Context

• The recent debate surrounding corporate leaders urging Indians to work longer hours sheds light on the structural issues in India's labour market.
• While these appeals might stem from a desire for economic growth, they fail to acknowledge the harsh realities of India’s predominantly informal workforce.
• The over-reliance on cheap labour, rather than technological advancement, continues to hinder India's long-term industrial progress.
• Amid these debates, it is important to examine the implications of this labour-dependent strategy, highlighting its impact on productivity, innovation, and economic sustainability.

The Informality of India's Workforce

• India’s workforce is overwhelmingly informal, with only 21.7% of workers in salaried jobs, according to the 2023-24 Periodic Labour Force Survey.
• Even among these salaried workers, nearly half lack formal contracts, paid leave, or social security.
• The call for longer working hours disregards the reality that most Indian workers, particularly manual labourers and household helpers, already endure gruelling schedules simply to survive.
• Unlike developed nations where productivity gains have reduced working hours, India continues to extract economic value by extending the workday rather than improving efficiency.

Striking Aspects of India’s Industrial Structure

• Cheap Labour as a Competitive Strategy
  • One of the most striking aspects of India’s industrial structure is its heavy reliance on cheap labour as the primary source of competitive advantage.
  • Instead of investing in technological innovation, automation, or efficient management practices, Indian businesses continue to extract economic gains by keeping wages low and increasing working hours.
  • This approach, while beneficial for short-term profits, ultimately hinders long-term economic growth and industrial competitiveness.
• A Historical Perspective: The Evolution of Labour Exploitation
  • Throughout history, economies have used labour-intensive methods to drive industrial growth, particularly in their early stages.
  • During the Industrial Revolution in Britain, factories exploited workers by enforcing excessively long hours under inhumane conditions.
  • Karl Marx famously described how capitalists had a ‘werewolf hunger for surplus labour,’ pushing workers beyond their physical limits in pursuit of higher profits.
  • However, by the mid-19th century, labour reforms, unionisation, and technological progress led to a shift from sheer labour exploitation to efficiency-driven productivity.
• The Structural Shift Toward Informality
  • Indian businesses have systematically shifted away from the organised sector, where labour laws ensure minimum wages, job security, and worker benefits, to the unorganised sector, where such regulations are largely absent.
  • This structural transformation has allowed industries to sidestep labour protections and exploit workers without facing legal repercussions.
  • One of the key strategies used to maintain low labour costs is the proliferation of small, unregistered firms.
  • Industrial hubs such as Coimbatore and Ludhiana are filled with micro-enterprises, often operating in small sheds, producing components that feed into larger manufacturing networks.
  • These businesses lack formal employer-employee relationships, with many owners being former workers themselves.
  • In such environments, wages remain depressed, and technological investment is minimal.
• The Rise of Contract Labour and Migrant Workforces
  • Another major factor in the persistence of the cheap-labour model is the increasing use of contract workers.
  • Over half (56%) of all workers who joined India’s factory sector after 2011-12 were employed on a contract basis rather than as permanent employees.
  • Contract workers receive significantly lower wages and are excluded from essential benefits such as job security, health insurance, and pension schemes.
  • Moreover, India's industry relies heavily on migrant workers who leave their villages in search of employment in urban and industrial centres.
  • These workers often belong to disadvantaged social groups, lack access to land or assets, and have no bargaining power in the labour market.
  • As a result, they are forced to accept extremely low wages and poor working conditions.

Why Cheap Labour Fails as a Long-Term Strategy

• Low Productivity and Stagnation
  • Unlike developed economies, where productivity growth drives economic expansion, India’s reliance on cheap labour has stifled innovation.
  • Businesses remain reluctant to invest in technology or skill development, leading to a workforce that is overworked but underproductive.
• Weak Domestic Demand
  • Suppressing wages weakens the purchasing power of the working class, limiting the growth of the domestic market.
  • When a large segment of the population earns barely enough to survive, demand for consumer goods, services, and housing remains low, slowing economic progress.
• Inability to Compete Globally
  • India's failure to modernise its industries has resulted in declining competitiveness in global markets. The garment industry is a prime example.
  • Despite its abundant workforce, India’s share in global garment exports has remained stagnant at 3.1% for two decades.
  • In contrast, countries like China, Bangladesh, and Vietnam have invested in modern factories, automation, and efficient management practices, allowing them to dominate the sector.
• Increased Worker Exploitation and Social Unrest
  • The continued exploitation of workers, through long hours, low wages, and informal contracts, leads to worsening living conditions, rising income inequality, and social unrest.
  • Without adequate protections, workers remain trapped in cycles of poverty, preventing overall economic development.

The Case of the Garment Industry: A Lost Opportunity

• India’s garment industry exemplifies how over-reliance on cheap labour has stunted progress.
• Despite its abundant workforce, India has failed to expand its share in global garment exports beyond 3.1% over the past two decades.
• In contrast, China, Bangladesh, and Vietnam have surged ahead due to their willingness to modernise and invest in productivity-enhancing technology.
• Indian manufacturers, by clinging to the advantage of low wages, have remained uncompetitive in the global market.
• A similar problem plagues India’s IT and other new-generation industries, where the reluctance to invest in workforce skill development and technological infrastructure limits their potential.
• Instead of creating a high-value, innovation-driven economy, industry leaders continue to rely on extensive work hours and minimal wages to sustain profits.

The Need for a New Industrial Strategy

• Invest in Technology and Automation: Embracing advanced manufacturing technologies, artificial intelligence, and automation can boost productivity without extending working hours.
• Prioritise Skill Development: Enhancing workforce skills through education and vocational training will create a more capable and efficient labour force.
• Strengthen Labour Laws and Worker Protections: Enforcing fair wages, job security, and social benefits will not only improve living standards but also stimulate domestic consumption.
• Encourage Formalisation of Enterprises: Incentivising businesses to operate within the formal sector will promote accountability, better wages, and stable employment opportunities.

Conclusion

• India’s continued dependence on cheap labour as a competitive strategy is
• While it has provided short-term gains for industries, it has stifled innovation, weakened domestic demand, and limited global competitiveness.
• If Indian industry is to thrive in the 21st century, it must move beyond exploitative labour practices and adopt a more forward-thinking approach that prioritises productivity, innovation, and worker welfare.
• The shift from a labour-intensive model to a technology-driven economy will be critical in ensuring long-term industrial and economic growth.