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Despite Prime Minister Narendra Modi’s 'Make in India' push to increase domestic manufacturing, job creation in the country’s $2 trillion economy is lagging.

Deadly Dispute at Auto Giant Highlights India's Jobs Malaise

March 10, 2017
The Maruti Suzuki case reveals the potential for violent unrest at one of the biggest success stories of foreign investment in Indian manufacturing.

In a crowded court just outside Delhi, the fate of 148 men caught up in a deadly labor dispute at India’s largest carmaker has been decided in a case that has highlighted the unrest rippling across India’s industrial landscape.

The trial court in Gurgaon convicted 31 Maruti Suzuki India Ltd. workers and acquitted 117 others of all charges, according to Rebecca John, a senior advocate who represented some of the workers. "If 117 out of 148 have been acquitted of all charges, I can only say it exposes the complete fabrication of evidence against the workers," John said. A detailed copy of the judgment has not yet been given out, she added, while the sentence is expected to be handed down in the coming week.

The case began with an argument between workers and a supervisor over conditions turned violent at a Maruti Suzuki plant in the state of Haryana in July 2012. A manager was burned to death when protesting workers allegedly set a fire on the factory floor, leading to a one-month shutdown. They were charged with conspiracy to commit murder, arson and rioting.

Anger Over Temporary Workers

Those at the plant say there was also simmering anger over the use of lower paid temporary workers, a practice that has increased since the incident, according to company documents. Maruti Suzuki spokesman, Kanwaldeep Singh, declined to comment on an active legal dispute. At the time of the incident, the company said nearly 100 managers were hospitalized after an "orchestrated act of mob violence."

The issues highlighted by the case remain as pressing today as they were in 2012. Despite Prime Minister Narendra Modi’s "Make in India" push to increase domestic manufacturing, job creation in the country’s $2 trillion economy is lagging. Temporary employment is increasing, while the quality of many coveted factory jobs -- which lifted hundreds of millions out of poverty in China -- remains poor.

Businesses blame the country’s rigid labor laws. But even as recent legislative changes give companies more flexibility, labor economists like Jesim Pais, director of the Society for Social and Economic Research, suggest they have not created high quality jobs.

And as Modi’s government pledges to reform the country’s labor laws after an earlier, unsuccessful attempt, they say the quality of industrial jobs could deteriorate even more.

'In Jail For So Long'

The Maruti Suzuki case reveals the potential for violent unrest at one of the biggest success stories of foreign investment in Indian manufacturing.

One of those caught up in the case, Amarjeet, who uses one name, said he was hired as an apprentice in 2007 and made only 3,500 rupees (US$52) a month compared to a permanent worker’s 20,000 rupees (US$300).

Five years later, he was making 10,000 rupees a month but had not yet been made permanent when he was arrested along with more than 100 others in a broad security sweep, defense lawyers say. He spent more than two-and-half-years in jail before he was granted bail and says he is innocent.

"Ask anybody in my village," he said outside the court in February. "They would say Amarjeet can’t even kill an ant. And they’ve kept me in jail for so long." On Friday, Amarjeet was acquitted of all charges, his lawyer Rajender Pathak said by phone.

Volatile Environment

As Modi encourages global firms to invest in India, the Maruti Suzuki case highlights the dangers of entering a potentially strained business environment.

In its "India Risk" survey of business people and policy makers, the Federation of Indian Chambers of Commerce and Industry said strikes, factory closures and social unrest were the top-ranked risk to businesses in 2016.

"The Government of India is promoting ‘Make in India’," Vikas Pahwa, lawyer for Maruti Suzuki argued in court, urging strict punishment of the workers involved, according to documents. "With this kind of volatile environment and industrial unrest, no country would come forward and invest in India."

Jitendra Kumar, who was fired from Maruti Suzuki after the incident and now works as a union organizer, said apprentices are being kept on longer, for more types of roles. "The same things are happening in all factories in the whole industrial belt here."

In February, 351 temporary workers lost their jobs at Omax Auto Ltd., a car parts supplier. One employee, Ajay Pandey, had been promised a permanent position after years at the company, Kumar said. Pandey later killed himself, prompting protests for compensation by other workers. An Omax spokesman said the terminations were due to "irresponsible" behavior and participation in union-organized work stoppages, adding that Pandey had missed work for months before being terminated.

Labor Laws

Despite world-leading economic growth, India is struggling to create jobs. In 2015, India’s job creation was the slowest on record: Only 135,000 net new jobs were created in key sectors for the estimated 12 million youth who joined the workforce, government data show.

In November 2014, Modi’s government amended the Apprentices Act to provide employers with greater flexibility such as deciding hours of work. Broader labor reforms are contentious in India, and the tweaks were praised as a way to speedily bring skills to India’s youth. The OECD has urged India to introduce "simpler and more flexible" labor law to aid job creation.

Union organizers said amendments have made it easier to use apprentices instead of full-time workers. Fines for companies violating the act are as low as 500 rupees. The use of temporary workers at many firms is also increasing: In 2015-16, for example, Maruti Suzuki employed 10,626 temporary workers compared to 6,578 in 2013-14, according to a company report.

Pais, from the Society for Social and Economic Research in Delhi, said the changes legalized common practices, such as relying on temporary instead of permanent workers, and paying them less for similar work.

"If you want an efficient and healthy industry, this is not the way to go about it," Pais said.

By Iain Marlow and Upmanyu Trivedi

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