The WSJ has a sobering article on the state of the manufacturing & labor relations in India -

COIMBATORE, India -- This ancient city has turned itself in recent years into a manufacturing dynamo emblematic of India's economic rebirth. But a homicide case playing out in an auto-parts factory here is raising concerns about whether the Indian industrial miracle is hitting a wall of industrial unrest.

"We can't be a capitalist country that has socialist labor laws"Pricol Ltd., which makes instrument panels for the likes of Toyota Motor Corp. and General Motors Co., was rocked in late September when workers burst into the office of Roy George, its 46-year-old human-resources boss. Angry over a wage freeze, they carried iron rods, witnesses say, and left Mr. George in a pool of blood. Police arrested 50 union members in connection with his death, their lawyer says. Charges haven't been filed.

The underlying question raised by this story is the size, shape & importance of the manufacturing sector for India's long term economic development...

Historically, nearly all first world nations initially went through a period where manufacturing formed the bulk of their employment. In the US, for ex, manufacturing has shrunk from ~40% down to 10% of the employed but, that's still roughly ~15-20M people today - a figure which has held remarkably constant for the past 40 yrs. China, of course has charted a league of its own and currently employs whopping 80-100M in manufacturing.

India, by contrast, is hoping to pioneer a development path led by the service sector. The potential problem with this is that while gleaming InfoTech giants like Wipro or Infosys make fantastic national champions and headline grabbers, they ultimately employ a very small percentage of the arguably most elite workers in the country (between 1M directly to 5M indirectly ; for comparison, the US IT industry was roughly 7M people in 2000). Unfortunately, the median individual in the 3rd world is usually far from the education / skill level necessary for thes sorts of jobs. For these folks, a factory job that pays a regular wage is both more attainable and, due to the large spill over effects, creates a broader national economy multiplier. The problem, as the WSJ notes, is that the Indian economy employs a comparatively paltry 1 million individuals in the "Organized Manufacturing Sector" and dropping -

Part of the reason for such poor manufacturing sector performance are India's notorious labor unions -

Battle lines are being drawn in labor actions across India. Factory managers, amid the global economic downturn, want to pare labor costs and remove defiant workers. Unions are attempting to stop them, with slowdowns and strikes that have led at times to bloodshed.

The disputes are fueled by the discontent of workers, many of whom say they haven't partaken of the past decade's prosperity. Their passions are being whipped up, companies say, by labor leaders who want to add members to their unions and win votes for left-leaning political parties. Adding to the tensions are the country's decades-old labor codes, which workers and companies alike say require an overhaul.

"We can't be a capitalist country that has socialist labor laws," says Jayant Davar, president of the Automotive Component Manufacturers Association of India.

And the unions in part, draw their strength from License-Raj-style laws which introduce a "political loop" in an otherwise highly operational business decision about flexible labor requirements -

Indian Manufacturing Workers

...The country's Industrial Disputes Act of 1947 requires companies to gain government permission before dismissing workers... Manufacturers have long complained that it can take years to dismiss their permanent employees, leading to bloated work forces and hampering companies' ability to respond quickly to changing business conditions.

A separate NYT piece provides further details on this modern day License Raj -

Current laws still say that any company employing more than 100 workers cannot fire people without government permission, and the labor commissioner in the government has to be notified of every single person working on the night shift. In addition, no worker can be made to work beyond 75 hours of overtime a quarter.

Combined with militant politics, and an increasingly interconnected global economy, the results have started spilling over into other countries ; the WSJ piece provides some examples -

• this year, labor actions have hit manufacturers from Indian automaker Mahindra & Mahindra Ltd. to Finland's Nokia Corp. and Swiss food giant Nestle SA.
• Workers at a unit of Korea's Hyundai Motor Co. staged sit-ins in April and July, demanding recognition of an outside union and reinstatement of suspended workers.
• In September, workers at a unit of Japan's Honda Motor Co. tried to prevent a trial of a new assembly line by threatening engineers and executives with shock-absorbers and motorcycle pieces, according to a court documents.
• Last year, the chief executive of Graziano Trasmissioni India Pvt. Ltd., a manufacturing unit of Swiss high-tech group OC Oerlikon Corp., was beaten to death by workers who had been suspended at a plant outside New Delhi.
• A strike that started in late September at Indian supplier Rico Auto Industries Ltd. left Ford Motor Co. without transmission parts, forcing it to halt production temporarily at an Ontario plant that makes Edge sport-utility vehicles and at a Chicago plant that builds Taurus sedans....The six-week Rico strike spurred GM to idle an SUV-production facility in Delta Township, Mich., for a week and cut one shift for a second week. GM also cut a shift at a transmission factory in Warren, Mich., said a person familiar with the matter.

Needless to say, if I were an MNC thinking about investing in India manufacturing capacity...this would certainly make me think twice.

vinod at 12:20 PM in Economics

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There has been somewhat of an uproar in Indian politics this week, after the release of an extensive government report on the 1992 destruction of the Babri Masjid, the “Liberhan” report. According to news coverage in the Indian media, the main findings of the report are 1) the destruction of the Masjid was a planned, rather than spontaneous event, and 2) the leaders of the BJP at the time were involved in the planning of the event. One of the controversial elements in the publishing of the report at this time came from the fact that it was leaked to the press before being officially published, leading the government to “table” the report in Parliament sooner than it ordinarily might have done.

The full report is here, for anyone who has an interest in reading it. (I would be curious to hear any comments from readers who’ve looked at some of it closely.)

Meanwhile, The Hindu has an editorial focusing on the leak, and how in effect it is a good thing for Indian democracy that this report finally sees the light of day:

But then the leak occurred because the government sat on the findings of an exercise that took more than 16 years to discover and establish “the sequence of events leading, and all facts and circumstances relating” to the demolition of the Babri Masjid by communal vandals on December 6, 1992. The habit of withholding from Parliament and the public the findings of expensive Commissions of Inquiry, which lack teeth in any case, until ‘action taken’ reports are readied by a slow-moving bureaucracy is indefensible. It devalues the whole exercise, aggravates the already indefensible delays, and serves up plenty of opportunity for motivated campaigns, speculation, and leaks. The news media in the present case, The Indian Express and NDTV 24x7, certainly cannot be faulted for doing their best to penetrate the veil of secrecy and get the essential findings out. This role is demonstrably in the cause of truth-discovery, and serious journalists and editors are not going to be deterred by sanctimonious cries of ‘breach of parliamentary privilege.’link)

In effect, the report is what everyone already knew. One can still argue, as the The Hindu does, that it’s important to have a formal recognition of the history, so people can finally begin to move on. The question isn’t why this report was leaked to the press now; the question is, why wasn’t it prepared and released 10 years ago or more?

amardeep at 10:30 AM in

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I cannot claim credit for the eye-rollingly bad title. It appears that this is the media’s favorite play on words for this occasion. They really get a [spicy] kick out of their cleverness. The Beltway is all atwitter today in preparation for the state dinner in honor of Indian Prime Minister Manmohan Singh’s visit. Many have quipped, and I agree, that it looks like a big Indian wedding tent has been built on the White House lawn. Like out of Monsoon Wedding:

The Chef: Marcus Samuelsson of NYC’s Aquavit

The Menu: Top Secret…for now. Samuelsson reportedly did not create the menu, he is just cooking it. Manmohan is vegetarian though so expect there to be several vegetarian offerings. You can follow the latest on the menu @ObamaFoodorama

The Guest List: ~400 titans of the Beltway and Hollywood, including Oprah, AR Rahman, Bobby Jindal, Nancy Pelosi, HRC sans WJC, and…Deepak Chopra. Thus far no sign of Rajan Zed on the invite list. God I hope not. And what about Padma Lakshmi. Who, if not her, will opine on the quality of the food? Er, as long as there are no hamburgers on the menu, I mean.

So what is a state dinner all about anyways? Ken Adelman at WaPo explains:

State dinners are less “symbolic signaling” than “political greasing.” Sure, they indicate who is important - those invited are on the A-List of Washington’s socialite “plum book” - and what is important - cellist Pablo Casals for the Kennedys and Country & Western music for the Bushes.

Beyond that, however, relationships are heightened and debts are deepened by State Dinner invitations. That’s more critical, since personal relationships are central to achieving results in politics, as in most endeavors of life. House Speaker Sam Rayburn once quipped that anyone who couldn’t size up another person in five minutes “doesn’t belong in my profession.” That clueless fellow probably doesn’t belong in many other professions, either. [link]

Politico.com has a convenient live feed set up](http://www.politico.com/livestream/) for those that want to follow.

Things have not been all that smooth since Obama took office. Indians love getting attention and there hasn’t been enough attention to go around while the U.S. has been dealing with so many other problems:

Just last week, Indians took great offense at two speeches Obama made on his trip to Japan, China and Korea. In Tokyo, Obama gave a speech on the importance of Asia without once mentioning India. And in a joint statement with Chinese Premier Hu Jintao, Indians saw signs of Obama encouraging a larger Chinese role in mediating relations between historical rivals India and Pakistan.

While perhaps inadvertent, such slights suggest “that nobody in the Obama administration is standing up now for India,” said C. Raja Mohan, a professor of South Asian studies currently on a fellowship at the Library of Congress. [link]

If there are any SM readers invited to this (I am sure there must be at least one) we would appreciate you feeding us little tidbits (anonymous is fine). Surely there will be some drama!

The White House is eager to show that, despite what some Indians see as a lack of attention during Obama’s first 10 months, it values Singh’s country as a key partner in dealing with extremists in South Asia, in settling international trade and global warming pacts and in steering the world economy out of turmoil…

Singh, in comments Monday, expressed optimism about the future of the U.S.-Indian relationship, calling for a “strategic partnership of global dimensions.”

The White House acknowledges that the state visit is meant to signal to India the value the administration places on the growing economic and political power. White House spokesman Robert Gibbs told reporters that Singh’s visit is “a show of respect.” [link]

I request that our readers help me out. If over the next few days you see a particularly interesting photo taken during Prime Minister Singh’s visit, please use the tip line to let me know. The White House’s Flickr feed often contains gems:

abhi at 9:10 AM in Arts and Entertainment, Food, Politics

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