Unit 1

Industrial Development In India

Modern factory system, Industrial policy resolutions in India, Concept of
Tri-Partism, Five year plans and its impact, Collective Bargaining,
Workers participation in India.
 Industrial Development In India

https://www.civilsdaily.com/industrial-development-in-india/
Industrialization during the British Rule
Indian Industry had a global presence before the advent of
Britishers in India. Before the advent of British in India, India
accounted for a quarter of World’s Industrial output.

The exports from India consisted of manufacturers goods like

cotton, silk, artistic ware, silk and woollen cloth.

The impact of British Policies and the Industrial Revolution led to the
decay of Indian handicraft industry. Post-Industrial revolution in
Britain, machine-made goods starting flooding into the Indian
markets.

The decline of traditional handicraft was not followed by the rise of

modern Industrialization in India due to the British policy of
encouraging the imports of British made goods and exports of raw
The First Phase (1950-1965): Industrial Sector at the Time of Independence

The main features of the Indian Industrial sector on the eve of the
Independence were:
1. There were majority of consumer goods industries vis-à-vis producer
goods/capital goods industries resulting in lopsided industrial development.
The ratio of consumer goods industries to producer good/capital goods
industry was 62:38 during the early 1950s.
2. The Industrial sector was extremely underdeveloped with very weak
infrastructure.
3. The lack of government support to the industrial sector was considered as
an important cause of underdevelopment.
4. The structure and concentration of ownership of the industries were in few
hands.
5. Technical and Managerial skills were in short supply.
The Second Phase (1965-1980): The Period of Industrial
Deceleration
The first three five-year plans mostly focused on the
development of the Capital Good sector. As a result, the
consumer goods sector was left neglected. The consumer goods
sector also known as wage good sector is considered to be the
backbone of the rural economy and its complete neglect had
resulted in fall in the growth rate of industries.
Phase Three (1980-1991): Industrial Recovery
The period of the 1980s can be considered as the period of the Industrial
recovery. The period saw a revival in the industrial growth rates. The period
witnessed an industrial growth rate of more than 6 percent during the sixth plan
and 8.5 percent during the seventh plan. The period was also marked by a
significant recovery in the manufacturing and capital good sector. The most
important observation from the revival of industrial sector was that the revival is
Phase Four (Post Reform Period)
The year 1991 ushered a new era of economic liberalisation. India
took major liberalisation decision to improve the performance of the
industrial sector.
1.Abolishment of the Industrial Licensing.
2.Simplification of the procedures and regulatory requirement to
start a business.
3.Reduction in the sector exclusively reserved for the Public sector.
4.Disinvestment of the selected Public-sector undertakings.
5.Foreign investors were allowed to invest in the Indian firms.
6.Liberalisation of the trade and exchange rate policies.
7.Rationalisation and massive reduction in the structure of Customs
Duties.
8.Reduction in the excise duties.
9.Reduction in the Income and Corporate taxes to promote Business.
To analyse the impact of these reforms measures on the industrial
The period of the 1990s
1.The average annual growth rate of the industry which was close to 8% in
the post-reform period fell to 6% in the 1990s.
2.The growth rate in the Eighth Plan was 7.3 percent which was same as
the targeted growth rate.
3.The growth rate in the Ninth Plan was 6.0 percent which was
significantly less than the targeted rate of 8.2 percent.
4.Further, the sector witnessed its worst ever performance in the last few
years of the Ninth plan with growth collapsing to just 2 percent.
 Period since 2002-03:
The period since the new millennium witnessed a sharp recovery and
revival of the industrial sector. The tenth and eleventh plan witnessed a
high growth rate of industrial production.
The rate of growth of the industrial sector was 5 percent during the initial
years of the Tenth Plan. The growth picked in the following years and
reached 7% in 2003-04, 8% in 2004-05 and 11% in 2006-07. For the plan
as a whole, the growth rate was 8.2 percent.
The period post-2011 till now.
The period starting from 2011-12 saw a severe slowdown in the industrial
growth and production. The slowdown during the period is due too.
Weak Demand for exports from the Developed Western Countries due to Global
Financial Crisis.
The slowdown in the Domestic Demand.
High Interest in India maintained by the RBI, due to persistently high Inflation.
The slowdown in the Private Investment by the private sector due to weak
returns on the investments.
Rising NPAs of the Public-Sector banks has led to weak credit and lending
offered by them.
Failure of past projects of the private sector.
Government reluctance to increase Public investment due to the stand of
maintaining a low fiscal deficit.
Uncertain Global Recovery.
Factory System: Meaning, Evolution and Merits

Meaning of Factory System:

Modern Industry means “Factory system”, and can be described as the

system of production in which hand tools have been replaced by
complicated and costly automatic machines.

The works are carried out in large workshops by a large number of

workers.
The different requirements of house which could not be fulfilled by one man
alone, gave birth to a united work which in turn took the shape of a
“Factory”.

Modern Industries brought the several processes of manufacture under one

roof, centralized and increased the use of power, introduced specialized
tools and machines and hired workers for fixed wages and hours.

Evolution of Factory System:

The invention of one machine after another in the 18th and 19th centuries
had a very great impact on the economic life of whole world. Actually, the
process which first started in England later on spread over the different
parts of the world. The system of production which came into being as a
result of this “Industrial Revolution” is now known as “Factory System”.
During the middle age, the India’s sense of leadership converted to selfishness
and proud made us parasite. We ruined to the last and condition still got worse
by the world wars in which not only money and skill was destroyed but also a
large number of talented people were slaugh­tered.
India has re originated effort since independence and has been able to
bring this present great development in short period of about 60 years.
Today almost all type of industries are running in India and in some of the
fields such as shoe, jute, sewing machines etc. we are leading world
market and exporting these products in large quantities.

We have equipped our country with large plants of raw iron, machine
tools, transportation, electronics equipment’s and textile.

A number of steel plants, heavy electrical, aeronautics, automobiles,

defence, com­munication, education and other social and country
requirement plants are running in different parts of the country.
Impact of Factory System on Labour and Management:
The modern system of manufacturing has given rise to many problems of
various nature, such as:
1. Problem of using complicated machinery.
2. Problem of raising capital for machinery, building and materials.
3. Problem of managing and running the industries.
4. The safety and security of labour class who work in factories and depend
on wages for their livelihood has given rise to many social, political and
economic problems.
5. The problem of rationalization and modernization.
6. The problem of large requirement of well-trained workers.
7. The problem of competition with foreign market for the purpose of
increasing exports.
8. The problem of regional disparity in industries.
Economic Development of Factory System:
From its very beginning the whole world has been engaged in a
continuous social, techno ­logical and scientific revolution.

It has moved from, handicraft to mechanical to automatic mass

production, from water power to steam to nuclear power; through
mineral, chemical, metallur­gical and electronic revolutions.

The factory system may be defined as “an attempt to organise the

industries on modern and scientific lines”. The development of
industries on modern lines first took place in England in 1770.
Industrial policy resolutions in India
Industrial Policy Resolution of 1956 (IPR 1956) is a resolution adopted by the Indian
Parliament in April 1956. It was the first comprehensive statement on industrial development
of India. The 1956 policy continued to constitute the basic economic policy for a long time.

This fact has been confirmed in all the Five-Year Plans of India. According to this resolution
the objective of the social and economic policy in India was the establishment of a socialistic
pattern of society. It provided more powers to the governmental machinery. It laid down
three categories of industries which were more sharply defined. These categories were:

Schedule A: those industries which were to be an exclusive responsibility of the state.

Schedule B: those which were to be progressively state-owned and in which the state would
generally set up new enterprises, but in which private enterprise would be expected only to
supplement the effort of the state; and

Schedule C: all the remaining industries and their future development would, in general be
left to the initiative and enterprise of the private sector.
Although there was a category of industries left to the private sector (Schedule C
above), the sector was kept under state control through a system of licenses. In
order to open new industry or to expand production, obtaining a license from the
government was a prerequisite.

Opening new industries in economically backward areas was incentivized through

easy licensing and subsidization of critical inputs like electricity and water. This was
done to counter regional disparities that existed in the country.

Licenses to increase the production were issued only if the government was
convinced that the economy required more of the goods.
Fair and non-discriminatory treatment for the private sector, encouragement
to village and small-scale enterprises, removing regional disparities, and the
need for the provision of amenities for labor, and attitude to foreign capital
were other salient features of the IPR 1956.

The Industrial Policy of 1956 is known as the economic constitution of the

country.
 New industrial policy of 1991
The New Industrial Policy of 1991 comes at the center of economic
reforms that launched during the early 1990s. All the later reform
measures were derived out of the new industrial policy. The Policy has
brought comprehensive changes in economic regulation in the country.
As the name suggests, these reform measures were made in different
areas related to the industrial sector.

https://www.indianeconomy.net/splclassroom/what-are-the-
features-of-new-industrial-policy-of-1991/
The 1991 industrial policy contained the root of the liberalization,
privatization and globalization drive made in the country in the later period.
The policy has brought changes in the following aspects of industrial
regulation:

1. Industrial delicensing
2. Deregulation of the industrial sector
3. Public sector policy (dereservation and reform of PSEs)
4. Abolition of Monopolistic and Restrictive Trade Practice under MRTP Act,
1969.
5. Foreign investment policy and foreign technology policy.
1. Industrial delicensing policy or the end of red tapism: the most important part
of the new industrial policy of 1991 was the end of the industrial licensing or the
license raj or red tapism. Under the industrial licensing policies, private sector
firms have to secure licenses to start an industry. This has created long delays in
the start up of industries. The industrial policy of 1991 has almost abandoned the
industrial licensing system. It has reduced industrial licensing to fifteen sectors.
Now only 13 sector need license for starting an industrial operation.

2. Dereservation of the industrial sector– Previously, the public sector has given
reservation especially in the capital goods and key industries. Under industrial
deregulation, most of the industrial sectors was opened to the private sector as
well. Previously, most of the industrial sectors were reserved to the public sector.
Under the new industrial policy, only three sectors- atomic energy, mining and
railways will continue as reserved for public sector. All other sectors have been
opened for private sector participation.
3. Reforms related to the Public sector enterprises: reforms in the public
sector were aimed at enhancing efficiency and competitiveness of the sector.
The government identified strategic and priority areas for the public sector to
concentrate. Similarly, loss making PSUs were sold to the private sector. The
government has adopted disinvestment policy for the restructuring of the
public sector in the country. at the same time autonomy has been given to
PSU boards for efficient functioning.

4. Foreign investment policy: another major feature of the economic reform

measure was it has given welcome to foreign investment and foreign
technology. This measure has enhanced the industrial competition and
improved business environment in the country. Foreign investment including
FDI and FII were allowed. Similarly, loan capital has also introduced in the
country to attract foreign capital.
5. Abolition of MRTP Act: The New Industrial Policy of 1991 has abolished
the Monopoly and Restricted Trade Practice Act. In 2010, the Competition
Commission has emerged as the watchdog in monitoring competitive
practices in the economy.
The industrial policy of 1991 is the big reform introduced in Indian economy
since independence. The policy caused big changes including emergence of
a strong and competitive private sector and a sizable number of foreign
companies in India.
Tripartism in Indian Industrial Relations

Tripartism is economic corporatism based on tripartite

contracts of business, labour and state affiliations within the
economy. 

Each is to act as a social partner to create economic policy

through cooperation, consultation, negotiation and
compromise.
Tripartism: Structure of ILO

Governments

ILO Workers
Employers
Tripartism: How it works?

Active
Active Interaction
Interaction in
in
order
order to
to seek
seek joint
joint
solutions
solutions

Partners
Partners must
must be
be willing
willing Partners
Partners must
must be
be
to
to reach,
reach, and
and respect,
respect, committed,
committed, competent
competent
agreements
agreements and
and active
active
Tripartism: Standard Setting

International Labour Standards (ILS)

Conventions Recommendations

Adoption by the Conference

Application at national level

(through legislation and practice)
ILS : Classification

Basic human rights Conditions of work

Employment Social security
Social policy Women
Labor administration Industrial relations
Children and young Protection of special
persons groups
 Five-Year Plans: With Objectives and
Achievements
From 1947 to 2017, the Indian economy was premised on the concept
of planning. This was carried through the Five-Year Plans, developed,
executed, and monitored by the Planning Commission (1951-2014) and
the NITI Aayog (2015-2017).

With the prime minister as the ex-officio chairman, the commission has a

nominated deputy chairman, who holds the rank of a cabinet Minister.
•First Plan (1951–1956)
•Second Plan (1956–1961)
•Third Plan (1961–1966)
•Fourth Plan (1969–1974)
•Fifth Plan (1974–1979)
•Rolling Plan (1978–1980)
•Sixth Plan (1980–1985)
•Seventh Plan (1985–1990)
•Annual Plans (1990–1992)
•Eighth Plan (1992–1997)
•Ninth Plan (1997–2002)
•Tenth Plan (2002–2007)
•Eleventh Plan (2007–2012)
•Twelth Plan (2012–2017)
Achievements of Planning:
1. A Higher Growth Rate:
Economic planning in India aims at bringing about a rapid economic
development in all sectors.
That is to say, it aims at a higher growth rate. India’s macroeconomic
performance has been only moderately good in terms of GDP growth
rates.
The overall rate of growth stands at 4.8 per cent for the whole planning
period (1950-2007) Compared with India’s own past (1900- 1920) when
she was caught in a low level equilibrium trap, growth acceleration during
the last 60 years has been impressive indeed.
2. Growth of Economic Infrastructure:
India’s performance in building up the necessary economic infrastructure
is really praiseworthy. At the inception of economic planning, road
kilometer was 4 lakh kms. India has now more than 3 million km of road
network, making it one of the largest in the world.
Railway route length increased from 53,596 kms in 1951 to nearly 63,500
kms in 2005- 06. Today, the Indian railway system is the largest in Asia and
the fourth largest in the world. Similarly, other modes of transport like
shipping, civil aviation, etc., have also expanded phenomenally.

3. Development of Basic and Capital Goods Industries:

Another major area of success of Indian planning is the growth of basic
and capital goods industries. With the adoption of the Mahalanobis
Strategy of development during the Second Plan period, some basic and
capital goods industries like iron and steel witnessed spectacular growth.
4. Higher Growth of Agriculture:
The most significant aspect of India’s Five Year Plans is that the overall rate of
growth of food production has now exceeded the rate of growth of population.
Though in the early years of planning, agricultural performance was miserable
resulting in the emergence of food crisis.
But now, due to the impact of bio-chemical revolution in Indian agriculture, food
crisis seems to be a thing of the past. She has attained self-sufficiency in food
grains.

5. Savings and Investment:

The rise in the domestic savings rate from 10 p.c. of GDP at the initial stages of
planning to around 19 p.c. in 1980-81 is definitely impressive. However, this rate
increased to 34.8 p.c. by the end of March 2007. Similarly, India’s record in gross
domestic capital formation rose from 20.3 p.c. in 1980-81 to 22.8 p.c. of GDP in
2001- 02. But it rose to 36 p.c. in 2006-07.
The major areas of failure of planning in India are:

1. Inadequate Growth Rate:

In quantitative terms, the growth rate of the Indian economy may be good
but not satisfactory by any standards. Except the First and Sixth Five Year
Plans, the actual growth rate remained below the targeted growth rates of
GNP and per capita income.
Only in recent plans (both Ninth and Tenth plan), actual growth rate has
exceeded the plan targets. In terms of per capita income, India is one of the
poorest nations of the world even after more than 58 years of democratic
planning.
2. Whither India’s Socialistic Society:
Indian planning aims at building up a ‘socialistic pattern of society’, in an
otherwise capitalistic framework, through various socialistic measures.

We have not yet made any significant progress towards the goal of attaining
a socialistic pattern of society even after nearly 58 years of planning.

The concept of socialistic pattern of building a society has been altogether

discarded when we introduced new economic policy measures in mid-1991.
Instead, Indian economy very much moves on the capitalistic path.
3. Economic Inequality and Social Injustice:

The twin aspects of social justice involves on the one hand, the reduction in
economic inequalities, and, on the other, the reduction of poverty. A rise in
national income with concentration of economic power in the hands of a
few people is not desirable.
In an otherwise capitalist framework, inequality in the distribution of
income and wealth is inevitable. In India’s socio-­political set-up, vast
inequalities exist. Indian plans aim at reducing such inequalities, so that the
benefits of economic development penetrate down to the lower group of
the society.
The objective of removal of poverty got its clear-cut enunciation only in the
Fifth Plan for the first time. Due to the defective planning approach, income
inequality widened and poverty became rampant. The incidence of poverty
was on the rise. It is now nearly 28 p.c. (2004-05).
4. Unemployment:
Removal of unemploy­ment is considered to be another important objective
of India’s Five Year Plans. But, unfortunately, it never received the priority it
deserved. In the Sixth Plan (1978-83) of the Janata Government,
employment was accorded a pride of place for the first time.

However, the Seventh Plan treated employment as a direct focal point or

policy. As a result, the employment generation programme in India has
received a rude shock and the problem of unemployment is mounting up
plan after plan. The number of job-seekers increased from 363 lakh as on
December 1991 to 406 lakhs as on June 2006. In the recent years, the trend
is on the rise.
 INTRODUCTION OF
COLLECTIVE BARGAINING
The concept of collective bargaining was introduced very late in
India as trade unions were found only in 20th century. The
concept of collective bargaining attained significance only after
1962. The phrase collective bargaining is said to be coined by
Sydney and Beatrice Webb in England. It is made up from
two words collective which means “group” and bargaining which
means “proposals and counter proposals”. So it is a process in
which the representatives of a labour organization & the
representatives of business organization meet and attempt to
negotiate a contract or agreement, which specifies the nature of
employee-employer union relationship.
Definition

“COLLECTIVE BARGAINING IS AN AGREEMENT BETWEEN A SINGLE

EMPLOYER OR AN ASSOCIATION OF EMPLOYERS ON THE ONE HAND AND
A LABOUR UNION ON THE OTHER, WHICH REGULATES THE TERMS AND
CONDITIONS OF EMPLOYMENT”

TUDWIG TELLER
Collective bargaining is a process of negotiation between employers and a
group of employees aimed at agreements to regulate working salaries,
working conditions, benefits, and other aspects of workers' compensation
and rights for workers.

The interests of the employees are commonly presented by

representatives of a trade union to which the employees belong.

The collective agreements reached by these negotiations usually set out

wage scales, working hours, training, health and
safety, overtime, grievance mechanisms, and rights to participate in
workplace or company affairs
 OBJECTIVES OF
COLLECTIVE BARGAINING
1. Resolve differences over complex issues.
2. Protect the interests of workers through collective action.
3. Carry out negotiations voluntarily, without interference from a third
party.
4. Arrive at an amicable agreement through a process of give and take.
5. To arrive at an agreement on wages and other conditions of
employment.
6. To have peaceful co-existence for the mutual benefits and progress.
7. To maintain employee employer relation bilaterally.
 CHARACTERISTICS

• Collective: Collective bargaining is a two way group process where

the employers representative and employees representatives sit together to
negotiate terms of employment.
• Strength: Both the parties in collective bargaining are strong and
equal.
• Voluntary: Both parties come to the negotiation table voluntarily in
order to go in particular negotiation. It is based on discussion, mutual trust and
understanding.
• Formal: It is a formal process in which certain employment related
issues are to be regulated at National, organization and workplace levels.
• Flexible: It is a flexible and continuous process and not fixed or static.
• Improvement: It is a method to improve the employer-employees
relation in organization and resolve management and employees
conflicts.
CONTD…
• Representation: Collective bargaining is between the
representatives of employees and management. The management
does not directly deal with employees. It carries negotiations with
the representatives/executives of unions and association.
• Dynamic: Collective bargaining is dynamic, that go on changing
over a period and grows and expand the way of agreement, the way
of implementation and way of discussion.
• Continuous: Collective bargaining is continuous and begins with
agreement, the implementation of agreement and further
negotiations.
• Bipartite Process: Because the employee and employers
representatives negotiate directly face to face across the table.
 TYPES OF BARGAINING

CONJUNCTIVE OR DISTRIBUTIVE BARGAINING: Conjunctive

bargaining is the most common type of bargaining & involves zero-sum
negotiations, in other words, one side wins and the other loses. Both parties
try to maximize their respective gains. They try to settle economic issues
such as wages, benefits, bonus, etc. For Example, Unions negotiate for
maximum wages & the management wants to yield as little as possible –
while getting things done through workers.
COOPERATIVE /INTEGRATIVE BARGAINING: Integrative
bargaining is similar to problem solving sessions in which both sides are
trying to reach a mutually beneficial alternative, i.e. a win-win situation.
Both the employer & the union try to resolve the conflict to the benefit of
both parties. Both sides share information about their interests and concerns
and they create a list of possible solutions to best meet everyone‟s needs.
CONTD…
PRODUCTIVITY BARGAINING: A form of collective bargaining leading to
a productivity agreement in which management offers a pay raise in exchange
for alterations to employee working practices designed to increase productivity.

Productivity bargaining has been described as "an agreement in which

advantages of one kind or another, such as higher wages or increased leisure,
are given to workers in return for agreement on their part to accept changes in
working practices or in methods or in organization of work which will lead to
more efficient working.
COMPOSITE BARGAINING: Workers believed that productivity
bargaining agreements increased their workloads. Rationalization,
introduction of new technology, tight productivity norms have added to this
burden and made the life of a worker some what uneasy.

As an answer to such problems, labor has come in favor of composite

bargaining. In this method, labor bargains for wages as usual, but goes a
step further demanding equity in matters relating to work norms,
employment levels, manning standards and enviornmental hazards etc.
Issues of collective bargaining
1. Wages and working conditions
2. Work norms
3. Incentive payments
4. Job security
5. Changes in technology
6. Work tools, techniques and practices
7. Staff transfers and promotions
8. Grievances
9. Disciplinary matters
10. Health and safety
11. Insurance and benefits
12. Union recognition
13. Union activities/responsibilities
14. Management rights
PROCESS OF COLLECTIVE BARGAINING
PROCESS OF COLLECTIVE BARGAINING
The collective bargaining process involve five steps:

Preparation: At the very first step, both the representatives of each party
prepares the negotiations to be carried out during the meeting. Each
member should be well versed with the issues to be raised at the meeting
and should have adequate knowledge of the labor laws.The management
should be well prepared with the proposals of change required in the
employment terms and be ready with the statistical figures to justify its
stand.
On the other hand, the union must gather adequate information regarding
the financial position of the business along with its ability to pay and
prepare a detailed report on the issues and the desires of the workers.
2. Discuss: Here, both the parties decide the ground rules that will
guide the negotiations and the prime negotiator is from the
management team who will lead the discussion. Also, the issues for
which the meeting is held, are identified at this stage.The issues could
be related to the wages, supplementary economic benefits (pension
plans, health insurance, paid holidays, etc.), Institutional issues(rights
and duties, ESOP plan), Administrative issues(health and safety,
technological changes, job security, working conditions).
Propose: At this stage, the chief negotiator begins the conversation with an
opening statement and then both the parties put forth their initial demands.
This session can be called as a brainstorming, where each party gives their
opinion that leads to arguments and counter arguments.

Bargain: The negotiation begins at this stage, where each party tries to win
over the other. The negotiation can go for days until a final agreement is
reached. Sometimes, both the parties reach an amicable solution soon, but at
times to settle down the dispute the third party intervenes into the
negotiation in the form of arbitration or adjudication.
Settlement: This is the final stage of the collective bargaining process,
where both the parties agree on a common solution to the problem
discussed so far. Hence, a mutual agreement is formed between the
employee and the employer which is to be signed by each party to give the
decision a universal acceptance.
ADVANTAGES
•Contract to guide standards.
•Participation in decision making process.
•All union members and management must confirm to terms of contract
without
exception
•Process exists to question manager’s authority if member feels something
was done
unjustly.
•Nurses gain control of practice.
•Improve professional relationships.
•Professionalism can be promoted.
•Protect patients from inadequate and unsafe care.
• Give economic security.
• Ensure that nurses have fair pay, good benefits and safe working conditions.
• Provide power.
DISADVANTAGES
Reduced individuality.
 Other union members may outvote one's decisions.
 Disputes are not handled with individual and
management only.
 Must pay union dues even if one does not support
unionization.