1.1.1 Import Substitution/ Plan Era (1947 to 1991):
For three of the five decades (1950-80), India steadily grew at the so-called “Hindu rate of growth” of three and a half percent. During the remaining period, it grew at rates between 5 and 6 percent. Indian economic policy during this period was mainly influenced by the colonial experience (which was seen by Indian leaders as exploitative in nature). This economic policy tended towards: –protectionism, with a strong emphasis on import substitution, –industrialization under state monitoring,
–state intervention at the micro level in all businesses especially in labour and financial markets,
–a large public sector,
–business regulation, and
Five-Year Plans of India resembled central planning in the Soviet Union. Steel, mining, machine tools, water, telecommunications, insurance, and electrical plants, among other industries, were effectively nationalized in the mid-1950s. Elaborate licences, regulations and the accompanying red tape, commonly referred to as Licence Raj, were required to set up business in India between 1947 and 1990. The first seven Five year plans focused on the following objectives vis-à-vis labour: –improving the conditions of labour and welfare of the workers –prevention and settlement of industrial disputes to prevent disruption that could adversely affect realization of plan goals –controlling industrial growth to prevent concentration of economic power in the hands of a few and reducing income disparities among individuals –worker’s education
–worker’s participation in management
1.1.2 Era of Economic liberalization (1992 onwards)
Starting with the July 1991 Budget, there was a clear switch in favor of a move toward outward-oriented, market-based economy. Liberalization has done away with the License Raj (investment, industrial and import licensing) and ended many public monopolies. The July 1991 reforms did away with import licensing on all but a handful of intermediate inputs and capital goods items. The availability of high-quality products has not only contributed directly to the welfare of the consumer but also indirectly by making the consumer more discriminating and therefore forcing domestic manufacturers to upgrade the quality of their products. India’s industrial policy was one of the areas most changed by the economic liberalization of the 1990s. Since 1991, India has also carried out a substantial liberalization of trade in services.
Traditionally, services sectors have been subject to heavy government intervention. Public sector presence has been conspicuous in the key sectors of insurance, banking and telecommunications. Changes did not impact the banking workforce or management structure; banks remain overstaffed and poorly managed. Trade unions persist as a formidable enemy of future reforms aimed at reducing operating expenses. The large and mobilized workforce, associated with the Communist parties, has gone on strike in the past, holding the entire banking system hostage.
Considerable progress has been made toward opening the door wider to private-sector participation including foreign investors in these three areas. The economy has moved on from 3.5% per annum of yesteryears to ‘unstoppable India’ at 7.5 to 9 % per annum at present. The remarkable performance of India’s economy is attributable in significant part to the spectacular dynamism shown by the services sector.
India is now called the ‘services hub’ of the world. Telecom and ITES-BPO revolution has strongly hit India. With the transition to a market economy the need has arisen for aligning industrial relations policies with industrialization strategies. This calls for: –facilitating the growth of enterprises and aligning labour policies with economic policies –a shift in policy focus from organized labour (10%) to unorganized labour (90%) –reform of labour laws and policies in the wake of globalization –a shift from job security to income security and social safety measures –concern for skills development, productivity and competitiveness –reformation of pension policies
–a shift in government role from control to facilitation
Criticism: Critics of trade liberalization have blamed it for a host of ills such as: –rising unemployment and wage inequality in the advanced countries, –increased exploitation of workers in developing countries –a “race to the bottom” with respect to employment conditions and labour standards, –the de-industrialization and marginalization of low-income countries, –increasing poverty,
–global inequality, and
–degradation of the environment.
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Topic: Industrial Relations
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