Abstract
This chapter critically examines the evolution of automotive industry in India and explains as to how the various industrial and sector-specific policies have shaped the current state of labour affairs in the sector. The author explains the ‘tierization’ process in the automotive sector, traces the temporal transformations in the value chains and discusses the implications of these changes on labour. It is shown that with the expansion and evolution of buyer-driven supply chains, the quality of employment in the industry has been on the decline. The author argues that over time, the power relations between capital and labour have considerably tilted in favour of the former. One of the major determinants of this change is the visible shift in the role of state in favour of industry, which is evident from the pro-industry policies of recent times and the laxity of governments in effectively implementing the extant pro-labour legislations. Eventually, it is concluded that ‘auto-revolution’ in India has been booming at the cost of labour, with growing worker insecurities and deteriorating labour standards.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Advent of Maruti Udyog Limited (MUL) in 1983 as a major player in passenger car market is a major landmark in the history of automotive industry of India. From this point onwards, the automotive sector in India got a supportive environment to expand. The situation became more conducive from the 1990s onwards with the commencement of economic reforms and liberalization policies, which helped a steady flow of foreign direct investment (FDI) to the automotive industry. Maruti Udyog (later on, Maruti Suzuki) became and still continues as the market leader in the passenger car segment ever since its Model 800 became a success in the 1980s.
- 2.
The automotive industry, comprising automobiles and auto-component sectors, is one of the vibrant segments of the otherwise stagnating manufacturing sector of India.
- 3.
The key determinants include: (a) supportive state policies ; (b) availability of skilled and unskilled workforce (‘cheap labour’); (c) abundant availability of steel at competitive prices; (d) overall steady growth of Indian economy and booming production sector; (e) growing middle class with sufficient purchasing power; and (f) favourable demographic scene—with a higher share of working population and increasing volume of internal migration . For a detailed account on the drivers of auto-revolution in India, refer to Remesh (2015a).
- 4.
The details of supportive policies of the state in the auto-sector will be discussed in detail in the next section of this paper.
- 5.
Tata’s taking over of Daewoo Trucks in Korea and the acquisition of Jaguar and Land Rover (from Ford) are some examples for this.
- 6.
In 1953, the Government of India introduced a restriction which prevented the operations of assemblers without any local manufacturing programme . Accordingly, assemblers solely involved in assembling of CKD units were asked to stop operations in three years. Krishnaveni and Vidya (2015) notes that only seven firms—namely Hindustan Motors Limited, Automobile Products of India Limited, Ashok Leyland Limited, Standard Motors Products of India Limited, Premier Automobiles Limited, Mahindra & Mahindra and Telco—survived these regulatory norms.
- 7.
For instance, the new PMP of the 1980s stipulated a local content ratio of 90% (D’Costa 2009).
- 8.
When MUL was formed, in the early 1980s, the government owned 80% of the equities. Over time, the share of government was reduced. In 2007, when the government sold out the remaining 18% of shares to financial institutions , the participation of Government of India in Maruti almost ceased to exist.
- 9.
An overall supportive environment was visible in the two-wheeler segment also. In 1982, government allowed foreign collaboration for manufacture of 100 cc two-wheelers, with a 40% cap on foreign equity.
- 10.
However, the quota restrictions on imports continued in the sector.
- 11.
The major multinationals entered the Indian market in the initial years of liberalization are: Daewoo, Peugeot, General Motors, Mercedes-Benz, Honda, Hyundai, Toyota, Mitsubishi, Suzuki, Volvo, Ford and Fiat (Krishnaveni and Vidya 2015).
- 12.
This was subsequent to India losing a case at WTO regarding quota restrictions on several items/sectors.
- 13.
This approach is maintained till date. For instance, to strengthen the recently launched ‘Make in India’ (MII) programme, the government has reduced the excise duty on small cars, scooters, motorcycles and commercial vehicles to 8% in 2015 (from 12% in February 2014).
- 14.
The import duties on auto-components were reduced from 60% in the 1980s to 10% in 2014 (Jha and Chakraborty 2014).
- 15.
Auto Policy, 2000, and Automotive Mission Plan 2006–16 are instances of specific and direct action of the Government of India to strengthen the automobile and auto-components sector.
- 16.
For instance, the liberal vehicle financing policies followed by the Indian banks since the 1990s enabled a large chunk of consumers to own two-wheelers and cars, thereby stimulating production in the automotive industry. Similarly, the National Highway Policy announced in 1997 is believed to have helped the growth of automobile industry. The environment and safety norms restricted by Indian courts also indirectly helped the auto-industry. For example, the 1999 order of Supreme Court of India directing all car manufacturers to comply with Euro I emission norms, within a stipulated time frame, in the National Capital Region (NCR), led to a quick increase in demand for cars (which comply with Euro norms). In the same way, the recent initiatives of the government (as well as interventions of courts) to promote eco-friendly vehicles—CNG, electric and hybrid—are believed to have brought more vibrancy in the automotive production and sales in India.
- 17.
The announcement of credit up to Rs. 85,000 to farmers in the Union Budget 2015–16 is expected to boost the production and sales in the tractor segment.
- 18.
Special concessions/rebates for automotive firms under Income Tax Act since 2012 are an example for this.
- 19.
Over the years, the industry–government nexus became strong. The entrepreneurs in the industry have been successful in establishing institutionalized interaction between the industry and the government. For instance, FICCI, CII and ACMA regularly organize periodic events bringing together the manufacturers and government officials. Such efforts help the industry to mobilize corporate opinion for desired policy changes. Thus, over the years, the role of industry has been elevated to that of influencing policy—thus, ‘instead of state regulating capitalism , markets led state to deregulate, reform and privatize the economy’ (D’Costa 2004).
- 20.
Given the strong backward and forward linkages , promoting SMEs in auto-sector was central to industrial policies of various governments, especially in the past few decades. Accordingly, the SMEs have been viewed by policy-makers and multilateral agencies as the growth engines and potential sources of employment provision (Vijayabaskar 2008).
- 21.
Apart from the above three auto-industrial belts, the other important localities in the automotive map of India include Jamshedpur–Kolkata cluster (Eastern Cluster) and an upcoming cluster around Sanand, in Gujarat . In a scenario where many state governments are in the process of inviting corporate investment in the automotive sector, a few more clusters may emerge in the coming years.
- 22.
While the firms in organized sector cater mostly to the OEMs and lead firms (and the production involves that of high-value precision instruments), the units in the unorganized sector mainly cater to the local after-sales market and deal mostly with low value-added products.
- 23.
SMEs act as the subcontractors delivering product or service to the large firms, as per the production requirements and specifications of the latter. The SMEs also try to regularly upgrade their technologies through vertical and horizontal integration networks with major assemblers (Kumar 2007). Such an arrangement provides the assemblers in auto-component sector greater degrees of flexibility to adjust their production, according to the fluctuating market trends.
- 24.
The integration of auto-firms through supply chains and subcontracting arrangements (or the ‘tierization’) commenced with the entry of Maruti Udyog Limited in the early 1980s. Prior to this, the prominent method followed by the assemblers was to produce parts and components in-house (Uchikawa 2011).
- 25.
Uchikawa (2011) explains this transformation as a two-stage process. An initial shift of value chain ‘from integrated firms to collaborative ones with captive units’, which eventually graduated to a ‘shifting of captive value chains to relational value chains’.
- 26.
Each renewal of contract implies further reduction in the share to small and tiny firms, putting more and more pressure on these firms to follow cost-cutting measures .
- 27.
A growing body of literature suggests that the industry is characterized by various post-Fordist production regimes and work organization/management systems (e.g. just-in-time production, 6-sigma, Kaizen).
- 28.
Due to weaker bargaining power within the supply chains and owing to constraints posed by poor resource base, the tiny units in the unorganized sector are usually operating with deplorably lower working conditions . These include low wages, non-provision of safety measures, extended hours of work and so on. This segment of the industry engages mostly unskilled labour, working as casual (and sometimes, contractual) workers.
- 29.
Strategies for cost minimization (such as just-in time production) force the firms to push down the wages and to enhance the workloads—to stay competitive in the value chains—‘low-road’ path in terms of labour standards (Vijayabaskar 2008).
- 30.
Contractualization and casualization were found even in lead firms (Vijayabaskar 2008).
- 31.
It is explained that in 2010, the shares of contract workers in the total workforce were 58% in manufacture of bodies and 36.8% in manufacture of parts and accessories (for motor vehicles and their engines). (Uchikawa 2011).
- 32.
The recent developments related to Apprentice Act and MEPP in Maharashtra are to be seen in this perspective.
- 33.
By the early 2000s itself, significant restructuring transformed the small and technologically backward industry to a relatively high-growth, dynamic one (D’Costa 2004).
- 34.
Japanese-style flexible arrangements and lean production methods were extensively used in the industry, as the success of firms largely depended on the use of flexible practices. Along with arm-length arrangements, where principal suppliers are located nearby, the OEMs also encouraged trust-based cooperative subcontracting arrangements. Along with this, technological upgradation and introduction of flexible production practices were introduced at the shop floor to rationalize workforce and enhance productivity. Many of these changes resulted in enhancement of work efforts per worker, besides multitasking.
- 35.
D’Costa (2004) also explains how in the early 1990s MUL expanded its annual capacity from 130,000 units to 180,000 without significant outlays on new capital equipment, as follows: “the number of strokes per minute of the press shop was increased…lunch breaks were staggered, the equipment maintenance was shifted to non-production time. Other cost-reducing, output-enhancing changes included reductions in welding and transfer time, lengthening the conveyor line, and adding another work station. Models with low demand were easily replaced with high demand items, making a new line available for high demand units. Even the paint shop (an expensive bottleneck) was reconfigured to accommodate production of additional units. These measures also released labour time for additional production”.
- 36.
Automation in the initial years was with greater use of numerically controlled machines (D’Costa 2004), but got intensified with the introduction of highly sophisticated machineries (including robots ).
- 37.
As per media reports, over 400 robots work in Hyundai’s Sriperumbudur factory. Ford’s Sanand Plant in Gujarat has 437 robots . Tata’s plant in Sanand has close to 200 robots . Maruti Suzuki has more than 1000 robots in its plants at Gurgaon and Manesar. Volkswagen India has 123 robots at its Pune plant.
- 38.
For a detailed account of new industrial relations and cooperative industrial practices in the automotive sector in the 1990s, refer to D’Costa (1998).
- 39.
D’Costa (2004) provides examples from MUL and Toyota Kirloskar, where the management could avoid or quickly settle strike, by resorting to non-confrontational modes.
- 40.
For instance, non-recognition of workers’ collectives was an issue that eventually led to labour protests in Tamil Nadu (Suresh 2010).
- 41.
In general, the automotive firms are found promoting ‘company unions’ (internal enterprise unions) and opposing the workers joining in political party-affiliated unions.
References
Annavajhula, J. C. B., & Pratap, S. (2012, August 25 & 2012, August 18). Worker voices in an auto production chain, notes from the pits of a low road—I & II. Economic and Political Weekly, XLVII No. 34, & XLVII No. 33).
Awasthi, D., Pal, S., & Yagnik, J. (2010). Small producers and labour conditions in auto-parts and components industry in North India. In A. Posthuma & D. Nathan (Eds.), Labour in global production networks in India. New Delhi: Oxford University Press.
Barnes, T. (2017). Why has the Indian Automotive Industry reproduced “low road” labour relations. In E. Noronha & P. D’ Cruz (Eds.), Critical perspectives on work and employment in globalising India. Berlin: Springer.
D’Costa, A. P. (1998). An alternative model of industrial development? Cooperation and industrial practices in India. Journal of International Development, 10.
D’Costa, A. P. (2004). Flexible Practices for mass production goals: Economic governance in the Indian automobile industry. Industrial and Corporate Change, 13(2).
D’Costa, A. P. (2009). Economic nationalism in motion: Steel, auto, and software industries in India. Review of International Political Economy, 16(4).
GoI. (2006). Automotive Mission Plan, 2006–2016, Ministry of Heavy Industries & Public Enterprises, Government of India, New Delhi. http://www.siamindia.com/uploads/filemanager/20AMP-2006-16.pdf. Accessed on October 15, 2015.
Jha, P., & Chakraborty, A. (2014). Post-fordism, global production networks and implications for labour: Some case studies from national capital region, India. Working Paper 172, Institute for Study of Industrial Development, New Delhi.
Krishnaveni, M., & Vidya, R. (2015). Growth of Indian automobile industry. International Journal of Current Research and Academic Review, 3(2).
Kumar, R. S. (2007). Global TNCs and local SMEs: Does subcontracting facilitate Indian SME competitiveness? Paper presented at the DRUID-DIME Academy Winter 2007 PhD Conference on Geography, Innovation and Industrial Dynamics, Aalborg, Denmark, January 25–27, 2007. http://www2.druid.dk/conferences/viewpaper.php?id=1012&cf=10. Accessed on July 20, 2015.
Mukherjee, A., & Sastry, T. (1996). Automotive industry in emerging economies: A comparison of South Korea, Brazil, China and India. Economic and Political Weekly, November 30, 1996.
Rani, U. (2005). Growth of small firms and diffusion of skills in these firms: Case of auto component industry. Paper presented at the IDPAD-funded Workshop on Globalisation and Informalisation: Consequences for Skill Formation, Security and Gender, held at India International Centre, New Delhi, October 17.
Remesh, B. P. (2014). Fundamental rights of workers at stake: Dissecting the Maruti workers’ struggles. In Sekar & Dhanya (Eds.), Worker’s right and practices in the contemporary scenario: An overview. V.V.Giri National Labour Institute, NOIDA.
Remesh, B. P. (2015a) Situating the ‘Automotive Revolution’ in Neo-liberal India: Evolution, industrial structure, trends and prospects. Input Paper (India-I), presented at the International Workshop on “Development of Automotive Sector in Emerging Countries”, Sao Paulo, Brazil, during 4–6 November 2015.
Remesh, B. P. (2015b). Expanding markets and worsening labour standards? The case of automotive sector in India. Paper presented in the International Conference on ‘Labour Questions in the Global South’, 18–20, November 2015, Jawaharlal Nehru University, New Delhi.
Sehgal, R. (2005, August 27). Gurgaon, July 25, police brutality not an aberration. Economic and Political Weekly, 40(35).
Sehgal, R. (2012). Maruti workers are the villains: Truth or prejudice? Economic and Political Weekly, XIVII(31).
Sen, K., & Das, D. K. (2015, June 06). Where have all the workers gone? Puzzle of declining labour intensity in organised Indian manufacturing. Economic and Political Weekly, L(23).
Sinha, P. (2015). Trade unions and industrial relations in the car industry in India. Input Paper (India-II), presented at the International Workshop on “Development of Automotive Sector in Emerging Countries”, Sao Paulo, Brazil, 4–6 November 2015.
Suresh, T. G. (2010). Cost cutting pressures and labour relations in Tamil Nadu’s automobile components supply chain. In A. Posthuma & D. Nathan (Eds.), Labour in global production networks in India. New Delhi: Oxford University Press.
Uchikawa, S. (2011). Small and medium enterprises in the Indian auto-component Industry. Economic and Political Weekly, 46(25).
Unni, J., & Rani, U. (2008). Flexibility of labour in globalizing India: The challenge of skills of technology. New Delhi: Tulika Books.
Vijayabaskar, M. (2008). Can cluster development programme ensure decent work? Evidences from Indian MSE clusters in global value chains. The Indian Journal of Labour Economics, 51(3), 2008.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2019 Springer Nature Singapore Pte Ltd.
About this chapter
Cite this chapter
Remesh, B.P. (2019). Re-reading the ‘Auto-revolution’ in India with a Labour Lens: Shifting Roles and Positions of State, Industry and Workers. In: D’Costa, A., Chakraborty, A. (eds) Changing Contexts and Shifting Roles of the Indian State. Dynamics of Asian Development. Springer, Singapore. https://doi.org/10.1007/978-981-13-6891-2_9
Download citation
DOI: https://doi.org/10.1007/978-981-13-6891-2_9
Published:
Publisher Name: Springer, Singapore
Print ISBN: 978-981-13-6890-5
Online ISBN: 978-981-13-6891-2
eBook Packages: Economics and FinanceEconomics and Finance (R0)