1. Labour and Change:
Essays on Globalisation, Technological Change and Labour in India
Kuriakose Mamkoottam
Chapter 3
STRUCTURAL CHANGES AND LABOUR IN INDIA
Introduction
During the recent past economies across the world have experienced structural changes of different
dimensions. While some of these changes may have been proactive in nature, many others have been
reactive. In fact, it appears that we are now living through one of those infrequent periods in history when
human society undergoes profound changes, which are unprecedented in its direction, speed and intensity.
New technologies in the form of Internet and digital networks have already made a major difference in not
only the way organisations work, but also the way we live. However, as Mamkoottam & Herbolzeihmer
(1990 & 1991) found in the case of Spanish automobiles and textiles, the absence of a simultaneous
approach to restructure the larger economy, society and the workplace can delay, if not totally stop, the
introduction of new technology. Rapid technological developments and Globalisation left little choice to
nations and economies across the world to compete in the emerging single (world) market. Restrictions,
with few exceptions, on the movement of capital, goods and services were gradually lifted and global
standards began to take control of quality, price and productivity. In order to take advantage of
globalisation and technological changes structural adjustments and economic reforms were (and still
continue to be) introduced in the Indian industrial and financial sectors.
The New Economic Policy
For several decades after independence the government of India followed a path of industrial development
which placed major emphasis on the state-owned public sector. The central and state governments in the
public sector units had made huge investment of several millions, which controlled the major share in
almost every sphere of manufacturing goods and providing services. However, over the years most of the
public sector enterprises became loss-making units and many were declared sick, though it must be
hastened to add that industrial sickness was by no means confined to the public sector alone. Ironically
industrial sickness was more pervasive in the private sector, particularly in the medium and small-scale
sector, many of which had to be taken over by the Government. What is more worrying is the fact that
several million workers were/ are employed in these sick units. Critics attributed the deteriorating standards
perpetuated by the Indian industry to the unhealthy protectionism and its isolation from the global market.
The Economist in 1990 used the metaphor of a 'caged tiger' to describe the over-protected Indian economy.
Direct state intervention and bureaucratic control had for long restrained and constricted the Indian
industry, be it through industrial licensing, import-export restriction, or labour legislation. Among the
major reasons for the existing non-competitive situation include technological obsolescence and inefficient
deployment of manpower with redundant skills.
In the wake of a severe foreign exchange reserve crisis and the increasing impact of globalisation, the
Government of India announced a new Industrial Policy in July 1991 with the major objective of
transforming and integrating the Indian industrial and financial sector with the global market. Several
major policy measures including privatisation of the public sector organisations, modernisation and
technological change, manpower training and skill up-gradation, rehabilitation of the sick industrial units,
and, above all, relaxation of the state control by introducing adequate legislative reforms were included in
the new policy package. In fact, an organised effort to tackle industrial sickness had commenced in 1987
with the enactment of the Sick Industrial Companies (Special Provisions) Act, 1985, and the constitution of
the Board of Industrial and Financial Reconstruction (BIFR). The BIFR - a quasi-judicial body - vested
with wide ranging powers was to act as a single window for nursing sick units back to health or for
recommending their closure. Through an amendment, the Sick Industrial Companies Act, the jurisdiction
of BIFR, which was till then confined to private sector units, was enlarged to cover sick public sector units
as well for rehabilitation.

2. 2
In countries where free competitive markets have been developed and nurtured over the years,
unemployment benefits under an overall social security system are available to the labour force. In the
absence of any such meaningful social security system in India, a social safety net was created under the
National Renewal Fund (NRF) to re-train the employees and rehabilitate obsolete technology. The main
objective of NRF was to ensure that technological change and modernisation of the production processes
did not adversely affect the workers. The Fund, while providing ameliorative measures to the affected
workers, was also to re-train them so that they would be in a position to upgrade their skills to participate
actively in the process of change. While bringing about restructuring, technological innovation or
modernisation, a variety of situations could arise and the NRF was constituted to deal with three kinds of
situations. First, in cases of enterprises, which did not need any immediate restructuring but may require in
the foreseeable future, NRF would contribute so that adequate funds were available when need arose.
Second, NRF would contribute to those units, which though intrinsically viable, need immediate
restructuring. Here, since there could be no opportunity to build up a corpus of funds, NRF could be used
for technological up-gradation, restructuring and retraining of labour. However, the units receiving such
funds from the NRF could be expected to undertake a suitable obligation to reimburse the amount, as they
became viable units over a period of time. Thirdly, NRF would act as a social safety net to those units,
which are already sick and can be referred to BIFR. The BIFR could either order closure or revival of the
unit after its evaluation. In either case labour retrenchment is likely which can be funded by NRF without
obligation of reimbursement. The NRF was appropriately structured with suitable mechanisms to deal with
these different situations, though it has not met with much success in achieving the intended objectives.
As in the case of change anywhere, the path chosen through structural reforms of the economy and industry
in India has not been easy to traverse. Structural reforms were introduced by the Indian Government amidst
a great deal of scepticism among political parties, intellectuals, opinion makers and bureaucrats within the
country. Opinions were divided even among the ministerial members of the government at the Centre.
However, the much fragmented labour unions almost forgot their ideological and historical differences to
come to a common platform to oppose the steps taken by the government in 1991 to liberalise the economy
and restructure the industry, particularly the public sector. In the absence of political consensus and faced
with widespread protests among the organised labour, the then government adopted a cautious and guarded
approach to reforms. It is noteworthy, however, that the economy and industry in the meantime began to
look up. Foreign investment started coming in and a gradual transformation of the Indian corporate sector
was under way. Multinationals in the area of computer software, cosmetics, garments, heavy engineering,
automobiles, air lines and cargo services, potable alcohol, footwear, food chains and serials and many
others began to look at India as a profitable sourcing and production centre. After nearly a decade of
reforms, the Indian economy looks healthier at least in terms of foreign investment, especially Foreign
Direct Investment (FDI) into India. Based on RBI sources the Economic Times (May 27, 2001) reported
that foreign investments at May 18, 2001 stood at US $42.829 billion. A healthy proportion of FDI inflows
as compared to portfolio investments is considered to be a positive sign as the former is long-term
investment. The industrial sector has not only shown a higher growth rate but had also become more
competitive as reflected through growth in exports, a healthy foreign exchange reserve, and growth in
employment in the private sector.
It is important to note that the Congress Party whose Government which initiated the process of
liberalisation in early 1991 was voted out of power in the subsequent general elections in 1996. Many
critics interpreted the result of the general election as an indication of the fact that the reform process was a
political failure. However, all the subsequent governments, though belonging to different political
ideologies and their coalitions continued the process of deregulation, enlarged the areas of foreign and
private investment, and partial privatisation (divestment) of the public sector. Important sectors like the
infrastructure, telecommunication, civil aviation, power and automobiles have been deregulated and opened
to multinational players. Even in the face of nation-wide protests and agitation by the employees of the
nationalised insurance sector, the Insurance Regulatory and Development Act (IRDA) was passed in the
1999 winter session of parliament, opening up the insurance sector to private / foreign companies. In fact,
the re-elected BJP-led coalition government has attached high priority to implement socio-economic
reforms, by creating new groups comprising top industrialists to generate ideas and to implement speedily
the already formulated ideas. To monitor and facilitate the process of privatisation, a new department of
dis-investment headed by a minister has been created recently.

3. 3
The public sector banks too have been identified to be restructured and gradually opened to divestment.
The Ministry of Finance, (GOI) has directed the banks to draw up a voluntary retirement scheme for the
employees to make them more efficient. The banks have been asked to reduce the level of operations, and
the organisational restructuring is expected to result in major cost saving. In a recent study by the
Federation of Indian Chambers of Commerce and Industry (FICCI), 22 percent of the staff in 16
nationalised banks were found redundant, when benchmarked on the basis of Rs. 125 lakh business per
employee (BPE). The Government is talking about taking steps to make the public sector undertakings
more accountable. According to a new plan drawn out by the Finance Ministry, all capital fusion for
restructuring plans would be subject to signing Memorandum of Understanding (MOU), in the form of
time-bound schedule for implementation. The schedule will be closely monitored by the Ministry to ensure
that the PSUs adhere to the conditionalities of the restructuring package. According to sources, the
government annually infuses about Rs.3000 crore in the restructuring plan of various PSUs in the form of
cash, loan write-off, interest subsidy etc. About one fourth of the 239 PSUs are sick, and about 40 PSUs
being declared not revivable by BIFR.
The liberalisation process and associated economic reforms in India have been constrained by the trade
unions and industrial relations in the country, while at the same time, the former has had their impact on
trade unions and industrial relations. As illustrated by John Dunlop (1958) the nature and climate of
industrial relations can be seen as an outcome of the complex set of transactions that take place among the
major players such as the state, the employers, the employees and the trade unions in a given socio-
economic context. Structural reforms and technological innovations directly and in important ways affect
the environment and thus industrial relations. Technological change and innovations, for example, cannot
be seen in isolation from the existing institutional arrangements governing industrial relations. It is the
interaction between (1) the changes made by the different players (government, employer, employee/union)
in the existing human resource management/ industrial relations practices and (2) decisions about
technological change that will determine how the interests of employers, employees, unions and the wider
society will be affected when such technological changes are introduced. To appreciate the exact nature of
this symbiotic relationship, we shall now examine the role played by the major players, namely, the state,
the worker / trade unions, and the employer, in creating the kind of industrial relations scenario in India.
Labour and Industrial Relations in India
Industrial relations should be seen as dynamic in nature. Like most developing countries in the world,
labour movement in India has had a shared history with the country’s independence movement. Not only
did labour play an active part in the struggle for independence, but labour movement derived its vitality
from the independence movement and sought support from political leaders. In fact, trade unions
continued to be closely linked with political parties in India. After independence, political parties used the
organised labour for political purposes, while trade unions found it difficult to sustain and succeed as
effective social partner without political patronage. Meanwhile, the fragmented structure of political parties
permeated the trade unions as well. Multiplicity of trade unions divided the labour force along affiliation
to political parties; a fragmented trade union structure not only weakened the movement, but also made
bilateral negotiation and collective settlements extremely difficult and rare.
Independent India with her deliberately chosen philosophy of socialist democracy enacted a legislative
framework, which protected the interests of the workers and trade unions. Even day-to-day relations
between the employer and employee are bound by legislation and political parties took upon themselves the
cause of the labour. During the 1950s to 1970s as the public sector expanded, trade unions not only grew
in numbers but also became more and more powerful vis-à-vis employers and management, in particular.
While the government heightened its focus on the nationalised sector, white-collar employees in the banks,
insurance and government undertakings too became unionised. Often politicians, particularly those in the
opposition, found unions an effective medium to demonstrate their strength and unions used the political
support to achieve their immediate objectives. For fear of losing the support of the organised labour, more
often than not the ruling party yielded to the demands of trade unions, some genuine, others not so.
However, the mid 1970s witnessed the dark side of Indian democracy with the late Prime Minister Indira
Gandhi declaring emergency, suspending fundamental rights including those of trade unions. But, soon

4. 4
after the emergency was lifted in 1977, trade unions revived with renewed vigour and vitality. Trade
unionism grew vertically among the officers and managers of public sector undertakings, university
teachers, doctors & nurses in government hospitals, and lawyers in the courts. In most cases, these
organisations popularly known as guilds and associations, came up as a reaction to the militant unions
among the lower employees on the one hand, and the loss of power and decision making role experienced
by the professionals and lower/ middle level managers, on the other hand. In a nation-wide study of
officers in the public sector, (Mamkoottam, 1990) found that the "powerless" and the voiceless officers
organised themselves into associations to protect their interests vis-à-vis the workers as well as the top
management. Gradually the (top) management, particularly in the public sector, became the weaker partner
in industrial relations. Strikes and industrial indiscipline increased with greater loss of man-days including
in essential services like hospitals, Railways, airways, telecommunications and postal services. Meanwhile
the declining productivity and poor performance of the organised sector including that of the government,
became the target of public displeasure. There was a growing concern that India was lagging behind in
producing world class products and services, fast losing out in the increasingly globalised export sector,
and a large part of the blame was put on trade unions. However, time and again trade unions expressed
their opposition and resisted initiatives of economic reforms and structural adjustments including those of
technological change and modernisation.
In fact, a key feature of industrial relations in India has been the confrontational relationship between the
employer/ management and trade unions, and an overwhelmingly dominant role of the state through a
plethora of labour laws. Many of these labour laws are not only archaic, but also have considerably
reduced and restricted labour flexibility. Flexibility is a key characteristic of modern business and industry.
Flexibility is an all-pervasive concept covering product design and manufacturing, production process, and
labour. Labour flexibility refers to a variety of decisions affecting skills, geographical and occupational
change of workers, recruitment, deployment and working hours, which would be essential to maintain cost
effectiveness, productivity, quality, and market competitiveness. Flexibility enables a course of action to
be modified in accordance with an encountered situation, which may surprisingly deviate from prior
anticipations. Central to the notion of flexibility is the capability of a system to generate a variety of
alternatives so that options are available to do things differently or do something else if the need arises. The
qualities of versatility, agility and resilience associated with flexibility have been noticeable by their
absence in the Indian labour force. Indian employers and potential foreign investors in India have been
clamouring for radical changes in the existing labour legislation allowing greater freedom to recruit, deploy
and discipline labour. However, it should be mentioned here that no government has so far taken steps for
initiating reforms in labour legislation and industrial relations.
Employer Strategies
Despite a rigid labour legislative environment and widespread protests by trade unions, in recent years
many employers have undertaken modernisation of the plant, restructuring of production processes and
work re-organisations. As tables-1 & 2 show, in some cases employers have laid off and retrenched labour
force. In a case of Associated Cement Company (ACC) versus an employees' union in one of its plants
located at Sevalia, the Gujarat High Court underlined the fact that under section 25-FF of the ID Act, a
company can shut down its plant or unit by transferring the title to another company. Another interesting
case is that of Hindustan Ciba-Geigy which implemented a successful VRS for its entire 907 strong work
force at its plant in
Table - 1: NUMBER OF UNITS EFFECTING LAY OFF & WORKERS LAID OFF
DURING 1990-98
YEAR CENTRAL STATE TOTAL
A B A B A B
1990 56 13907 386 50173 442 64080
1991 46 10791 415 60269 461 71060
1992 101 47979 376 59633 477 107612
1993 52 19212 373 46416 425 65628

5. 5
1994 60 17806 282 40261 342 58067
1995 21 8176 263 53810 284 61986
1996 54 14291 253 47046 307 61337
1997 52 21601 255 43564 307 65165
1998 49 7960 132 15848 181 23808
(Jan-Sep)
Source: Annual Report 1998-99, MOL
A= number of units; B =Workers laid off;
Bhandup in the suburbs of Bombay. The success of the Ciba scheme is attributed to its truly voluntary
nature, and its ability to convince the union, which initially blamed the management for making the plant
non-viable through "mismanagement". The Bhandup plant, set up in early 1960s, was the "mother plant"
of the Swiss multi-national till some years ago when it started making losses. The pharma division
employed 1,452, workers- more than three times the staff in the agrochem division, which employed 440.
On a turnover of Rs.20 crore, the unit made a loss of Rs.7 crore. The wage bill alone was Rs.10 crore. The
management threw its books open to the union, took them into confidence and offered various options,
including the possibility of selling the plant to a new owner under whom the employees could continue to
work, an employees' co-operative to operate the unit, and a VRS. The VRS provided for two options:
One, monthly payment of full pension for 180 months from the date of accepting the scheme, or till 60
years of age. Two, commutation of a part of the pension - not exceeding 33.33 per cent of the pension,
which would be paid four weeks from retirement- with the balance being paid monthly over 180 months, or
till 60 years of age. The union after due evaluation of the various options accepted the voluntary retirement
scheme.
Table-2: NUMBER OF UNITS EFFECTING RETRENCHMENT & WORKERS RETRENCHED
THEREIN DURING 1990-98
YEAR CENTRAL STATE TOTAL
A B A B A B
1990 1 8 267 3029 268 3037
1991 2 54 233 4342 235 4396
1992 2 85 220 3751 222 3836
1993 3 178 186 2713 189 2891
1994 - - 135 2192 135 2192
1995 - - 94 1792 94 1792
1996 4 285 75 2087 79 2372
1997 10 526 151 2716 161 3242
1998 1 1 75 1067 76 1068
(Jan-Sep)
Source: Annual Report 1998-99, MOL; A= number of units; B =Workers laid off
Public sector units too have reduced manpower through VRS. In the Marxist ruled state of West Bengal,
known for its militant trade unionism, workers of the Bengal Potteries en-masse accepted a VRS. MMTC
and the State Trading Corporation reduced their manpower substantially through VRS. Hindustan
Shipyard Limited, Delhi Transport Corporation, Bharat Gold Mine Limited are among other successful
cases of manpower reduction through VRS. In fact, it is reported that major restructuring efforts by way of
downsizing have taken place during the past few years in the public sector in India. According to a report
(Economic Times, 1 June 1999), through VRS 152 PSUs have shed as many as 1,20,000 employees since
1993-94. These PSUs include those, which are sick as well as those, which are revivable. Some of the
prominent companies which have separated large number of employees through VRS include National
Textile Corporation (23,000 employees), Bharat Coking Coal (9,793), HMT (4,309), and Eastern
Coalfields (6,859).

6. 6
But the indiscriminate introduction of VRS in the public sector units have raised anxiety due to the fact that
the scheme has not only led to the loss of their best employees, but the enormous cash outflow could lead to
disastrous consequences. Bharat Heavy Electrical Limited, which employed over 70,000 people, besides
indirectly providing work to another 30,000, withdrew the VRS package offered, when the management
discovered that many of the senior and best qualified workmen and officers were availing of the scheme to
join the company's competitors in the private sector. The Indian Drugs and Pharmaceuticals Ltd, the largest
pharmaceuticals company in the public sector, while spending an amount of RS. 12.5 crore lost 450
employees, majority of whom were senior officers barring about 25 workers. A revival package rendering
nearly 78,000 workmen surplus with the mills under the National Textile Corporation located in different
parts of the country was enthusiastically received in the initial stages. Although about 32,000 workers had
opted for the scheme involving an amount of Rs.245 crore, the younger workers became suspicious of the
scheme and refused to accept it. According to a study conducted in 1993 by the All India Management
Association (AIMA) on the human dimensions of liberalisation, more organisations were able to close
down parts of their business in post-July 1991 period than earlier. Based on a sample of chief executive
officers (CEOs) of 71 organisations in the organised sector, the study showed that more than 75 per cent of
sample organisations had surplus labour. The study revealed that industry had consciously gone for
replacing labour with capital during the recent past, by judiciously bringing about technological automation
and organisational restructuring. Interestingly, 52.4 per cent of the respondents in the study reportedly
found no resistance from the trade unions and workers, but received positive response (Economic Times
Dec.12, 1993).
In a similar survey it was found that 64 per cent of the companies were going through process of re-
structuring and 26 per cent were planning to do so in the near future. Marketing, organisational structure,
quality, training and finance were among the top areas earmarked for restructuring (Business Today,
January 7-21, 1994). The survey had covered a sample of 148 chief executives, directors, and
vice-presidents of large, medium and small firms, spread out in the major industrial centres of the country.
In other words, to face growing competitiveness and economic recession, companies in India have been
downsizing by shedding employees. Some others shut down operations first and later seek legal help. As
mentioned earlier, the process of legal closure is not easy and often not granted by the government. To
circumvent the protracted process, employers have resorted to shutting down operations or separating
employees through VRS. In recent past many companies like National Rayon Corporation and gas major
BOC stopped production in one of their Bombay units and sought permission to close down. To avoid
legal battle and to reduce worker protests, companies such as Philips, Siemens, and many others offered
attractive separation packages. Over the past few years, Philips in India reduced its original 10,000
employees by half and Siemens by 20 percent by offering VRS. In sunset industries such as the composite
textile mills, the number of closed mills is increasing every season. According to an estimate, by the end of
March 1998, 93 of the 278 composite textile mills in the country had shut down production completely
(Economic Times, Jan 20, 1999).
While rationalisation of manpower often helps to improve operational efficiency and the health of the
organisation, without proportional rise in employment, unemployment is proving to be a difficult problem
to grapple with. Declining employment rate along with a growing GDP has been a global phenomenon and
it is projected to continue even in the developed world. Most developed economies have been experiencing
a decline in full employment while marking the growth of part-time workers. According OECD sources, as
much as 39 percent of total employment in Netherlands in 1996 has been part-time, while the figures for
Britain was 22 percent, France and Germany 16 percent each, Japan 15 percent, Spain 9 percent and the US
8 percent. As tables 3-4 show, during the past few years, employment in India has registered an over-all
marginal growth, but it has been negative in the public sector.
Table 3: EMPLOYMENT IN THE ORGANISED SECTOR

7. 7
In the end of (in lakhs) Total percentage change
Over previous year
Public Private Total Public Private Total
1 2 3 4 5 6 7
March 1997 195.59 86.85 282.45 0.67 2.03 1.09
March 1996 194.29 85.12 279.41 -0.19 5.62 1.51
March 1995 194.66 80.59 275.25 0.11 1.60 0.54
March 1994 194.45 79.30 273.75 0.61 1.01 0.73
Source: Annual Report 1998-99, M.O.L
Table- 4: EMPLOYMENT BY BRANCHES OF PUBLIC SECTOR
Branches of Employment Percentage growth
Public Sector (in lakhs) over previous year
March 1996 March 1997 1996/97
Central Government 33.66 32.95 -2.11
State Government 74.14 74.85 0.96
Quasi Government
(Central) 35.38 35.85 1.33
Quasi Government
(State) 29.20 29.50 1.03
Local Bodies 21.92 22.44 2.37
Source: Annual Report 1998-99, M.O.L
Labour and Trade Union Response
Global experiences show that workers' response and trade union strategies towards technological change
vary depending on the labour market conditions, the power structure in and around the trade unions and the
labour legislation operating in that environment. Based on three large scale surveys of around 2000 British
work places undertaken in 1980, 1984 and 1990 Daniel & Millward (1993) observe widespread support for
technical changes, including advanced technical changes, among both manual and non-manual workers -
and even stronger support from their trade union representatives. However, the same study pointed out that
organisational changes provoked much more mixed reactions. Organisational change was resisted more
often than it was supported among manual workers. Reactions to organisational change among office
workers were fairly evenly balanced between favourable and the unfavourable, but they were much less
supportive than they were towards technical change.
According to Daniel and Millward, new technology represented progress and advance; the benefits of new
machines were concrete and demonstrable, and represented competitive advantage. Investment in new
technology represented confidence in the future and improved long-term job prospects and security.
Workers were familiar with many features of new technology and valued their benefits. Overall, the
introduction of new technology tended to be associated with success. Organisational change that was
introduced independent of new equipment, on the contrary, tended to be more frequently associated with
failure. It was often seen as an admission of unproductive organisation in the past. It was more often

8. 8
viewed with suspicion, as the benefits derived from different forms of organisation were often seen as a
matter of judgement and not self-evident. Moreover, the idea of change is not often effectively
communicated to the lower levels in the organisation before it could be implemented.
Muneto Ozaki (1992) suggested in an ILO study that workers have had limited influence on the process and
pattern of technological change in most countries except in Sweden where they have played a direct role in
the planning of technological change. According to the study, unions and workers had little or no influence
on planning of technological change in Japan or in the machine tool industry in the U.S. In Sweden, semi-
autonomous work groups, which are funded by public policy, play a direct role in the introduction of
technological change and in the creation of new work roles. As Willman (1986) suggested the trade union
behaviour in the face of technical change will depend upon changes in the political and economic climate,
the incidence and impact of innovations, changes to union structure, and collective bargaining. Studies on
technological change in the U.K. (Daniel 1987), Italy (Treu 1984), Australia (Deery 1986) and Spain (Fina
and Hawksworth 1984; Mamkoottam & Herbolzeimer 1991) show that technological changes were mostly
introduced unilaterally by the management but faced little resistance from the trade unions.
Labour and trade unions nowhere in the world have keenly welcomed technological changes, and India is
no exception. As mentioned earlier, the state has played a dominant role in Indian industrial relations
affecting almost every possible dimension of industrial relations, which has considerably reduced and
restricted labour flexibility, and slowed down the introduction of new technologies. The 15th session of the
Indian Labour Conference held in 1957, in principle, limited the possibilities of introducing technological
change, by adopting the “Model Agreement” which approved “no-retrenchment” clause on account of
technological change. The employers were required to provide workers with suitable alternative jobs in the
same establishment or under the same employer. All along the Indian government has followed a cautious
path to effect changes in labour laws relating to retrenchment of workers. A promised exit policy
announced in 1991had to be abandoned in the face of strong opposition from the trade unions of the
organised sector, including officers' associations of the various public sector companies. Gradually the
focus shifted to an approach of what is called "structural reforms with a human face", by which changes in
labour laws would be introduced in phases.
However, it should be appreciated that the trade unions find it difficult to accept technological changes as
there is fear in the minds of employees that the envisaged changes, if implemented, will adversely affect the
labour and employment situation in different ways. Major technological changes with the accompanying
structural and organisational changes could affect the existing occupational structure, manpower skills,
employment patterns and other related areas. Moreover, new technology has important implications for the
structure and strategy of trade unions. The evolution of technological changes has shaped and reshaped the
labour movement. As Gill (1987) suggests, perhaps it is in the history of the labour movement that the
discontinuous nature of technological change can be seen most clearly.
Ranabir Samaddar (1995), based on a case study of newspaper industry, suggests that new technology is a
weapon in the hands of the management to eliminate trade unions. On the other hand, Mamata Roy (1995)
concludes from her study on the banking industry that the worker may become an eager supporter of
technological change. Studies by K.B. Akhilesh et al (1989) show that mostly management has taken
workers for granted while introducing technological change. In general, the management tends to believe
that workers' (and union’s) resistance can be overcome by monetary rewards by way of ex-gratia benefits.
These studies have noted that such efforts to introduce technological change for improving productivity and
quality could not succeed unless accompanied by efforts in creating awareness about new technologies
among the workers.
In fact, it is worth noting that the workers (and unions) are not concerned about introduction of
technological change per se; what they are concerned would be the shop floor reorganisation resulting from
such changes in terms of job loss, internal re-deployment, change in work methods etc. As noted by
Manik Kher (1997), although the workers and unions have been resisting shop floor changes directly and
technological changes indirectly, companies in the private sector have been able to bring about major
changes in the shop floor while introducing technological changes by incorporating counter demands in

9. 9
wage settlements. In a recent ILO study by the present author (Mamkoottam 1998) on “Productivity
Linked Wages in South Asia', it was found that management has preserved the rights to introduce
technological changes and re-deploy workers to enhance productivity. Moreover, wage increases were
made often conditional to such changes in the negotiated agreements signed between the management and
the union(s).
In a study of technological change in steel, textile and engineering sectors in India, Manik Kher (1997)
observes variations, which may be explained by the nature of the production process, educational
qualifications of the workers, industrial relations environment, and the over-all economic development of
the region. Although modernisation processes in steel, engineering and textile were intended to improve
quality and reduce costs, the implementation of the modernisation programme varied in each case across
the public sector and the private sector. Public sector management with a remarkable exception of the
Greenfield plant was found complacent, non-committed with a lower level of morale. Such work
atmosphere affected quality of the decisions in terms of timeliness and reliability. In the private sector, on
the other hand, decision-making was quicker. The competitive spirit drove them towards greater
commitment and concerted efforts (Kher 1997:70).
Since the time the new industrial policy was announced in 1991, the trade unions in India registered their
disapproval in several ways including strikes on a few occasions. The trade unions in the banking,
insurance, and other public sector units not only rejected the offer of discussion but also threatened to
boycott and oppose the implementation of various measures announced by the government of India as a
part of the package of structural reforms and economic liberalisation. In fact, the process of reform
envisaged in the financial, manufacturing and service sectors of the economy has been considerably slowed
down due to continuous resistance expressed by the organised labour trade unions. However, as we have
discussed in the earlier section, labour and trade unions would be co-operative to restructuring provided the
management was willing and able to evolve a strategy of negotiation and dialogue. Recently, Escort's
management proposed to transfer 250 workers from the Rajdoot motorcycle factory to the group's tractor
units. Although initially reluctant, the unions finally agreed to the redeployment. Similarly, the
Bombay-based Philips Employees' Union submitted a charter of demands, which were negotiated and
settled eight months in advance of the expiry of the existing agreement. Another example of the new trend
is the militant Bata Mazdoor Union accepting a crucial productivity agreement linking wages to
productivity.
Although unions have been coping with technological changes and shifting their focus of bargaining, the
recent changes appear to be so swift and radical that they have nearly threatened the very foundation of
trade unions. Major aspects of new technology annul the very foundation of traditional trade unions.
Flexibility, for example, questions the fixed rules and norms of work determination. Job demarcations and
occupational identities are increasingly being blurred and gradually disappearing. Decentralisation
disperses production/ service centres and reduces collective strength. Unskilled and semi-skilled workers
have been the backbone of traditional trade union centres, and their gradual reduction and elimination and
the simultaneous trend in subcontracting are threatening the future of trade unions. More and more
organisations are becoming smaller in size and flatter in structure with fewer unskilled and semi-skilled
workers. Above all, the new worker is better educated, well informed and professionally oriented. His
aspirations, needs and problems are different from those of the traditional worker.
Though gradually, both the state and the corporate sector, including the public sector, have introduced
technological changes, work reorganisation, down sizing, de-layering, productivity improvement
programmes etc. Developments in recent years in India indicate that unions are unable to stop the process
of re-structuring, modernisation and other changes in the work place. In fact, the developments during the
past few years indicate that the organised labour is becoming weak. While trade unions worldwide are
suffering from decline in their membership rates, it may be difficult to prove that trade unions in India have
declined in size. As table-5 indicates, although the total number of registered trade unions continued to
grow, the total membership of trade unions submitting returns and their average membership have shown a
noticeable decline since 1992. However, there is clear evidence to show that their bargaining power has
declined in

10. 10
Table-5: Trade Union Membership
Year No. of No. of Membership Average Percentage
registered unions of unions submi- membership of women
trade submitting tting returns of unions
union returns (000) submitting
returns
1962 11,614 7087 3977 561 9.3
1966 14,686 7244 4392 606 7.1
1971 22,484 9029 5470 606 7.1
1977 30,810 9003 6034 670 8.1
1980 36,507 4432 3727 841 5.9
1985 45,067 7815 6433 823 9.4
1990 52,016 8828 7019 795 11.9
1992 55,680 9165 5746 627 10.4
1993 55,784 6806 3134 460 15.9
1994 56,044 6265 4093 652 --
1995 57,611 6422 4253 660 --
Source: Indian Labour Year Book, 1991 & 1996; Master Guide to Labour Statistics, 1989; Pocket Book
of Labour Stattistics,1998, MOL, Labour Bureau, GOI.
the recent years. Tables 5 & 6 show that the strike propensity of trade unions and the number of workers
involved in strikes have come down, while the management's propensity to lock out may have increased,
which has been termed as "managerial militancy". National trade union centres appear to be losing their
control over local / enterprise unions. In a recent study of collective agreements chosen from the public
sector, private (domestic) sector and multinationals in India, it was found that unions agreed to
technological/ skill up-gradation, and organisational/ work place restructuring in return for linking wages
with productivity (Mamkoottam, 1997).
A combination of several interrelated factors including globalisation of the economy (economic and
structural changes), technological change, attitudes of the state, employer and workers (towards unions),
occupational structure and demographic shifts in worker profile may be contributing to the declining power
of the unions. In some ways India of the 1990s may be compared to the US of the 1970s when trade
unionism started its decline there. Increased price competition placed pressure on unionised employers to
lower costs. Traditional collective bargaining contracts, which rigidify internal labour markets, became
less acceptable because they limit flexible resource allocation. Many employers located new production in
low wage (typically non-union) settings in the US and abroad. Unionised employers paying higher wages
found it hard to compete against non-union firms, promoting widespread adoption of union avoidance and
investment relocation strategies. According to Wever (1994), workers had fewer reasons to join unions, and
in some cases saw reasons not to. Union jobs were increasingly associated with plant closings and job
insecurity.
Table-6: NUMBER OF STRIKES & LOCKOUTS
YEAR PUBLIC PRIVATE STRIKE LOCKOUT TOTAL
SECTOR SECTOR
1989 615 1171 1397 389 1786
1990 628 1197 1459 366 1825
1991 653 1157 1278 532 1810
1992 617 1097 1011 703 1714
1993 359 1034 914 479 1393
1994 316 885 808 393 1201

11. 11
1995 343 723 732 334 1066
1996 381 785 763 403 1166
1997 448 857 793 512 1305
1998 283 814 665 432 1097
1999(P) 165 762 540 387 927
2000(P) 91 565 350 306 656
SOURCE: Annual Reports-1998-99 & 2000-2001, M.O.L.
Though technological change, product innovation and customer orientation had not occupied a place in the
priority list of the employer or the government in India for many decades, international competition and
shrinking export market in the late 1980s to early 1990s began to make a difference. Successive
governments, including those political parties, which opposed liberalisation, have come to champion the
cause of technological up-gradation and economic reforms. No political party except the left (CPI/CPM) is
seen to take a strong position against technological change and economic reforms. The traditional alliance
and nexus between political parties and the affiliated trade unions appear to be growing weak. As U.M.
Purohit of BMS put it, "Earlier, when people were disenchanted with one government's policies, they could
teach a lesson to that political party by voting it out of power in the next elections. Now what happens is
that governments change but same economic policies remain in force" (Labour-2000, On-line Conference,
September 22, 1999). A related and important reason is the growing public sentiments and media
campaign against militant unionism, which display little concern for the customer or the hapless citizen. It
is perhaps most ironic but true that the striking doctor will condemn the militant banking union, while the
banking employee will have no sympathy for the vocal university teacher.
Table-7: WORKERS INVOLVED IN STRIKES & LOCKOUTS (000)
YEAR PUBLIC PRIVATE STRIKE LOCKOUT TOTAL
SECTOR SECTOR
1989 918 446 1158 206 1364
1990 884 424 1162 146 1308
1991 788 554 872 470 1342
1992 566 686 767 485 1252
1993 565 389 672 282 954
1994 523 323 626 220 846
1995 725 264 683 307 990
1996 606 333 609 331 939
1997 618 363 637 344 981
1998 901 388 801 488 1289
1999(P) 553 758 1099 212 1311
2000(P) 466 223 385 305 690
SOURCE: Annual Reports-1998-99 & 2000-2001, M.O.L.
Employers and management have adopted a two-pronged strategy to bring the worker closer to the
organisation, while keeping the union away. Employers in recent years in India have shifted operations
from highly unionised regions, such as Kerala and West Bengal to less militant regions, or to free trade
zones like the EPZ. Use of sophisticated technologies has not only reduced the size of the organisation, but
has also changed the type of worker employed. The profile of the labour is gradually changing from the
uneducated, unskilled or semi-skilled to a multi-skilled, young, ambitious and career-minded worker. He is
more interested in safeguarding his own interests than becoming an active unionist to fight for larger
interests. Both in the UK and the US studies have shown that the young, educated worker engaged in
smaller organisations and using high technologies, earning comparatively higher wages, is less inclined

12. 12
towards trade unions (Hundley 1988; Disney, 1990; Ben-Israel & Fisher, 1994). Findings from Central and
Eastern Europe (CEE) also indicate that union membership had halved during early capitalist
transformation. According to Pollert (1999), trade unions have encountered structural, political and
ideological problems in CEE. Decline of trade unions has been attributed to worker apathy, anti-union
employers, and the contraction of large state enterprises. Growth of small private firms and services along
with self-employment, semi-informal micro-companies have further contributed to de-unionisation. Union
presence is weaker among women who are concentrated in services and in small and medium-sized
enterprises, among white-collar workers, and among younger workers.
Like elsewhere in the world, companies in India too have gradually shifted attention to develop innovative
human resource policies, offering workers the kind of benefits traditionally unions have fought for, be it
through welfare schemes, participatory forum or empowerment endeavours. In December 1996 the workers
and the management at Eicher Tractors Plant (Alwar), a 9001 company, jointly decided to give up the
traditional bargaining for wage increase and settled for annual pay revision on the basis of productivity and
performance. The management also introduced other innovative schemes including the following:
• Introduction of asset building loan up-to RS. 25,000/=. in every four years for personal acquisitions
such as a house;
• Hospitalisation scheme for those not covered under ESI;
• Kin’s marriage gift upto Rs.3501/= (one time);
• Additional Earned Leave bonus (for every 12 EL two more days of EL is given as bonus; for 13 EL-4
additional EL as bonus; for 14-15 another five additional EL given as bonus) in order to reduce
absenteeism;
• Recognition for outstanding contribution (RS. 250-5000 given quarterly and yearly);
• Small Group Activity (SGA) teams consisting managers, supervisors and workers for solving various
problems.
At least some managers have undergone a change in their attitude towards workers and have come to
realise that reduction of excess manpower alone will not bring in competitiveness. Along with
technological and organisational changes, human resource management strategies are being changed.
Employers realise that it is futile to fight the battle against labour in the domestic market while facing
competition in the international economic market. The management has come to realise that reduction of
excess manpower alone will not bring in competitiveness, enhanced productivity, quality and flexibility.
Along with technological and organisational changes, human resource management strategies are being
changed. Workers are no longer seen as liabilities, but key resources, which are to be carefully nurtured
and constantly developed. A healthy work culture can be created through proactive human resource policies
and preventive measures can reduce conflict at the work place. The slogan of the 1980s -productivity
through people- has caught the attention of the 1990s' manager. Efforts are being made to integrate human
resource management and industrial relations policies with the larger corporate goals and the mission of the
organisation. Personnel management is no more seen as merely concerned with procedural matters of
recruitment and salary administration, and industrial relations merely as a fire fighting system, but are
viewed and restructured as integral parts of a holistic human resource management strategy evolved at the
highest level of the management. The thrust of the new human resources policy is to attract, retain and
develop human resources on a continuous basis to attain corporate excellence and maintain organisation's
competitiveness. Professional skills are being employed to revamp the organisation to create a new work
culture, which is inculcated with the values of quality, cost and customer satisfaction. Organisations are
being restructured into flat and lean structures with reduced hierarchies and faster decision making
processes.
Decentralised decision-making, developing teamwork and improving communication are occupying the
attention of the top management today. Organisations are making focused efforts to understand the worker
and his union. Managements have realised the importance of creating learning organisations through
training and re-training the employees. Managers are also learning to relate to workers by understanding
and empathising with the workers. The importance of developing people management skills to
communicate more effectively with the subordinate employees and their unions are receiving better
attention in Indian organisations today. A positively oriented professional approach is considered important

13. 13
by the modern manager to manage employee grievances and to arrive at and implement negotiated
collective settlements. In a large engineering concern, Larsen & Toubro, the management engaged in a
long drawn negotiation with the union to initiate TQM, Kaizen and Kanban. A 10 per cent increase in
productivity was achieved by reducing the working hours from 47 to 45 hours per week and increasing
wages which amounted to Rs.5 crores per year. The employees and unions are not opposed to change per
se; what they are opposed to is the manner in which change is often unilaterally introduced by the
management.
Modern management systems such as TQM, Kaizen and Kanban will be effective to achieve better quality,
productivity and flexibility provided the employees are fully involved in the process. As Ray Marshalls
(1992) has suggested, high-performance systems have high degree of employee involvement in what would
have been considered "management" functions in the traditional mass production systems. Moreover,
quality, productivity, and flexibility are enhanced when production decisions are made as close to the point
of production as possible. Even in a traditionally labour militant state like West Bengal, the left-controlled
CITU welcomed "participatory management". According to the CITU general secretary of the state, If the
workers are involved in the technological upgradation process, their resistance to modernisation will stop
(Business Standard, Dec.22, 1994).
Agenda for the Unions
Unions will have to come to terms with the changing occupational structure and employee profile engaged
in a new work environment. The union will need to examine the workers' indirect economic, psychological
and social needs and find ways to fulfil them. Dissatisfied with the politicised and centralised structure of
the national trade union centres, workers are keener to develop enterprise unions. Clearly, decentralised
unions and enterprise bargaining are seen as more market friendly in most part of the world. According to
Pollert (1999), in the CEE the general trend towards decentralisation in about 90 percent of union's
representatives reporting local basic pay agreements. In a study of how unions in the Manufacturing,
Science and Finance union (MSF), the general workers' union (GMB), and the engineering and electrical
union (AEEU) respond to industrial restructuring in the South West of England, Upchurch et al (2000)
found that unions have been on the defensive. According to the authors, individual cases member
grievance are abundant but a collective response to address the 'new politics of production' was as yet
largely absent. They have argued that the control of the labour process has passed in recent times into the
hands of management, while the work has become harder and with it employee discontent has increased as
well. A more interesting or disturbing observation is that meanwhile the ability of collectively organises
over pay has been severely weakened, as pay has become increasingly individualised and based on
performance. In fact, many steps such as performance based pay or flexible deployment of workers, which
are being initiated by management, may be seen to question the very existence of unions.
Unions are examining the implications of work place changes. Some of the unions have even begun to talk
about a cultural change in their philosophy by shifting away from a defensive strategy towards alternate
approaches based on research and creative thinking. Structural and attitudinal changes of serious
dimensions are evident within the philosophy and strategies of unions in dealing with the new realities of
globalisation and industrial restructuring in India. Employees often prefer enterprise unions, which focus
on localised bargaining, rather than the traditional, politicised and centrally controlled unions. In the new
context of reforms and restructuring at individual enterprise levels, workers find less relevance for their
unions being driven by guidelines issued by national centres, which are more often than not politically
motivated. The new and younger worker and his union prefer to concentrate on specific issues and
problems reflecting his own immediate work environment, including restructuring. For example, the union
in TELCO signed an agreement in April 1992, which recognised the management's right to re-deploy and
retrain to increase productivity, provided there was no retrenchment. In fact, there is a new fear among the
union leaders that workers may revolt against them if they did not protect his immediate interests. This is
precisely what happened with Kanoria Jute Mills near Calcutta, where the workers discarded the trade
unions and put up a new banner meant to take care of the workers' interest. The workers in this case have
dismissed directives of the union high command and tried to resume work in the mills (Mamkoottam,
1994).

14. 14
The workers, in general, have always been suspicious of strike as a useful weapon; but now they are
beginning to realise their ability to assert their will against those leaders who do not keep their interest in
mind. There are indications that central trade unions are losing their ground, and that independent
enterprise unions would be the future. Substantial fall in the membership of unions which are affiliated to
national centres of trade unions are being reported while more and more unions prefer an independent
status. Another interesting development of the recent years has been the acceptance, in principle at least,
by leaders of all the national union centres that the multiplicity of unions has considerably reduced their
bargaining power. In fact, on several occasions during the post liberalised period, all the different unions
have come together on a common agenda to protest against the government taking steps towards economic
liberalisation and industrial restructuring, and some unions have initiated serious discussion to evolve a
unified front. However, the tone and tenacity of the unions are on the decline.
In order to be relevant and meaningful in the new context, the unions may need to shift their exclusive
focus from traditional wage bargaining, which is characterised by quantitative post facto conflictual
bargaining to an ante facto (proactive) bargaining and enlarge the union expertise into technological and
organisational matters. A new co-operative bargaining model based on continuous problem solving
approach rather than the conflict model may be required in the context of the new technology. As in the
case of Scandinavian countries, much of the union activity in several parts of the world are already
concerned with developing expertise within the union to understand technological developments, and their
implications on health, environment, employee skills and their education and re-training.
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