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The Emergence of the Informal Sector: Labour legislation and politics in South India, 1940–60

Published online by Cambridge University Press:  11 September 2019

KARUNA DIETRICH WIELENGA
KARUNA DIETRICH WIELENGA*
Affiliation:
Oxford School of Global and Area Studies, University of Oxford Email: karuna.dietrichwielenga@area.ox.ac.uk
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Abstract

The informal sector and informal employment relations occupy a prominent place in India's economy: one of their key features is the apparent absence of the state from labour regulation. This article seeks to trace the emergence of the division between the formal and informal sectors in India's economy from a historical perspective: it shows how the state, far from being absent, played a fundamental role in creating the dichotomy. This is done through a close study of labour legislation and the politics around it, taking South India as a case study. The article examines the enactment of four laws in Madras province in the late 1940s, ostensibly aimed at protecting workers, and their subsequent implementation by the Madras government. It shows how these laws ended by excluding workers from small unorganized industries (such as beedi-making, arecanut-processing, handloom-weaving, and tanning) from legal protection. It explores the ramifications of this exclusion and argues that the reinforcement of the formal–informal divide was the outcome of a complex political struggle between employers, workers' unions, and the state during this formative period.

Type
Research Article
Information
Modern Asian Studies , Volume 54 , Issue 4 , July 2020 , pp. 1113 - 1148
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Copyright
Copyright © Cambridge University Press 2019

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Footnotes

Research for this article was made possible by a Newton International Fellowship. I would like to thank Barbara Harriss-White, Matthew McCartney, and Judith Heyer for many valuable discussions and comments in the early stages of writing this article; the anonymous reviewers for suggestions that helped improve its structure and argument; Shashank Kela, who, as always, contributed to sharpening my ideas and edited my text.

References

1 For a summary of debates, see Basille, Elisabetta and Harriss-White, Barbara, ‘Introduction’ in International Review of Sociology, No. 20: 3 (2010), pp. 457–471CrossRefGoogle Scholar.

2 Ibid., p. 469. Also see Mezzadri, Alessandra, ‘Glozalization, informalization and the state in the Indian garment industry’ in International Review of Sociology, No. 20: 3 (2010), pp. 491–511CrossRefGoogle Scholar.

3 Rohini Hensman's discussion on the expansion of the informal sector refers to the role played by policy and legislation for a much later period, from the mid-1970s onwards. See Hensman, Rohini, Workers, Unions and Global Capitalism: Lessons from India (Delhi: Tulika Books, 2011), chapter 3Google Scholar.

4 Robb, Peter, ‘Introduction’ in Robb, Peter (ed), Dalits and the Meanings of Labour (Delhi: OUP, 1996), pp. 44, 47Google Scholar.

5 Anderson, Michael, ‘Work Construed: Ideological Origins of Labour Law in British India to 1918’ in Robb, Peter (ed), Dalit Movements and the Meanings of Labour in India (Delhi: OUP, 1996), pp. 118–119Google Scholar.

6 Anderson, Michael, ‘India: The Illusion of Free Labour, 1858–1930’ in Hay, Douglas and Craven, Paul (eds), Masters, Servants and Magistrates in Britain and the Empire, 1562–1955 (Chapel Hill: The University of North Carolina Press, 2004), pp. 440–441Google Scholar.

7 Mohapatra, Prabhu, ‘Regulated Informality: Legal Construction of Labour Relations in Colonial India, 1800–1926’ in Lucassen, Jan and Bhattacharya, Sabyasachi (eds), Workers in the Informal Sector: Studies in Labour History, 1800–2000 (Delhi: Macmillan Publishers, 2004)Google Scholar.

8 Haynes, Douglas E., Small Town Capitalism in Western India: Artisans, Merchants and the Making of the Informal Economy, 1870-1960 (Cambridge: Cambridge University Press, 2012), chapter 8CrossRefGoogle Scholar.

9 The Madras presidency became Madras province in 1947 and Madras state from 1950. During the 1950s, it was divided into the modern states of Tamil Nadu, Andhra Pradesh, Kerala, and Karnataka (with additions from various princely states).

10 Provincial governments not only implemented central labour laws, but also formulated legislation for workers in the small-scale industrial sector. During parliamentary debates on the Factories Act, some members of parliament stressed the need to widen the definition of factory to include workers in smaller establishments: the central government argued that this could be done by provincial governments if they thought it necessary. During another discussion on industrial policy, it was stated that small-scale industries were essentially the prerogative of the province, while the centre dealt with large-scale industry. Thus, the interaction of the state (through legislation) and workers in small-scale industries is best examined at the level of the province. See the statement on the industrial policy of the government tabled in the Constituent Assembly in 1948: The Constituent Assembly of India (Legislative) Debates Official Report, Vol. V, 1948, p. 3295Google Scholar. For the debate on the Factories Act, see The Constituent Assembly (Legislative) Debates, Official Report, Vol. VI, 1948, pp. 520–537Google Scholar.

11 Development Department G.O. No. 2120, 27 April 1948, Tamil Nadu State Archives (hereafter TNSA).

12 Factory Workers in Madras' in the Economic Weekly, 24 February 1951, pp. 206–208.

13 D. W. Karuna Miryam, Weaving Histories: The Handloom Industry in South India: Aspects of Production, Work and Identities, c. 1800–1960 (PhD dissertation, University of Delhi, 2014), chapter 4. Tirthankar Roy and Douglas Haynes have also documented the transformation of the handloom industry. Roy, Tirthankar, Artisans and Industrialization: Indian Weaving in the Twentieth Century (Oxford: Oxford University Press, 1993)Google Scholar and Haynes, Small Town Capitalism.

14 Shahana Bhattacharya, Labour in the Leather Industry in India, 1870s–1970s (PhD dissertation, Department of History, University of Delhi, 2013).

15 Development Department G.O. No. 2120, 27 April 1948, TNSA.

16 Naidu, B. V. Narayanaswami, Report of the Court of Enquiry into Labour Conditions in Beedi, Cigar, Snuff, Tobacco-curing and Tanning Industries (Madras: Government Press, 1947), pp. 6, 8, 10Google Scholar. In the case of tanneries, out of 15 units sampled in Madras, only two were large (employing 1,569 and 798 workers, respectively); others employed a maximum of 175 and a minimum of four workers: Mukhtar, Ahmad, Report on Labour Conditions in Tanneries and Leather Goods Factories (Simla: Government Press, 1946)Google Scholar.

17 Narayanaswami Naidu, Court of Enquiry, pp. 12–14, 26–27.

18 Miryam, D. W. Karuna, ‘Caste and Work: Weaving in Nineteenth-century South India’ in Bhattacharya, Sabyasachi (ed), Towards a New History of Work (New Delhi: Tulika Books, 2014), pp. 97–120Google Scholar.

19 Shahana Bhattacharya, Labour in the Leather Industry, chapter 5.

20 Aditya Sarkar's study of the first factory laws reveals that these concerns existed even in those early days. Sarkar, Aditya, Trouble at the Mill: Factory Law and the Emergence of the Labour Question in Late Nineteenth-century Bombay (New Delhi: OUP, 2018), chapter 3Google Scholar.

21 Main Report of the Labour Investigation Committee (Delhi: Government Press, 1946), p. 48Google Scholar.

22 Proceedings of the Legislative Council of the Governor of Madras, Vol. LXIII, No.1, October 1932, pp. 82–89.

23 Development Department G.O. No. 2120, 27 April 1948, TNSA.

24 Ibid.

25 Ibid.

26 Madras Legislative Assembly Debates, Vol. V (No. 1–14), p. 1037.

27 This was the case in the Legislative Assembly (or lower house), which consisted of elected representatives. In the Legislative Council (or upper house), whose members were not directly elected, there was open opposition to the bills. Several members (lawyers by profession) expressed indignation at the possibility that the offices of professionals like lawyers and doctors would be subject to its provisions (Madras Legislative Council Debates, Vol. X1V, from p. 696 on). In the end, all such establishments were exempted from the purview of the MSE Act.

28 Ibid., p. 1039.

29 Ibid. Also, see pp. 562–569.

30 Madras Legislative Assembly Debates, Vol. VII (Nos 1–15), p. 232.

31 Ibid., p. 374.

32 Ibid., p. 334.

33 Ibid., pp. 372–373.

34 Ibid., p. 333.

35 Ibid., pp. 368–369.

36 Ibid., pp. 375–377.

37 Ibid., pp. 242, 387–388, 397.

38 Madras Legislative Assembly Debates, Vol. V, p. 1039; Vol. VII, pp. 234–237, 559–560, 562–563, 593. It was pointed out that some beedi-making establishments (and hotels) had already begun doing this in order to evade attempts to bring them under the ambit of the Factories Act of 1934. Dougals Haynes, in his study on the handlom industry of western India, shows how the splitting of factories and workshops became a widely used strategy to avoid complying with the law. He argues that this tendency shaped the industrial landscape of artisanal towns that became dominated by small workshops. Haynes, Small Town Capitalism, pp. 285–287.

39 Madras Legislative Assembly Debates, Vol. VII, p. 559.

40 Ibid., pp. 398–399.

41 Ibid., p. 242. In its original form, the MSE bill prohibited dismissal without one month's notice for all employees. However, this was made conditional upon six months of continuous service by the select committee.

42 Madras Legislative Assembly Debates, Vol. VII, pp. 304–305.

43 Ibid., p. 403.

44 Development Department G.O. No. 2120, 27 April 1948, TNSA.

45 There was some public discussion on the need to protect labour in small-scale and decentralized industries; however, this was drowned out by calls to protect their owners. This phenomenon is dealt with in more detail in subsequent sections: see the Mail dated 18 January 1947, copy in Development Department G.O. No. 2120, 27 April 1948, TNSA.

46 Development Department G.O. No. 2120, 27 April 1948, TNSA.

47 Ibid.

48 Ibid.

49 Ibid.

50 Development Department G.O. No. 458, 31 January 1949, TNSA.

51 Development Department G.O. No. 2210, 22 April 1949, TNSA.

52 Ibid.; also Development Department G.O. No. 2667, 6 June 1953, TNSA.

53 Development Department G.O. No. 458, 31 January 1949, TNSA.

54 Development Department G.O. No. 749, 15 February 1949, TNSA.

55 Development Department G.O. No. 5194, 21 December 1950, TNSA.

56 ILC Department G.O. No. 3416, 4 December 1954, TNSA.

57 Development Department G.O. No. 749, 15 February 1949, TNSA.

58 Ibid.

59 Development Department G.O. No. 4817, 31 October 1953, TNSA.

60 Ibid.

61 Ibid.

62 Development Department G.O. No. 960, 15 April 1954, TNSA.

63 Ibid.

64 ILC Department G.O. No. 3416, 4 December 1954.

65 Two years after the Tamil Nadu Catering Establishments Act 1958 was passed, an amendment was introduced granting the state government authority to exempt establishments: ILC Department G.O. No. 5384, 6 September 1961; Labour Department G.O. No. 210, 30 May 1969.

66 Development Department G.O. No. 2667, 6 June 1953, TNSA; Industry Labour and Cooperation (hereafter ILC) Department G.O. No. 466, 24 February 1954, TNSA.

67 Development Department G.O. No. 2667, 6 June 1953, TNSA.

68 ILC Department G.O. No. 466, 24 February 1954, TNSA.

69 Madras Legislative Assembly Debates, Vol. VII, p. 590.

70 For more data on labour-market segmentation on gender lines, see Harriss-White, Barbara, India Working: Essays on Society and Economy (New Delhi: Foundation Books, 2004)Google Scholar.

71 Madras Legislative Assembly Debates. Vol. VII, p. 591.

72 Narayanaswami Naidu, Court of Enquiry, pp. 6–14.

73 For mobilization by beedi workers in the Malabar region, see Isaac, T. M. Thomas, Franke, Richard W., and Raghavan, Pyaralal, Democracy at Work in an Indian Industrial Cooperative (Ithaca and London: Cornell University Press, 1998)Google Scholar.

74 Development Department G.O. No. 2120, 27 April 1948, TNSA. Owners also broke up large enterprises in order to deal with labour unrest and distance themselves from labour issues (left to branch managers): Narayanaswami Naidu, Court of Enquiry, p. 7.

75 Madras Legislative Assembly Debates, Vol. VII, pp. 563, 593.

76 Development Department G.O. No. 5580, 22 November 1949, Labour Law Journal, Vol. I, p. 201.

77 Madras Legislative Assembly Debates, December 1953, Vol. X, No. 4, pp. 226–227.

78 ILC Department G.O. No. 499, 9 February 1957, TNSA.

79 Ibid.

80 Ibid.

81 ILC Department G.O. No. 664, 2 February 1963, TNSA; ILC Department G.O. No. 5722, 22 November 1962, TNSA.

82 Labour Department G.O. No. 4452, 16 September 1965; Labour Department G.O. No. 12, 14 April 1969, TNSA. Hearing writ petitions filed by manufacturers, the High Court ruled that any trademark-holder who did not employ workers himself but bought beedis from other factories could not be held accountable for conditions in those factories. The Madras government decided not to appeal the judgment (ILC Department G.O. No. 664, 2 February 1963, TNSA). After this ruling, several beedi manufacturers closed down their factories, reopening them through agents from whom they ostensibly ‘bought’ beedis.

83 Described in Isaac et al., Democracy at Work. Owners argued that the industry would collapse if their costs of production increased (as a result of better wages and working conditions). This may be true of small establishments, but the huge profits made by larger factories and the rapid rise to wealth of many owners disproves the contention: many of them entered politics, getting elected in various capacities.

84 Ibid. Also see Agarwala, Rina, Informal Labour, Formal Politics and Dignified Discontent in India (Cambridge: Cambridge University Press, 2013)CrossRefGoogle Scholar. The change in the gender composition was probably the combined result of a steady rise in home-based work and stagnation of wages, prompting men to shift to other kinds of employment.

85 ILC G.O. No. 3203, 15 November 1954, TNSA.

86 Development Department G.O. No. 4817, 31 October 1953, TNSA.

87 ILC Department G.O. No. 3203, 15 November 1954, TNSA.

88 I have not been able to trace the date on which this exemption was granted: ILC Department G.O. No. 603, 2 February 1965, TNSA.

89 The Tripartite labour conference was a body set up by the central government to discuss labour issues, with representatives from business, trade unions, and the government.

90 Development Department G.O. No. 5120, 10 December 1953, TNSA.

91 Development Department G.O. No. 3314, 22 June 1949, TNSA..

92 Development Department G.O. No. 458, 31 January 1949, TNSA.

93 Development G.O. No. 742 (A), 16 February 1949, TNSA.

94 Development Department G.O. No. 3314, 22 June 1949, TNSA.

95 Development Department G.O. No. 2884, 22 June 1951, TNSA.

96 For cases in the handloom industry, see Development Department G.O. Nos 1312–1313, 14 March 1949, Development Department G.O. No. 1023, 1 March 1949, TNSA.

97 ILC Department G.O. No. 3533, 3 August 1956.

98 Development Department G.O. No. 5190, 25 October 1949, Development Department G.O. No. 2566, 14 May 1949, Development Department G.O. No. 1421, 10 April 1950, TNSA.

99 The Hindu, 15 March 1949.

100 One tribunal mandated specific wage rates while another refused to do so on the grounds that these depended upon market conditions: Development Department G.O. No. 1421, 10 April 1950, TNSA.

101 One tribunal fixed Rs 10 as a bonus on Deepavali for a group of handloom weavers; another ruled that weavers appearing before it should get one month's wages as bonus for 1946 and 1947; yet another tribunal rejected a claim for a bonus because employers refused to present their books for it to determine whether or not they had made a profit! See Development Department G.O. No. 2566, 14 May 1949; Development Department G.O. No. 1421, 10 April 1950; Development Department G.O. No. 479, 6 February 1950, TNSA.

102 Development Department G.O. No. 2105, 25 May 1950. Numerous awards reveal the arbitrary nature of decisions. Very often, they were made on assumptions about the capacity of the industry to pay (even though employers hardly ever submitted working costs or profits): see Labour Law Journal, Vol. I, 1949 (reprinted Allahabad: Bharat Law House, 1975)Google Scholar.

103 Development Department G.O. No. 3173, 15 June 1948, TNSA.

104 Development Department G.O. No. 5190, 25 October 1949, Development Department G.O. No. 2566, 14 May 1949, Development Department G.O. No. 1421, 10 April 1950, TNSA.

105 ILC Department G.O. No. 2470, 20 July 1955, TNSA.

106 ILC Department, G.O. No. 644, 19 February 1957; ILC Department G.O. No. 3553, 3 August 1956, TNSA, IL Department G. O. No. 603, 2 February 1965, TNSA. There are numerous more such examples: ILC Department G. O. No. 4974, 11 October 1962, TNSA.

107 The arguments were similar: they asserted that workers were paid on a piece-rate basis, had no obligation to work on the premises, and the relationship was contractual. Development Department G.O. No. 5580, 22 November 1949; ILC Department G.O. No. 2400, 4 September 1954, TNSA.

108 ILC Department, G.O. No. 499, 9 February 1957, TNSA.

109 ILC Department No. 3263, 25 June 1962, TNSA.

110 ILC Department G.O. No. 3216, 22 June 1964, TNSA. After this ruling, some state governments passed orders under section 85 of the Factories Act extending its provisions to beedi-manufacturing workshops/factories.

111 Development Department G.O. No. 2105, 25 May 1950. Notings like this one were common: ‘In the present state of tiles industry at Samalkhot, having regard to the class of labour employed, there is, in my opinion, no need at present to provide for privilege leave or casual leave’ (this was in relation to workers in the tile-making factories). Development Department G.O. No. 4324, 23 August 1949 in Labour Law Journal, Vol. I, p. 650.

112 The arguments are familiar: they had no fixed hours, they could come and finish their work when they pleased, they were paid on volume of work (piece-rates): ILC Department G.O. No. 3653, 19 July 1962, TNSA.

113 Development Department G.O. No. 3993, 29 July 1949, TNSA.

114 Sarkar, Trouble at the Mill.

115 See arguments in Madras Legislative Assembly Debates, Vol. V, pp. 1039–1040, and Vol. VII, pp. 332–335, 562–573.

116 Ibid.

117 See petitions by beedi-factory and handloom-factory owners cited earlier. Beedi manufacturers also deployed this argument when the state began exploring the possibility of bringing legislation aimed specifically at them: ILC Department G.O. No. 499, 9 February 1957.

118 Nasir Tyabji, Small Industries Policy in India (Delhi: OUP, 1989), p. 123.

119 Shah, K. T. (ed), Report: National Planning Committee (Bombay: Vora and Co. Publishers, 1949), pp. 27–28, 35–36, 46Google Scholar.

120 Planning Commission, Report of the Village and Small Scale Industries (Second Five Year Plan) Committee (Government Press: October 1955)Google Scholar.

121 Tyabji, Small Industries Policy, p. 139.

122 See, for example, Parthasarathi, Prasannan, The Transition to a Colonial Economy: Weavers, Merchants and Kings in South India, 1720–1800 (Cambridge: Cambridge University Press, 2001)CrossRefGoogle Scholar; and Sahai, Nandita Prasad, Politics of Patronage and Protes: The State, Society and Artisans in Early Modern Rajasthan (Delhi: OUP, 2006)CrossRefGoogle Scholar.

123 See Ravi Ahuja on labour policy and regulation in early colonial South India: Ahuja, Ravi, ‘The Origins of Colonial Labour Policy in Late Eighteenth-century Madras’ in International Review of Social History, No. 44 (1999), pp. 159–195CrossRefGoogle Scholar. Also Prabhu Mohapatra on the use of law to hold down labour on plantations in the nineteenth century: Mohapatra, Prabhu, Immobilising Labour: Plantation Labour in Assam and the British West Indies, 1830–1926 (Noida: V. V. Giri National Labour Institute, 2004)Google Scholar.

124 Sarkar, Trouble at the Mill.

125 Ravi Ahuja, ‘Produce or Perish: The Crisis of the Late 1940s and the Place of Labour in Postcolonial India’ (unpublished article).

126 Douglas Haynes notes the efforts of unions in western India to get legal measures such as factory laws extended to the handloom industry. Haynes, Small Town Capitalism, pp. 285–287.

127 See, for example, newspaper reports from Janashakti dated 15 November 1944, 29 November 1944, and 7 May 1945.

128 Madras Legislative Assembly Debates, Vol. VII, p. 335, 373–274.

129 Chibber, Vivek, Locked in Place: State-building and Late Industrialization in India (Delhi: Tulika books, 2004)Google Scholar.

130 Gupta, Chirashree Das, State and Capital in Independent India: Institutions and Accumulation (Cambridge: Cambridge University Press, 2016)CrossRefGoogle Scholar.

131 Harriss-White, India Working, pp. 18, 37.