Austerity, neoliberalism, and the Indian working class

In recent years, the Indian economy has been the darling of pundits commenting on international economic outlooks. During the quarter from April to June of 2016, India recorded a 7.1 percent increase in GDP—down from 7.8 percent last year, but still impressive enough to be at the top of the world’s economies. Much of this has been attributed to the pro-business policies of Prime Minister Narendra Modi, and his willingness to push through a number of changes to the laws regulating the Indian economy. At the same time, India finds itself in the midst of a crisis.

First of all, almost no one believes the Indian government’s figures about growth. They are now based on market-price calculations rather than on production figures, which most analysts agree are widely inflated.1 Second, whatever growth there has been has depended almost entirely on state expenditures, up some 18 percent over last year. Third, actual production rates have ground to a halt: railway freight, one of the best indices of how much is being produced and traded in the country, declined 9 percent this year. Fourth, the Bombay Stock Exchange took a massive dive in August 2015, as foreign investors withdrew upwards of $2.5 billion from several funds.2 This crisis renewed calls for economic reforms, especially labor laws, which are seen as overly restrictive for businesses. Finally, the public banks, which control some 70 percent of the country’s investments, are known to sit on a glut of bad loans. The combination of these factors produces an unsustainable situation.

At the same time, there has been a debate on the left about where this growth has come from. Since an estimated 80 to 90 percent of the Indian workforce labors in the informal sector of the economy, it has led many to conclude that the driving engines of growth in India are not based on exploitation at the point of production but rather on extractive industries and financialization, or what in other contexts has been called accumulation by dispossession. While these critics have been quite right to focus on the egregious actions of the Indian state against tribal populations (who live on large mineral reserves), the creation of Special Economic Zones, and the privatization of state-owned industries, they have largely ignored the way that the majority of the economy still depends on the exploitation of labor. In fact, the only way to understand the history of neoliberalism in India and the current crisis that Indian capital faces is to understand the last forty years as a systematic attempt to reorganize the labor process to benefit Indian capital.

The decline of labor
The current crisis and the bourgeoisie’s solutions stem from the ways that neoliberalism was implemented in India. It was not merely policy changes and a liberalization of trade; the implementation of neoliberalism required the crushing of India’s once impressively powerful labor unions. In fact, it is only by comparing the unions now to the power of labor in an earlier incarnation that one can see just how far labor has been pushed back onto its heels. The years which ushered in neoliberalism were also the years when labor was handily defeated and defanged by ruling classes everywhere, which makes it difficult to accept the argument of some left analysts that the expansion of extractive industries is more important than a weaker union movement for the restoration of profit rates.

The years between 1974 and 1984 were probably the height of the combativity of the Indian working class, but this period also saw the first decisive victory for the capitalist class, a victory that it has held onto ever since. The global economic downturn of the early 1970s had ripple effects in the Indian economy. Stagnating wages, inflation, and unemployment all made the Indian working class desperate. Beginning with the strike wave of 1973, when there were more than 3,370 industrial disputes, continuing until 1984, when the Bombay textile strike was finally defeated, the Indian working class was able to demonstrate its extraordinary social power.

Nevertheless, the unions were defeated, primarily by the government of Indira Gandhi, but also by communalism and the politics of Hindu chauvinism (in the case of Maharashtra). Nor can the totally bankrupt strategies of the official left unions be overlooked as a contributor to the defeats. This period ushered in the process that we today call neoliberalism. In fact, without the systematic repression of labor and the rewriting of important labor laws in this period, capital would not have been able to massively restructure the economy. Indian capital relied on the state to implement martial law in the 1970s because it had such substantial class enemies and a much stronger labor force. Defanging most of the unions by law meant that the state could legally repress them, thus tipping the balance in capital’s favor.

The great railway strike
The nineteen-day long railway strike of 1974 brought the entire nation to a standstill as some 1.7 million workers downed tools in the largest industry-wide strike in the nation’s history. It was provoked by a decade of organizing inside the railway industry, in which rank-and-file workers demanded raises, job protections, and challenged horrific working conditions.

One of the legacies of colonialism was the interpretation that the railroad companies applied to worker’s “shifts.” “Historically,” writes one analysis of the strike, “many of the British-run rail networks had termed the work of the loco staff as ‘continuous,’ implying that workers would have to remain at work as long as the train ran on its trip, often for several days at a stretch especially on the goods trains. Independence did not change this. The spread of diesel engines and the consequent intensification of work in the Indian Railways since the 1960s created much resentment among the workers.”3

The railway workers were represented at the time by two unions: the pro-Congress National Federation of Indian Railwaymen (NFIR) and the Lohiaite socialist-inspired All India Railwaymen’s Federation (AIRF). The two unions had already become thoroughly bureaucratized and bought off by the government by the mid-1960s, and saw their primary task as controlling the anger of railway workers rather than addressing their grievances. So when anger built up in the rank and file, they had to organize themselves, replace their union leaders, and set up independent unions. There were dozens of smaller unions up and down the country that had been engaging in local actions in the years leading up to 1974.

In February 1974, the unions organized the National Coordinating Committee for Railwaymen’s Struggle (NCRRS), which brought all of the unions, the political opposition, and the main trade union federations together in order to prepare for the strike. The government of India refused to budge, and was preparing for its own crackdown. On May 2, the government arrested the leader of the impending strike, George Fernandes, without any warning. In response, the workers immediately went out—not waiting until May 8 as planned. The entire nation was brought to a standstill as 1.7 million railway workers dropped their tools. In Bombay, electricity and transport workers as well as taxi drivers joined the protests. In Gaya, Bihar, striking workers and their families squatted on the tracks. More than 10,000 workers of the Integral Coach Factory in Perambur, Tamil Nadu, marched to the Southern Railway headquarters in Chennai to express their solidarity with the striking workers.

This display of solidarity, while important, was short of what was necessary to defeat the repression that was coming. What would have been needed was a full understanding of what the Indira Gandhi government represented, something the Communist Party of India did not possess. In fact, the CPI not only joined the government and supported martial law, it also instructed its affiliated unions not to strike. Two things ultimately broke this strike even before the state was able to use its full force: divisions in the working class about how and when to offer solidarity; and the Left’s confusion about whose side Indira Gandhi was on. The realpolitik of the various official left groups has always dominated their class solidarity instincts, and this has allowed the state and capital to divide the working class at key moments of struggle.

As glorious as the strike was, the government was prepared to be brutal and vicious. More than 50,000 workers were arrested, along with the top leadership of the strike. Another 17,000 workers were fired from their jobs. The railway colonies were practically under siege. For instance, in Mughalsarai in Uttar Pradesh, which has one of the biggest railway yards in the world, women were assaulted and even children were attacked. The Border Security Force (BSF), the Central Reserve Police Force (CRPF), and the Provincial Armed Constabulary were deployed in the townships where railway workers lived. There were also instances of workers being forced by terror to work. Instances of train drivers being shackled in their cabins were reported at the height of the strike.4

It took the full force of the state to crush the strike—but it hadn’t defeated labor yet. Indira Gandhi’s imposition of the emergency laws in 1975 allowed her to make some important changes to the Indian constitution and remove several civil liberties, implement repressive censorship and security laws, as well as eliminate the right to strike, but still labor and other forces protested. It was, in fact, the movement of the left-wing activist Jayaprakash Narayan (also called the “Bihar movement”) that ultimately ended Indira Gandhi’s military rule.

Bombay textile strike
In this period of restructuring, the Bombay textile strike of 1982–84 was the last real gasp of a fighting labor movement in India. The restructuring of capital begun in the 1970s accelerated. Already the state was offering protections to smaller firms so that they could compete in the domestic markets (these laws were initially designed to protect handlooms), giving the smaller power loom workshops an advantage over the large industrial mills, which were not only taxed and regulated but also were required to recognize unions.

Labor laws in India before 1975 protected workers in workplaces with more than one hundred employees, allowing them to have access to unions and some kind of regulatory enforcement of their rights. But with the growth of power looms, the shift in the marketplace away from cotton to synthetic materials, the aging infrastructure of the industrial mills, and the bosses’ contempt of the unions, the owners sought to abandon the mills altogether and shift over to the smaller workshops. The Ambani family’s Reliance Industry made its seed money in making just this shift.5 When the unions struck in 1982, they were protesting working conditions, stagnating wages, and the lack of bonuses.

The textile mills had once been the strongholds of the Communist Party in Maharashtra, but they were replaced after independence by the Congress-Party affiliated Rashtriya Mill Mazdoor Sangh, which had sole bargaining power with the textile mills. The RMMS refused to challenge the bosses when wage increases tied to bonuses based on profits were denied. (Textile workers were paid about thirty rupees a month with a dearness allowance of another fifty rupees, while the official living wage was pegged at 165 rupees.) The rank and file was accordingly forced to organize around the state-backed union leadership.

This time, however, the strike faced two disadvantages. First, as capital was looking to get out of the mills anyway, the strike became the pretext for asking the state to intervene and solve the conflict for the capitalists. The state helped break the strike by providing legal cover for the mill owners as they transferred their assets out of the mills. Bosses were allowed to declare bankruptcy (often right after they had taken out loans from the banks), and in many instances were able to either purchase power loom workshops or buy back the mills and turn them into real estate.

Secondly, part of the way that the Communists had organized throughout the 1960s was to lead campaigns around Marathi nationalism, including the campaign for a separate state for Marathi speakers. Bal Thackeray, founder of the Shiv Sena, was centrally involved in the strike activities of 1982–84. When the strike failed, the Shiv Sena was able to scapegoat workers from other parts of India as responsible for the economic problems the workers faced.6 The real lesson from this strike was ignored by the unions: The state was not a reliable ally in the fight against capital. Not only did the state make it possible for big capital to escape with its assets intact, it also allowed the transfer of control of the industry to smaller firms without any of the regulatory oversight.

Political, not structural, defeats for labor
These two historic strikes were key defeats for the Indian working class, and arguably, the class has never really recovered from them (in much the same way that American labor has never really been the same since President Reagan fired the air-traffic controllers in the PATCO strike). But the reasons that they failed were political rather than structural.7 At each moment it would have been theoretically possible for the Communist parties in India to resist very differently than they did, and their refusal to lead the working class with slogans and the organization of solidarity allowed the class to be decimated. This historic defeat is what inaugurated the four main problems that the Indian working class faces today: draconian labor laws; right-wing Hindu and Marathi chauvinism; the over-reliance on the state to settle industrial disputes rather than preparing to fight until victory; and finally, the lack of any real solidarity between the more than ten major trade union federations. It is impossible to understand neoliberalism without understanding these political failures. And it is also important to understand these failures in order to counter those who diminish the importance of the working class by mistaking conjunctural realities for structural ones.

Labor reforms
To make matters worse, the current regime in charge of the Indian state is asking for even more from the Indian working class. Prime Minister Narendra Modi came to power promising a massive overhaul of India’s regulatory regime, with labor laws in particular in his crosshairs. Modi’s “Make in India” plan hopes to bring foreign investment to India, but India’s labor laws are normally cited as the reason that manufacturers don’t want to come to India. At issue is Modi’s attempt to make it easier for employers to lay off their workers in order to pursue his plans to bring more manufacturing to India. The Industrial Disputes Act of 1947 requires employers to give two-months notice and seek government approval before laying-off a worker in any workplace that has more than one hundred workers. Modi wants to raise that limit to 300, thereby making it more attractive to invest in larger enterprises and less risky should they fail—currently, 85 percent of India’s businesses employ fifty people or less.

The biggest target that the Modi government has its eyes set on are the flimsy labor laws that offer the Indian working class the barest of protections. In addition to laws that protect workers at large workplaces from being laid off without government notice, Modi’s plans include decertification of unions, hiring and firing at will, and even going after some of workers’ basic rights to organize. In Rajasthan, for instance, the BJP government has just eliminated the protections that workers had under the Industrial Disputes Act (which protects workers from being laid off without compensation), the Contract Labor Act (which protects casual labor from being exploited), and the Factories Act (which governs workplace safety and regulation). The state of Madhya Pradesh followed suit not long after. Now there is talk of a large overhaul of all of the labor laws at the federal level, which would completely undercut the kinds of protections that unions have relied on in order to defend even the barest of gains. It is important to remember that a mere 7 percent of the Indian working class is unionized.

The rollback of workers’ rights represents the bourgeoisie’s solution to their crisis of profitability, as well as the ordinary operation of capitalism when it smells blood in the water. One reason these laws are necessary is because of the high cost of doing business in large factories, and the industrial classes want to move towards larger factories to compete internationally. Currently, manufacturing is dominated by the informal sector in India—84 percent of manufacturers rely on workplaces of fifty people or fewer.  Modi’s plans match the Organization of Employers recommendations to overhaul the labor laws:

  • India is perhaps the only country, where the requirement of strike notice, barring public utility service, is totally lacking. Therefore, Section 23 of the Industrial Disputes Act, 1947 [is to] be suitably amended to provide at least a compulsory three weeks strike notice. . . . To deter illegal strikes, it can be proposed to provide for 8 day’s deduction of wages for each day of illegal strikes.
  • Provision for recognizing a Bargaining Agent under the Trade Unions Act, 1926 may be introduced to strengthen the collective bargaining machinery. A union with 51 percent membership should be recognized as the Sole Bargaining Agent. In cases where no single union has 51 percent, the top 2–3 unions with more than 25 percent membership may come together to form Joint Bargaining Councils. A union with less than 25 percent membership should not have a right to challenge a collective agreement nor raise a collective dispute.
  • The number of outsiders in the Trade Union Executive should be restricted to a maximum of two persons as against 50 percent in the legislation and out of the two top positions of “President” and “General Secretary,” at least one post should be held by the internal employee.8

In part, the reason that the bourgeoisie is so interested in overhauling the labor laws in India is because they are the main weapons of the major trade union federations to settle disputes with management. As a result, almost all trade union activity in the major unions is geared towards electoral politics and forming coalitions with other parties rather than shop-floor organizing. Now that the BJP has won a handy majority, the emptiness of that strategy stands revealed, just as does the atrophying of labor’s muscles throughout India. While there are slight signs of hope in the new data on strike figures, even here there is weakness, because the balance sheet reflects the turnout of the massive symbolic one-day actions that the unions have called regularly since the National Democratic Alliance came to power and not sustained struggles to gain a share of profits.

Year Strikes Days Lost Lockouts Days Lost Total Lost
2000 426 11,960,000 345 16,800,800  
2002 295 9,664,527 284 16,921,382  
2003 255 3,205,950 297 27,049,961  
2004 236 4,828,737 241 19,037,630  
2005 227 10,800,686 229 18,864,313  
2006 243 3,160,000 192 10,600,000  
2007 210 15,055,713 179 12,111,039  
2008         17,434,000
20099 167 8,075,046 178 9,547,009 13,365,000
2010 199   172   18,068,000
2011 179   191   14,483,013
2012 260   179   12,727,973
2013 178   20   3,654,361
2014 88   16   18,232,773

10 Source: “Industrial Disputes,” Labor Bureau, Government of India, at

The 2015 strike
The unions that have retained some combativity—auto, airlines, nursing, domestic labor—have continued to grow, but even so, the picture continues to look tough for labor. But on September 2, 2015, ten of the twelve major national trade union federations called a massive one-day strike in response to a breakdown in negotiations with the central government over economic reforms and minimum wages. Media estimates of participation in the strike were generally inflated, but it would not be an exaggeration to say that millions of workers participated. ASSOCHAM, the Indian chamber of commerce, estimated that the strike cost the economy $3.7 billion dollars.

The strike was felt most acutely in the transportation, banking, and mining industries. In states like West Bengal, Kerala, and Andhra Pradesh, it massively disrupted everyday life as buses and taxis stopped running and banks were closed. The strongest attack against strikers was in West Bengal, where the ruling Trinamul Congress Party unleashed its cadres and the police. More than a 1,000 people were arrested and dozens were wounded. Television reports showed police officers dragging female activists through the streets. In the days leading up to the strike, the chief minister of West Bengal, Mamata Bannerjee, declared that she would use her power to stop any disruption to the economy.

The strike was the result of a breakdown in negotiations between the main trade union federations and the central government. The main issues related to differences over a new minimum wage (unions were asking for 15,000 rupees and the center countered with 6,330), universal social security, a reduction in layoffs, a halt to price rises in key consumer goods, and improved enforcement of labor laws. But there was also a push back against some of the new legislation that Modi was trying to implement. The unions objected to the disinvestment in public sector undertakings (PSUs), the unwillingness to recognize unions in a timely fashion, the introduction of foreign direct investment into railways and defense, and the lack of any limits to the contract system (casualization).

More serious threats
But the most serious threats came through amendments to India’s labor laws, many of which the unions rely on for basic protection for their workers, especially limits to how employers lay off their workers. These are all reforms that the capitalists in India have been clamoring for, citing them as the primary reasons that they are unwilling to invest in large enterprises in India. This is all the more worrisome given that Indians themselves have been willing to overlook the genocidal policies of their country’s current prime minister in exchange for 7–8 percent growth rates. In fact, India’s economic success has allowed its rulers to get away with murder—literally.

But had the analysts bothered to look below the surface, they might have seen just how unstable the Indian economy actually is. The economic data only tell part of the picture, not the least because the data are completely jerry-rigged. India’s growth rates this year miraculously jumped from 4 to 7 percent when the Central Statistics Office announced it would be recalculating how growth was to be measured—switching from GDP to gross value added.11 Simply lowering the poverty line similarly halved India’s poverty rate. The World Bank routinely assesses poverty as earning less than two dollars a day, but India now counts urban poverty as thirty-three rupees a day (fifty-five cents a day) and rural poverty as twenty-seven rupees (forty-five cents a day). This has remarkably reduced poverty in India from almost 50 percent to 30 percent without materially changing anything.

But the story gets even worse when you look at the rest of the official figures. These figures are just for people living in abject poverty in India. Slightly better are those that fall under the Empowerment Line, who earn 50 percent more than the abject poor or 75 cents a day. The number in this group rises to 56 percent, a whopping 680 million people. And if you look at what the World Bank considers to be vulnerable sections of the population—those who still have trouble meeting basic needs—you add another 413 million people to the mix. That’s close to one billion people living in dire straits. What that leaves are the two hundred million people that India considers to be middle class and the tiny section of the very rich.

This is not only a human crisis; investors have recently begun to withdraw from the Indian economy, citing the slow pace of labor reforms. Using other indicators than the manufactured GDP numbers, India’s economy looks troubling:

  • India’s cargo traffic—rail, air, and sea—is sluggish. Two-wheeler sales are decelerating. March’s factory-output figures showed the slowest growth in five months, though the seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index indicated a nineteenth straight month of expansion in May. Exports fell in April for the fifth month in a row.12
  • There is a crisis in profitability in India, with returns on investment shrinking (see figures below). The preferred strategy over the last thirty years has been to try to make the working class pay to restore them, which accounts in many ways for the abysmal wage rates in India. Median household purchasing parity is under three dollars a day.13
  • This has resulted in a massive concentration of wealth at the very top with few productive outlets. In June, the Boston Consulting Group issued a report that the number of Indians with ultra-high net worth (UHNW) tripled in 2014. India went from 284 people with a net worth greater than $100 million in 2013, to 928 people in 2014. That puts India in fourth place behind the US (5,201), China (1,037), and the UK (1,019). India ranks third in the world in the number of billionaires.14

It’s something of a joke that the Indian ruling class has run out of ideas about selling the economy. It used to be that the ruling class tried to say that it cared about the poor, and its election slogans stressed “bread, clothing, housing,” (roti, kapda, makan), or “electricity, roads, water” (bijli, sadak, pani), but now they’ve given up even talking about the social problems that the poor face, and instead extoll the Indian economic miracle by referring to “India Shining” (Bharat Uday). They note that the good days (acche din) have come as India pursues manufacturing as part of Narendra Modi’s “Make in India” campaign. None of this, however, hides the current crisis of profitability, which is a direct result of the fact that the Indian ruling class pursued the same policies as the rest of the world when it faced a major economic crisis in the 1970s.

Neoliberal outcomes to the defeat of labor
After a period of robust, even astronomical growth beginning in the 1990s, and continuing on into the twenty-first century, the economy is once again facing serious problems. The right wing in India and the capitalist class have used these new glitches in the economy to argue for their standard solutions—the suite of neoliberal policies: restructuring the working class, especially reducing legal protections on unions and workers; more deregulation and informalization of production; a further reduction in the regulatory regime and the scope of its laws; an end to what little social welfare continues to exist; an expansion of state-sponsored infrastructure development, but a continuation of the privatization of state-owned industries; and a greater reliance on the state to force through development against those sections of the population that might otherwise resist displacement.

Two things have happened as a result of twenty years of pursuing neoliberal policies in India that are key if we want to understand the crisis that India will be facing in the coming years. First, the entirety of the growth that has been generated in India has been on the backs of the working class, whose wages are abysmally paltry. The main target here has been unions and the laws that favor them. This is not a strategy that can continue indefinitely, and not just because it results in the immiseration of the Indian working class, but also because we know that for many of the industries global competition requires economies of scale making large workplaces still important and potentially locations for organizing workers.

Second, even as the Indian ruling class has amassed a vast fortune, it has run out of productive places in which to invest its profits. India is facing a decline in its investment-to-GDP ratio, which measures how much capital is getting reinvested as a proportion of the total output of a country. India’s investment-to-GDP ratio has fallen to below 30 percent from a high of 40 percent a decade ago.15 Most of the growth that was generated in India over the last decade depended on these high investment rates, especially the purchasing of heavy machinery and the construction of infrastructure, all of which was important for India to recover from the problems it inherited from British colonial rule. This rapid decline in investment rates is normally talked about as a result of high interest rates; however, earlier this year the Reserve Bank of India lowered interest rates, but this hasn’t solved the problem.

The investment rate is important because it shows that capital cannot reinvest profitably. Instead, capitalists would rather save their money than put it back into the economy. In comparison, China’s investment-to-GDP ratio is 47 to 50 percent.

Accumulation by dispossession?
That there has been substantial real growth over the past twenty years cannot be disputed, but there has been a debate about how those gains have been achieved. According to David Harvey, capital accumulation can no longer happen through simple reproduction but has to happen instead through what he calls accumulation by dispossession: the use of state power to acquire land, dispossess the people who live on it, and then extract the resources underneath. 16  Harvey lists all of the ways that the commons are raided by the state for the benefit of freeing up areas that allow capital to expand. This, Harvey claims, is the way that capitalists have resolved the crisis of profitability. These land disputes have also been a focus of the left and are the scene of some of the most spectacular resistance by peasants.

There are problems with this view, the most important one being that it changes both the agent and the method by which this accumulation is challenged. If Harvey is right, accumulation by dispossession can only really be challenged through social movements, organized largely by the people affected by this dispossession, but lacking in many ways the economic power possessed by labor. Moreover, several critics have noted that Harvey’s definition of accumulation by dispossession is so capacious that it even includes surplus value extraction and, therefore, becomes less useful as a tool for explaining the shift in nodes of accumulation. In India there are additional problems. First, most of the land that has been acquired through state coercion has been gifted not to capitalists from the Global North, but to Indian and other Asian firms; accumulation in the Global North, then, cannot be used to explain accumulation in the Global South. Second, mining and the extractive industries account for 2 percent of GDP as of 2014, so we can’t say that there is a shift to extractive industries as the primary source of economic development in India. Third, most of the land that is acquired in this way is actually set aside for new real estate development—land for manufacturing and new commercial campuses—and not for extraction. Most of this land is used to bypass ailing infrastructure and to provide space for the expansion of the service sector (as in the Mahindra World City outside Jaipur), or in manufacturing (as in the Noida Special Export Processing Zone). And even here, much of the economic activity is the same that would happen in any city.

Fourth, the kind of industry that is developing in these zones relies on expanded accumulation for which the new labor rules are important—workplaces that deal in workforces of more than 300 people. Other analysts, like Kalyan Sanyal,17 use Harvey’s ideas to make radical claims that the informal sector—comprising a good chunk of the jobs of the working class—makes it impossible for workers to do anything but barely survive; claims that are belied by the rise of new slum entrepreneurs in places like Dharavi and Delhi. This should make us rethink whether it is the case that the primary struggles are no longer at the point of production. The All India Organization of Employers has produced another graph that makes the same point. If you start in 1980 and draw a line through to 2010, measuring the number of industrial disputes, there is a very clear pattern:


The fact remains that the gains in India’s growth have been concentrated at the very top. In 1971, total sales of the top twenty industrial houses in India accounted for about 61 percent of the net domestic product of the private organized sector; the corresponding figure for 1981 was 87 percent.19 To come to the situation in the early part of this century, note the continued dominance of what the business press regularly calls the “big four” of Indian business: the Tatas, the Birlas, the Ambanis and the Mittals. In key industries like energy, telecom, steel, automobiles, IT and retail, these four business houses either continue to dominate or are poised to do so in the near future.

Another measure of the concentration of Indian capital at the top can be seen from the following: In 2008, of the 500 surveyed companies, the top twenty private companies accounted for about 40 percent of the sales, 47 percent of after-tax profits, and 45 percent of market capitalization.20 This concentration of capital at the top also becomes a barrier to profitability. Michael Roberts has shown that profit rates in India are falling largely because so few firms are willing to invest in capital formation so long as the infrastructure in India is as terrible as it is. 21 

Low capital investment means low productivity, which also means a severely falling rate of profit. The goal of the bourgeoisie currently is to get the state to shoulder the costs of infrastructure improvements, so it can get on with the business of investing and raising profitability again.

The fact that disciplining labor has been so important to the neoliberal project has not been accidental—it has been the primary way that accumulation has proceeded. But it is not enough to argue that labor is important economically. It also matters whether or not labor can fight back in serious and substantial enough ways to fundamentally alter the economic arrangement. Historically, there have been reasons to suspect that Indian labor unions, tied to large political parties, have been unwilling to act in decisive ways against big business.

Most of those who take labor seriously are cynical about large labor unions that are dominated by the official left (i.e. the Stalinists) as well as unions (the non-Stalinist trade union left) so tiny as to be unable to influence labor struggles in important ways. All of this is to say that getting a very good understanding of the nature of class and social struggle in the New India is a very difficult thing to do because of the ways that the working class has been defeated and the ways that the various strands of the left in India have responded to that working-class defeat.

Here’s how Craig Phelan characterizes the problem:

One reason why so little is known about Indian labor and trade unionism is its complexity and diversity. There is no coherent Indian industrial relations system; both the central and state governments have been prolific in passing labor laws. Rather than a single national trade union federation, there are no less than twelve, each of which in turn serves as the labor wing of an established political party. There are also a growing number of unaffiliated unions that, although usually lacking in resources, pursue their own agendas free from the domination of political parties. Indian trade unionism is deeply divided along ideological lines, and it is further divided by caste and community ties. By law, only seven workers are needed to form a union, and therefore an unhealthy level of union proliferation is reflected in the workplace, eroding collective bargaining strength, stifling worker militancy, and undermining any sense of working-class unity.22

Another example: by most estimates India’s informal and unorganized workforce is at about 85 to 90 percent of all workers, a massive 300 million workers. That means, that even when strikes do happen, they are limited to very small sections of the economy. The minimum wage, such as it is in India, guarantees workers in the official economy an average annual salary of around $700 a year, putting them at barely above the poverty line. For the rest of the economy, it is a one-sided class assault. This has meant that capital accumulation has proceeded virtually unabated; but does that mean the working class is increasingly irrelevant to the process of accumulation?

Ultimately the problem is not hopeless, as jobs have not shifted into the frictionless world of post-Fordist production. This is how Pranab Bardhan explains how labor was reorganized:

With the current decline of agriculture there has not been a commensurate increase in manufacturing particularly in labour-intensive industries; some of the successful cases of industries both in exports and domestic production are in capital- or skill-intensive activities (vehicles, car parts, machine tools, pharmaceuticals, etc.). The real expansion has been in the service sector, not just in business processing, software, communications and finance, but also in traditional services (like trade and transportation). The contribution of the service sector to GDP is now more than 55 percent (the major part of which, contrary to popular impression, is still in the traditional service sector). Even with the widest definition of all information technology-enabled services, they employ less than one-half of 1 percent of the total labor force.23

These facts are important because they dispel the claims that Harvey makes about where the new nodes of accumulation actually are.

Signs of hope?
For the last ten years, the Indian media has been going wild about the rising Indian middle class and its massive consumptive power as the exemplary symbol of India’s enormous economic growth rates. Much of this new Indian middle class works in the service industry, mostly private, though some are employed as civil servants. But the jewel in the crown of this new middle class has definitely been India’s much touted IT sector, even though it employees a tiny fraction of India’s workers. Still, the IT sector has been the coveted place for students to try and find jobs, so much so that it has skewed the priorities of the nation’s educational system and produced a glut in the IT job market.

But ever since 2008, with the global financial crisis, the IT sector has been facing a serious crisis. Earlier this year, India’s largest IT firm, Tata Consultancy Services (TCS) announced that it would be issuing letters of termination. Rumors began to circulate that it would result in as many as 25,000 layoffs in Bangalore, Chennai, and Hyderabad. Around the same time, Yahoo, IBM, and HP also announced that they would be laying off employees. Unions speculated that 35,000 people had already lost their jobs in the last two years for cost-cutting purposes. Until the beginning of this year, the laws that govern the IT sector had not been tested, nor was it clear that IT workers qualified as laborers protected under the Industrial Disputes Act.

The intervention of the major unions, the organization of rallies and protests, and the filing of petitions in the courts resulted finally in a ruling that IT workers were indeed workers, and that their layoffs were therefore illegal without proper legal notice. By February, the companies had all announced much smaller layoffs and the unions had revealed significant successes in organizing what was otherwise seen to be an unorganizable sector. Industry journals in the United States even began to worry that the growth of trade unions in Indian IT would put the entire model of outsourcing at risk and threaten their profits. Trade unions have continued to agitate since then for greater openness in hiring and firing in the entire IT sector. It should come as no surprise, then, that thousands of tech workers joined their fellow unionists during the most recent general strike.

These should be signs of hope for the left. They serve as a reminder that the power of capitalism to suppress working-class dissent is not total and that the working class continues to fight back. Even if the current trade union leadership has no real strategy for confronting capitalists in India, they are sometimes forced to bring their members out on strike and to fight in the streets where workers get a sense not only of their power, but who are their real allies.

The most recent mobilizations of labor in India have not been decisive, but they demonstrate both the unevenness of the gains of economic growth, as well as the real force that the working class is capable of mobilizing. What is revealed, most importantly, is that the Indian economic miracle has not been without its problems. There is no uniquely Indian fix to the problems inherent in capitalist accumulation; nor has the working class disappeared into complete inactivity. The recent massive general strikes reveal some of the strengths that labor has left, while the signs of new organizing offer some hope of renewed vibrancy as well.

  1. “The elephant in the stats,” The Economist, April 9, 2016,
  2. “India stock market witnesses massive plunge,” The BRICS Post, 24 August 2015,
  3. V. Sridhar, “Chronicle of a Strike,” Frontline, Volume 18, Issue 19, September 15–28, 2001.
  4. See Nrisingha Chakrabarty, History of railway trade union movement (New Delhi: Centre of Indian Trade Unions, 1985); T.N. Siddhanta, The Railway General Strike (SI: AITUC, 1974); Stephen Sherlock, The Indian Railways Strike of 1974 (New Delhi: Rupa & Co., 2001).
  5. “Dhirubhai Ambani: Streaking up the ladder, ” India Today, October 9, 2013,
  6. The Shiv Sena was an Indian far-right regional political party whose ideology is based on pro-Marathi ideology and Hindu nationalism (Hindutva).
  7. This is important because some, including Nivedita Menon and Aditya Nigam (see their Power and Contestation, India since 1989), conclude that labor has become irrelevant both to economic questions in India and to the social resistance to neoliberalism.
  8. “Industrial Unrest: Past Trend & Lessons for the Future,” All India Organization of Employers,
  9. Source: “Industrial Disputes,” Labor Bureau, Government of India,
  10. Statistics on 2009 labor disputes, Closures, Retrenchments, and Layoffs in India, Government of India, Ministry of Labor and Employment,
  11. David Ashworth, “India Now Uses Gross Value Added to Calculate Economic Output,” Market Realist, 28 May 2015,
  12. Raymond Zhong and Gabriele Parussini, “Behind India’s World-Beating GDP Data, Central Bank Sees Weakness,” Wall Street Journal, June 2, 2015,
  13. Eric Bellman, “India or China: Which Asian Giant Has More Inclusive Growth?”,
  14. “No. of Indians with over $100 million hits 928,” Times of India, 17 June 2015,
  15. Rahul Anand and Volodymyr Tulin, “Disentangling India’s Investment Slowdown,” IMF Working Paper (WP/14/47), March 2014.
  16. David Harvey, Limits of Capital (London: Verso Books, 2007).
  17. Kalyan Sanyal, Rethinking Capitalist Development (New Delhi: Routledge India, 2014).
  18. “Industrial Unrest: Past Trends & Lessons for Future,” All India Organization of Employers, 1, (1980–2010).
  19. Pranab Bardhan, “Notes on the Political Economy of India’s Tortuous Transition,” Economic and Political Weekly, Vol. 44, No. 49 (December 5–11, 2009), 31.
  20. The Economic Times, “Top Companies in India 2015,”
  21. Michael Robert’s Blog, “India’s Modinomics,”
  22. Craig Phelan, et. al., “Labor History Symposium: Workers, Unions, and Global Capitalism: Lessons from India,” Labor History 52:4, 535–562.
  23. Pranab Bardhan, 31.

Issue #78

July 2011

Slavery and the origins of the Civil War

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