Korea Institute for International Economic Policy

Indian Industrial Relations

Mai Thi Nguyet Anh Vietnam

Seoul, January 28th 2013

Table of Contents

Introduction ......................................................................................................................... 3 1.1 1.2 1.3 1.4 Definition .................................................................................................................... 3 Features ....................................................................................................................... 4 Objectives of Industrial Relation................................................................................. 4 Main aspect of Industrial Relations............................................................................. 5

Indian industrial relation ..................................................................................................... 5 2.1 The six phases of industrial relations in India ............................................................. 6

2.1.1 The first phase (Mid 19th century 1920) ............................................................... 6 2.1.2 The second phase (1920 Independence 1947) ...................................................... 6 2.1.3 The third phase (1947 to mid 1960s) ....................................................................... 7 2.1.4 The fourth phase (1970s) ......................................................................................... 9 2.1.5 The fifth phase (1980s) .......................................................................................... 10 2.1.6 The sixth phase (1990-2000) ................................................................................. 11 2.2 2.3 3 4 5 Importance of industrial relations ............................................................................. 12 The future of industrial relation in India ................................................................... 13

Recommendation ............................................................................................................... 14 Conclusion......................................................................................................................... 15 References ......................................................................................................................... 16

Introduction

In the modern industrial society, it is clear that industrial relation is one of the most complicated issues which attracts the attention and concern of authorities, governments and researcher all over the world. This phenomenon of a new complex industrial set-up directly contributes to the emergence of Industrial Revolution. Simple manufacture process, small scale investment, local markets and small number of employees are all the characteristics of the pre-industrial revolution. Industrial relations system is built by the process of industrialization with three main factors: management, labor union and the government. They develop a number of rules, codified in the institutions, which are used to govern the workplace. Industrial relations assume that labor markets are not perfectly competitive and thus, employers typically have more power than employees. It is clear that that there are apparent conflicts of interest between employers and employees (for example, higher wages versus higher profits) under the policy environment. Therefore, the challenge for industrial relations nowadays is to reestablish the connection among those factors with broader academic, policy, and business worlds.

1.1

Definition

Industrial relations is the relation between the management of an industrial enterprise and its employees or trade union. It is necessary that both parties promote a harmonious relationship to maximize the performance of the production process in the organization. There are many ways to sustain a good relation between employer and employee such as avoiding any dispute or conflict and nurturing the mutual understanding. It is significantly crucial to maintain a good industrial relation within the organization to create a favorable environment for better performance and higher productivity.

In fact the concepts of Industrial Relations are very broad-based, drawing heavily from a variety of discipline like social sciences, humanities, behavioral sciences, laws etc.

1.2

Features

The existence of two parties, management and labor is an indispensable condition for the emergence of industrial relations. Without the interaction of those two parties, this relationship cannot exist. In another word, it is the industry, which provides the environment for industrial relations.

It is clear that conflict and cooperation exist together within industrial relations. Therefore the purpose of industrial relation study is analyzing attitudes, relationships, practices and procedure developed by those two parties to diminish or find an effective solution for the conflicts.

The coexistence of labor and management makes it clear that both parties do not work separately but do work as parts of a big organization. It is an interactive relationship, one parties have a noticeable influence on the other. Therefore, countrys socio-economic and political environment, nations labor policy, rules regulations agreements, attitude of trade unions workers and employers are also included in industrial relations study. Industrial Relation also involves the issues about conditions of labor - managements cooperations as well as the requirement to activate and promote the desired co-operation from both the parties.

1.3

Objectives of Industrial Relation

Encourage the mutual understanding between two parties to preserve the interest of labor and management.

Develop the harmonious relations and minimize the industrial disputes (strike, lockouts, etc.) to ensure the highest productivity of workers as well as the industrial progress of a country

Diminish the turnover and absenteeism to raise productivity, especially when the national economy reaches the full employment situation.
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Promote the quality and democracy among parties based on profit sharing and managerial decisions to guarantee the benefit of the industry and the country as well.

Utilize the efficiency of government control in term of imposing policy, regulation as well as building the national plans.

Improve the economic conditions of workers in the context of industrial managements and political condition.

1.4

Main aspect of Industrial Relations

Labor Relations (between union and management). Employer-employees relations (between management and employees) Group relations (between various groups of workmen). Community or Public relations (between industry and society). Promotions and development of healthy labor-managements relations. Maintenance of industrial peace and avoidance of industrial strife Development of true industrial Democracy

Indian industrial relation

In the area of globalization and international economic cooperation, the industrial relations system in India has encountered many problems for decades which make the country under the pressure. The main pattern of the whole system which was established before independence remains almost unchanged. It is undeniable that government which historically has a close relationship with unions plays a vital role as the coordinator of this highly centralized system. However, the broad influence of the government on the system has shown a negative impact in developing experience in collective bargaining.

This research provides an overview about the evolution of industrial relations in India in the context of economic change. Indian industrial relations nowadays has to face to a variety of
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challenges including the structure of the Indian labor market, the overwhelming size of the informal or `unorganized' workforce, and its location outside the industrial system. Women workers, union movement failure and how to address their needs is also one of the essential issues in concern. It is significantly important and imperative to build a system that involves all workers and increase the number of working age people over the next decade.

2.1

The six phases of industrial relations in India

2.1.1 The first phase (Mid-19th century 1920)

It was the time India was under the British Government control. The British Government released many regulation and policy such as enforcing penalties for violating or breaking contract to limit the competitive advantages of indigenous employers against the British employers. A variety of policies and legislation were adopted during the latter half of the nineteenth century which became the basis of the emergence of industrial relations in India.

Many changes arose in social, economic and political conditions after the end of the First World War. Since the workers wage was not able to cover the rising living expense, there was intense labor unrest. The constitutional development in India led to the election of representatives to the Central and Provincial legislatures who took a leading role in initiating social legislation. The establishment of International Labor Organization (ILO) in 1919 as well as the emergence of trade unions in India, especially the foundation of All India 'Trade Union Congress (AITUC) in 1920 had a great and substantial influence on the labor legislation and industrial relations policy in India. 2.1.2 The second phase (1920 Independence 1947)

Improving working condition as well as providing the social security benefits was the main focus of the government policy after the First World War which brought out the implementation of a range of new policies. The Trade Disputes Act, 1929 aimed at providing conciliation machinery for the industrial disputes. During that time, The Royal Commission on Labor (1929-31) made a survey to enquire the problem of Indian worker in term of
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working condition (health, safety, and welfare) and gave out some specific recommendations to solve the shortcomings.

The Second World War and its serious situation forced the government to maintain the satisfied labor force to ensure the highest performance of production. The government control therefore had a broader influence and power on industrial workers in term of regulating the condition of work and welfare. There were two-fold action in this regard namely, (i) statutory regulation of industrial relations through the Defense of India rules and the orders made thereunder; and (ii) bringing all the interests together at a common forum for creating labor policy

One of the most important developments in Indian industrial relation was the tripartite consultative system which showed the faith of India in the ILO's philosophy and objectives. The need of tripartite labor machinery on the pattern of ILO was emphasized by the Royal commission of Labor in the early of 1931 but the first step to make it enforced was not taken until 1942. 1942 was marked with the first tripartite labor conference held at New Delhi under the Chairmanship of Dr. B.R. Ambedkar. Two organizations, namely, the Indian Labor Conference (ILC) and the Standing Labor Committee (SLC) attended this conference to develop a full-fledged system for labor and management.

The objectives set at the time of their inception in 1942 were: (a) promotion of uniformity labor legislation, (;b ) laying down of a procedure the settlement of industrial disputes; and (c) discussion of all matters of all-India importance as between employers and employees.

The ILC/SLC has immensely contributed in achieving the objectives. They facilitated to enact central legislation as well as discussed about all labor matters in the various meetings of ILC/SLC.

2.1.3 The third phase (1947 to mid 1960s)

After independence, an Industrial Truce Resolution was adopted in 1947 at a tripartite conference. The conference emphasized the need for respecting the common interest of labor
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and capital as well as reducing the conflicts or disputes between the parties

The relationship between the government and its affiliated union federation during this time seemed to tighten as the result of the Industrial Disputes Act (ID Act) of 1947. The provision in the act prevented employers from bargaining with union as well as from determining the representative union which made it impossible to involve either party in collective bargaining. Additionally, there was no provision for union recognition while it allowed any seven workers to register their union. The ID Act also made it difficult for the union to call a legal strike. During the late 1950s, however attempts were made to introduce labor legislation which promoted collective bargaining through various voluntary arrangements such as the Code of Discipline and the inter-union Code of Conduct. Since government greatly intervened in the determination of wages and working conditions the structure of bargaining was mainly focused on the national level.

The first phase of the Indian union movement corresponds to the first three five-year plans (1951-56, 1956-61, 1961-66), a period of national capitalism.

The approach to labor problem in the First Five-Year Plan (1951-56) was based on the wellbeing of the working class and its crucial contribution to the economic stability and progress of the country. The workers were considered an extremely important factor to achieve the targets of the Plan and in the achievement of economic progress. The Plan stated the worker rights of collective bargaining in organization should be fulfilled in order to have a mutual relationship.

The Second Plan (1956-1961) stated that union movement was an indispensable factor to ensure the interest of labor as well as to attain the production target. Multiplicities of trade unions, political rivalries, lack of resources were the major challenges facing existing unions. The plan also emphasized on avoiding disputes at all levels and achieving industrial peace.

The Third Five-Year Plan (1961-66) highlighted the need for increasing application of the principle of voluntary arbitration in resolving differences between workers and employers and recommended that the works committees should be empowered to be an active and
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effective agency for the democratic administration of labor matters

The post independence period of industrial relations policy aimed at the establishment of peace in industry, and grant of a fair deal to workers. The first phase represented the period of a state intervention that had the government guide and control on the labor movement through appropriate labor legislation, labor administration, and industrial adjudication. The interaction between capital and labor was restricted and coordinated by the government. During this period, few strategic choices were open to either union or employers as labor relations outcomes were over determined by the state. The institutional structures to boots efficient collective bargaining remained underdeveloped. 2.1.4 The fourth phase (1970s) The second phase corresponds with the 1967-69 Annual Plans, the fourth (1969-74) and the Fifth (1974-79) Five Year Plans. This is associated with overall industrial stagnation with the suffering from two oil price shocks, in 1973 and in 1978. As a result, the level of employment in the economy decreased which affected union activity, collective bargaining practices and labor market. The number of disputes, the number of workers involved in these disputes as well as the number of mandays lost increased phenomenally from 1966 to 1974.

There was no change in term of the system of regulating labor relations in The Fourth FiveYear Plan (1969-74). It made an attention to employment and training as well as to strengthen labor administration for better enforcement of labor laws, research in labor laws, and expansion of training programmes for labor officers.

The Fifth Five-Year Plan (1974-79) paid much attention on employment, both in rural and urban sectors. The government devised a new pattern of bipartite consultative process to create a favorable industrial relations as well as to raise the productivity by avoiding lay-offs, retrenchments, closures, strikes and lockouts. The new machinery implemented policies at the national, state, and industry levels to quickly solve the industrial conflicts and encourage industrial harmony. The failure of INTUCs internal practices as well as its ineffectiveness in representing union
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voice at the enterprise level made the workers seek more skilled politicians and negotiators to lead their union struggles. This period showed a rise in the number of disputes involving multiples union. The establishment of the National Apex Body, composed of twelve union federations and eleven employer representatives and the 1976 amendment of ID Act which force the firm employing more than 300 workers had to seek government permission before retrenching workers, were the two interventions which had a noticeable impact on the industrial relations during this time.

Overall, comparing to the other phases, this phase faced to a maximum industrial conflicts both in term of the number of disputes and the number of worker involved. 2.1.5 The fifth phase (1980s) This phase correspond to the sixth (1980-85) and the Seventh (1985-90) Five Year Plans as well as the two Annual Plans (1990-92). Employment in major sectors, especially in services, faced a considerable drop during this time since the economy suffered from severe internal and external shocks. The economy moved away from an import-substituting inward looking growth strategy towards strategies that encouraged both export promotion and domestics competition. The changes made a significant impact on the trade unions, labor market and the structure of industrial relations. This period was characterized by the rise of independent unions against the traditional party-affiliated unions.

The Sixth Five-Year Plan (1980-85) emphasized on building a healthy industrial relations basing on the cooperative attitude of the two parties employers and employees. The plan stated that disputes (strikes and lockouts) should be considered only on the last stage and effective arrangements should also be delivered to conciliate the conflicts and to eliminate unfair practices and irresponsible conduct. The plan also focused on the responsibility of labor unions in nation building activities as well as improving living standard of workers. Additionally, it showed a need of changing the existing laws on trade unions to encourage harmonious industrial relations

The Seventh Five-Year Plan (1986-91) stated that an effective policy to fix the shortcomings of the industrial system has to be implemented while maintaining the interest of workers. It
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was undeniable the need of strikes and lockouts in some cases which is the considerable scope for improving the industrial relations. Since the government cannot bear the huge burden of losses, in the proper management of industrial relations the responsibility of unions and employees has to be identified and disputed or conflicts should be minimized.

In the late 1970s there was a phenomenal rise in the number of disputes led by unaffiliated unions and the importance of traditional party-affiliated unions decreased. In 1989, the Labor Ministry listed nine major union federations and a number of small independent unions in their registry. 2.1.6 The sixth phase (1990-2000) In June 1991, the government decided to adopt the World Bank IMFs stabilization and structural adjustment program. The economy had to experience the devaluation of rupee. At the same time import quotas were reduced, tariffs were lowered and the government no longer had a monopoly power on the import and export. A statement on industrial policy with an attempt to lower the fiscal deficit was presented. This fourth phase corresponds to the eighth (1993-97) and the Ninth (1997-2002) Five Year Plans.

The Eighth Five-Year Plan (1992-97) emphasized the important of labor participation in decision making and management to promote industrial democracy. The government made an attempt in introducing workers' participation in administration. The result, however was unsatisfied, the effort to bring out an effective legislation and implementation had been failed. It required a more attention in activating a proper education and training as well as the cooperation from both employers and employees to promote the participative management.

Ninth Five-Year Plan (1997-2002) showed an effort to make a favorable condition for improving labor productivity as well as providing social security in the operations of the labor market. A pool of resource was developed which included skill formation, information exchange about job opportunities. The plan also highlighted on improving working condition, delivering insurance for the workers as well as creating an industrial harmony. According to the plan, labor surplus together with employment in unorganized segments of the economy were the causes of social issues such as bonded labor, child labor, poor working condition.
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During the time, many meetings were held raising the urgent need for tripartite consultation to resolve all the concerning labor matters under economic reform. The unions had serious concern about the present of a proper consultation at industrial or enterprise level. In addition, the unions experience a drop in sectional interest group during this phase. It was necessary that government policy should be carried out to protect consumers from sectional interests of many unrepresentative trade unions.

On October 1999 the government set up the second National Labor Commission. The terms of reference made a suggestion of realization of existing labor laws in the organized sector and also of enforcing and adding more number of legislation in order to give a minimum protection for unorganized workers as well as for the workers under an improper management.

In the context of continuing economic liberalization, the industrial relations will show reforms toward greater employment flexibility, greater decentralization in bargaining, decrease in government control over the bargaining process, reduction in the number of disputes. Employment and efficient union voice, therefore, could be promoted both at micro and macro level.

2.2

Importance of industrial relations

It is obvious that the healthy industrial relations are the key of success of all organization. With healthy industrial relations, a favorable environment is created for organizations to achieve long term goals while maintaining the interest of the parties.

Uninterrupted production: A healthy industrial relation ensures the continuity of production and smooth running of an industry as well as the other ones. Both employees and employers will not be out of work which utilize all the potential resource and encourage the higher productivity to achieve organizations goals. This positively contributes to the development of national economy.

Reduction in Industrial disputes - The industrial disputes are diminished and decreased in the condition of good industrial relation which fulfills all the basic needs and motivation of the
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workers as well as ensure the reasonable benefit of the employers. It helps promoting cooperation and increasing production. High morale Good industrial relations promote the morale of the employees with the mindset that they and their employers are sharing the same interest and aiming at the same goals (higher performance in production for example). This morale make the workers feel that they are part of organizations success and make the employers realize that the benefits are not for them alone but should be shared equally and generously with his workers. In short, the high morale is an important factor to develop the cooperation and industrial peace. New facilities New facilities for workers development are provide in the condition of industrial peace such as training facilities, labor welfare facilities etc. Those facilities help worker increase the productivity and show the best result in term of production at lower costs. Higher performance Good industrial relations are maintained on the basis of cooperation and recognition of each other. It will help increase production, reduce cost and activate all the potential and resource of the organization for the best outcomes..

Thus, from the above discussion, it is evident that good industrial relation is the basis of higher production with minimum cost and higher profits. It also results in increased efficiency of workers. New and new projects may be introduced for the welfare of the workers and to promote the morale of the people at work.

2.3

The future of industrial relation in India

The future of industrial relation in India has to adapt to the new environment that emerged after the structural changes under economic reforms.

The first issue relates to promoting collective bargaining by selecting a bargaining agent for negotiations and imposing new labor law support the foundation of bargaining agency in every unit and industry. Collective bargaining helps the both parties develop the mutual understanding to reach a common agreement and limit or quickly settle the conflict between them.
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The second issue lies in the weakness of state legislations concerned about labor matters. Although a range of attempts are made to improve the efficiency of the legislation and labor law, India still has to solve problems that the legislation process is facing.

The third issue, another challenge for the industrial relations system is the workers participation in management. Many organizations have realized the importance of the workers participation and applied many forms of workers-participation schemes but the result came out not as good as expected due to the improperness when running the scheme. It has raised a new issue and required a change to fix the problem and utilize the benefit of worker participation in management.

Recommendation

Both management and unions should develop cooperative attitudes towards each other. The participation of workers in the management of the industrial unit should be encouraged by making effective use of works committees, joint consultation and other methods

All basic policies and procedures relating to Industrial Relation should be widely informed to everybody in the organization. The manager must ensure that people will understand and agree with these policies. Although the management doesnt intervene in union activities, it is better that management should implement the attitude of encouraging the judicious union leadership to improve the industrial relation. The employers must recognize the right of collective bargaining of the trade unions.

The manager should eliminate any suspicion and misunderstanding by encouraging the union integrity and solidarity. Distrust, rumors and doubts should all be removed in the organization environment.

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Conclusion

To conclude, it is obvious that industrial relations in India are governed by certain forceseconomic, social and political. Industrial relations can improve only if there is a convincing change in the attitudes of employers and employees and they take responsible, surrender their sectional interests and dedicate for the mutual goals. The Government should play an active role in encouraging and supporting healthy industrial relations through legislation reform, adopting new policies as well as the effective control over industrial disputes. It takes great effort of all the actors, management, workers and government to face and handle all the existing issues to achieve the long term industrial harmony.

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