Why in the News?

Indian industry leaders are hurting their future by depending too much on cheap labour for growth.

What are the issues related to cheap labour in India? 

• Long Working Hours: Migrant industrial workers often work 11-12 hours a day without breaks during peak demand, compromising their physical and mental well-being.
• Informal Employment: As per the 2023-24 Periodic Labour Force Survey, only 21.7% of workers hold regular jobs with salaries. Even within this group, nearly half face informal conditions (no contracts, paid leave, or social security).
• Exploitation via Contract Work: 56% of workers joining the factory sector since 2011-12 are contract workers, lacking legal protection and receiving lower wages.
• Migrant Worker Vulnerability: Migrant workers face multiple disadvantages due to social position, lack of assets, and inadequate access to social security.
• Profit Maximization: Industries prioritize profit over worker welfare, with profit shares rising from 31.6% in 2019-20 to 46.4% in 2021-22 in the factory sector.

What is the current situation of the garment industry in India?

• Stagnant Share in Global Exports: India’s share in global garment exports has remained stagnant at 3.1% over the past two decades. Example: In contrast, Bangladesh (7.9%) and Vietnam (6.4%) have increased their market share by investing in modern technologies and efficient supply chains (Economic and Political Weekly, August 2024).
• Over-Reliance on Cheap Labour: The industry depends heavily on low-cost, unorganized labour rather than technology and automation, limiting productivity. Example: Over 70% of the workforce in garment manufacturing operates in small, unregistered enterprises with poor working conditions and low wages (PLFS 2023-24).
• Declining Competitiveness: Rising competition from China, Vietnam, and Bangladesh has reduced India’s competitiveness in both mass-market and premium garment segments. Example: India’s textile and garment exports dropped by 13.3% to $32 billion in 2023-24, while Vietnam’s exports rose to $44 billion (Ministry of Commerce data, 2024).
• Lack of Innovation and Modernization: Indian firms lag in adopting advanced production technologies, affecting product diversity and design innovation. Example: While countries like Vietnam invest in smart textiles and sustainable practices, Indian firms focus primarily on basic, low-margin garments.
• Impact of Policy and Infrastructure Gaps: Inadequate government support, high logistics costs, and delayed payments to small firms hinder sectoral growth. Example: The Textile PLI Scheme launched in 2021 aimed to boost manufacturing but has had limited uptake, particularly among smaller manufacturers due to complex compliance issues.

How can India benefit from its cheap labour?

• Investing in Skill Development and Training: Enhancing workers’ skills can increase productivity while maintaining cost advantages. Example: The Skill India Mission has trained over 50 million workers since its launch in 2015, improving output quality in sectors like textiles, automotive, and electronics.
• Promoting Labour-Intensive Industries: Expanding labour-intensive sectors (e.g., textiles, leather, and electronics assembly) can maximize employment and exports. Example: The Apparel Park Scheme in Tamil Nadu supports garment clusters, increasing job opportunities while improving global competitiveness.
• Strengthening MSMEs and Local Supply Chains: Supporting Micro, Small, and Medium Enterprises (MSMEs) through policy incentives and better access to credit can utilize cheap labour efficiently. Example: The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme has provided ₹3.7 lakh crore in credit to over 65 lakh MSMEs (as of 2024).
• Encouraging Export-Oriented Production: Facilitating exports through simplified regulations and logistical improvements can enhance global market access. Example: The Remission of Duties and Taxes on Exported Products (RoDTEP) scheme helps Indian exporters by reimbursing embedded taxes, making Indian goods more competitive.
• Adopting a Hybrid Model of Labour and Technology: Combining low-cost manual labour with affordable automation can balance efficiency with cost advantages. Example: Maruti Suzuki uses a man-machine hybrid system for auto production, reducing costs while maintaining high output, making it India’s largest car exporter.

Way forward: 

• Enhance Technology Adoption and Innovation: Encourage investment in advanced manufacturing technologies and R&D through better policy incentives and stronger industry-academia collaboration to improve productivity and global competitiveness.
• Support Labour Welfare and Formalization: Implement policies to improve working conditions, ensure social security for informal workers, and promote skill development programs to balance cost efficiency with worker well-being.

Mains PYQ:

Q Can the strategy of regional-resource based manufacturing help in promoting employment in India? (UPSC IAS/2019)

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