial Relations Act. That is why businesses don’t hire employees formally. Jobs in the private sector cannot be sinecures (that is economically unfeasible), the flexibility to hire and fire has to be allowed (as is the norm everywhere). It is not the end of the world as is made out to be in India. Private employers are NOT under any obligation to keep non-performing employees under their payroll. Frankly, the government needs to follow the same policy but that will not happen I guess. The nurses and construction workers go to work in places like Iraq because they cannot get formal employment in India and the fault is of the 2-3% employees in the formal sector who hold the entire sector hostage by not allowing them to change the archaic laws. Please read Dr. Bibek Debroy’s analysis of the labour laws for better understanding. Also an interesting report by Hemal Shah on this:


    1. @Payal Puri …… I agree with you that labour laws should not ensure tenure. However, there is more to a set of labour laws than just tenure. Working conditions, compensation for work related accidents etc. etc. matter … and more so when markets are not perfectly competitive (whatever be the reason).

      Then again, it is interesting to note that you talk ONLY about bad labor laws inducing unemployment. Fair enough, but what about monopolies? Why should “non-performing private sector firms” be in the market? Why bail out, as has recently been done, the “non-performing” sugar mills? Why hasn’t DLF and Kingfisher gone kaput? Why are Reliance and Tatas offered cheaper credit (and very favorable terms) by public sector banks? Why are import duties high on products which can potentially compete with the inputs produced by Reliance? Why do private schools and hospitals need “subsidized” land? Why share profits with firms that extract natural resources, why not simply hire them from the global market? So on and so forth. ………… Asking for selective competition in labour markets only, and “assuming” that monopolies cannot exist elsewhere is naive, but of course staple for the Austrian school (read libertarians). For mainstream economists, you either have competition in all sectors or you don’t. And when you don’t, then you need political power to look after your needs (a fancy way of stating the same is that you need institutional or market design).


      1. @payal puri …… just to emphasize my point: Here is what “economist” Vivek Kaul writes, criticising the Govt.s recent increase in the MSP of wheat/rice in Firstbiz:

        ” Farmers have a ready buyer, and one who keeps increasing the price.”

        Now replace “Farmers” by “Reliance”, sounds right? But he will never say so for Reliance. For all these “free-marketeers” (whatever the phrase means), it is not economics …. it is plain vanilla politics.


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