Ease of doing business has actually meant ease of violations – at the cost of workers’ lives

On May 13, a four-storey building in Mundka in Delhi went up in flames, killing 30 workers. Twenty two of them were women, many of whom had picked up work after the pandemic for a meagre Rs 6,500-7,500 a month.

The workers were employed in an illegal manufacturing and assembling unit that had been functioning from the building since 2017. There are hundreds of such small-scale, unregistered industrial and commercial enterprises across India.

The past few years have also seen the mushrooming of start-ups, which are exempted from the purview of statutory labour laws on the pretext of “ease of doing business”. In real terms, the rhetoric of “ease of doing business” amounts to employers enjoying the ease of committing legal violations.

Even setting aside the fact that many workplace accidents do not get reported, the frequent mishaps in micro, small and medium-sized enterprises, or MSMEs, that are briefly captured in the media are in themselves ample proof of rampant violations of legal safeguards and corruption involving employers, government officials and politicians.

The bypassing of approvals, requisite licences and no-objection certificates from civic agencies – as evident in the Mundka fire – points to criminal negligence that involves government officials working in collusion with factory owners to turn a blind eye to illegal activities.

This nexus breeds unsafe working conditions on a wide scale, but is ultimately downplayed as Indian policy projects the loss of workers’ lives as collateral damage for the sake of profit.

A flawed model

India’s current growth model rides firmly on the logic that approvals and state regulation are onerous and an impediment to the efforts of developing economies to attain and sustain high economic growth. Consequently, micro, small and medium-sized enterprises, and newly established start-ups are indirectly provided leeway to evade the law with relative ease.

Such enterprises are allowed the “ease of doing business” through a growing ambit of legal exemptions. In this light, the past two decades have witnessed hectic activity with respect to amendments to several key labour laws, both, at the state and central level.

For example, the 2014 Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by Certain Establishments) Amendment Act exempts small enterprises, employing up to 40 workers, from furnishing returns on their compliance. Earlier, the threshold limit under this legislation was up to 19 workers.

The owners of small enterprises constitute a large employer lobby. According to the Economic Survey of India 2019, small enterprises employing less than 50 workers have come to constitute almost 46% of manufacturing units in the country.

This trend typifies India’s current growth model in which micro, small and medium-sized enterprises enjoy some leverage, given how they are strategically placed in global supply chains as vendor companies to which bigger corporate houses outsource the most labour-intensive work.

But serious questions arise about whether this current (de)regulatory framework that promotes dwarfism is good for the Indian economy.

How long can big corporations excuse themselves from the accountability of what their small-scale vendor companies do to the workers they employ? How long can the profit motives of small units dictate an abysmal quality of life for scores of workers trapped in such firms?

For manufacturers, reducing the cost of raw materials and capital goods is not easy as this would substantially reduce the profits of firms involved in raw material processing, transportation and capital goods production. As a result, employers tendentially sustain their super profits by lowering labour costs.

The owners of big enterprises resort to hiring contract labour, fixed-term workers and apprentices in a larger quantum of work processes, while the owners of micro, small and medium-sized enterprises strive to stay competitive by simply overexploiting their small workforces.

In fact, for the owners of smaller establishments, it is cheaper to avoid incorporating safety measures in their units since, taken together, the bribes to officials and occasional disbursal of compensation to workers amount to only a small percentage of owners’ profits.

Systemic problem

Considering this overall structure of production and the fact that employers are well aware of the lethal repercussions of their actions, factory accidents appear more as the norm than as chance events.

The post-facto response of government authorities and institutions highlight the systemic nature of the problem. The arrests of factory owners and hastily announced compensation are efforts to simply pacify public anger and the agitated family of workers.

On the ground, there is no enhancement in accountability or improvement in working conditions. Once media attention ebbs, the accused employers easily gain access to bail and are able to influence witnesses. Meanwhile, local police stations carry out lax investigations that culminate in weak chargesheets.

Notably, the more stringent sections of the law, such as Section 304 of the Indian Penal Code – pertaining to culpable homicide not amounting to murder – are avoided, and employers are usually booked under bailable sections such as 304A, for causing death by negligence.

The dismal records of imprisonment of erring employers and pithy amounts deposited as compensation are disturbing proof of the pervasive lack of accountability.

Likewise, the alarmingly low figures recorded for factory accidents in recently compiled official data further highlight the lack of accountability. The figure of 6,500 industrial casualties reported by the Union Labour Ministry in 2021 for the period 2014 to 2018 amounts to a gross underestimation, considering that only the formal sector, comprising just 3% of total industries, is required to report injuries.

Add to this the fact that many states are not compiling and reporting injury data. More importantly, high under-reporting is expected, given the rapidly downsized labour inspectorate with dwindling authority. Not only do illegal manufacturing units escape notice, but even registered small-scale enterprises slip off the radar of factory inspections.

Thus, even if small enterprises are legal and registered, inspections of their premises, and therefore checking compliance with labour standards, is poor.

Diluting laws

What makes matters worse are the several detrimental amendments to statutory labour laws, which clearly encapsulate the state’s steady withdrawal from the public regulation of a majority of employer–employee relations. As a consequence, private regulation by employers of workplace dynamics and their dominance within the work relation has grown manifold.

Several of the recent amendments to key labour laws are encapsulated in the Occupational Safety, Health and Working Conditions Code, formulated by the Centre in 2020.

Building on the growing policy paradigm of reduced factory inspections and the corresponding promotion of self-certification by employers of their compliance with labour laws, the Code strategically mainstreams web-based inspections that simply amount to seeking information electronically from employers.

By stipulating a high threshold on the number of workers required in a workplace for the formation of a safety committee, the Code actually ensures that a miniscule number of factories, mines, construction sites, and others will constitute such bodies.

Similarly, with the Code prescribing new threshold limits on the size of the workforce on whom the workplace safety laws apply, many more workers employed in small-scale units have been pushed out from the ambit of protective legislation. These conditions dangerously return us to a situation akin to the heightened vulnerability and precarity of labour in the early colonial period.

Dehumanised working class

Those excluded from the purview of crucial labour laws are a large component of migrant workers, and a significant corpus of women from impoverished working-class households.

The predominance of women in small-scale units highlights how the steadily declining real wages of a majority of working-class families – more so following the Covid-19 pandemic and lockdowns – have pressed many women into over-exploitative work arrangements.

Working at micro, small and medium-sized enterprises or as home-based workers in slums, women are bogged down by long hours of repetitive, mundane work which is lowly paid, and are also denied other rights and benefits such as rest and paid leaves.

Juggling dismal working conditions, low and stagnant wages as well as huge quantums of housework, women workers find it difficult to sustain continuous waged employment.

Correspondingly, there is a marked flux in the workforce participation of women workers as they are compelled to periodically withdraw from paid employment to attend to household emergencies, domestic chores, child-bearing and rearing.

This flux feeds into a vicious cycle that facilitates their overexploitation as a largely informal workforce since employers use their fluctuating participation to brand women’s labour as low-skilled, assigning it lower wages.

An under-consuming majority, high unemployment rates and a huge workforce of underpaid, overworked and dehumanised workers tied down to firms that fail to enhance the size of their operations, hardly represents a noteworthy growth story, but rather a huge fetter to sustained economic development. How many more lives will be lost before we come to terms with this fact?

Maya John is a labour historian and assistant professor at the University of Delhi.