Article: Can India become the Germany of the East?

Employee Relations

Can India become the Germany of the East?

A boost to manufacturing will create 70 million incremental jobs, says Poornima Gupta, Assistant Professor
Can India become the Germany of the East?

India is now emerging as a service industry and this requires more changes in industrial and labour policies


India was primarily an agricultural driven economy, which evolved into a manufacturing and services economy. Even industrial places are no longer the same as newer industries have replaced traditional mass-employment hot spots to more technology intensive skilled workforce employers. The pace of change that has happened in India in the last 30 years has been tremendous. It took off at a slow pace and then gradually gained momentum as policies unshackled large parts of the economy. But IR has not kept up.

I do not think HR managers have the adequate resources to handle the current IR situations. Because of the changing workforce patterns, globalization and the accelerated change in technology, HR tends to be more reactive than proactive. It is always playing catch-up. Strikes are a total fallout of IR and the latest is the Bosch strike in Bangalore. Whenever an extreme situation happens, like in the case of the CEO being beaten in 2010 or Maruti HR Manager being burnt to death, they start thinking of making new policies.

The social profile of industrial workers is changing rapidly. Unlike the early years of Independence, not many come from a background of hardship and deprivation. Workers in the organized sector earn well and like to live well. Their aspirations for their children are no different from those of the middle class. Their eyes are set on upward mobility.

As the policies concerning labour laws were more favourable to the employee, most of the manufacturing organizations started using contract labourers instead of permanent labourers to mitigate their risk. This led to insecurities among the workforce causing a spate of strikes and lockouts, changing the IR scenario drastically. The Labour Act of 1926 had to be amended to include contract labours. Although the number of strikes have come down in the last decade, we see some evidence of severe hostility amongst the labourers and their employers, which causes extreme reactions resulting in casualties.

India is now emerging as a service industry and this would require more changes in the policies, which were primarily formulated keeping the manufacturing sector in mind.

Make In India – its importance

The Make In India campaign is very much needed at the moment when manufacturing needs to be driven with innovation. We are a country where innovation at the grassroots level is paramount. Why can’t we invest in making in India the parts that we are importing from China and other countries? I am sure if we put our minds to it, we can come out with much cheaper products. The push to manufacturing will not only increase our GDP, but also create jobs. It is projected that a boost to manufacturing will create 70 million incremental jobs. If we are able to manufacture some of the products, which are currently imported, our trade deficit will go down as well. The demographic dividend, which India has at the moment, will benefit us greatly as it is a country of a billion engineers.

Make In India Vs Made In India

While Made in India is surely better in terms of branding of Indian products, but till we are able to establish the trust of the customers, make in India should be good enough. But yes, India has the capability to be the “Germany of the East” and not the “Factory of the West” as per the report from CII-BCG 2012. Competition is always better as it keeps you on your toes and prevents you from becoming stale. India is capable of taking on the competition provided it gets enough support from the government. At the moment one of the biggest challenges faced by the manufacturing sector is the restrictive regulations. If these change, I am sure Indian companies are more than ready to take on their foreign counterparts.

Poornima Gupta, Assistant Professor, Organizational Behaviour and HRM, Great Lakes Institute of Management, Gurgaon

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Topics: Employee Relations, #IndustrialRelations

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