India’s Industries Depend on Cheap Labour Over Innovation

Source: The post India’s Industries Depend on Cheap Labour Over Innovation has been created, based on the article “Indian industry needs innovation, not mindless toil” published in “The Hindu” on 24th February 2025.

UPSC Syllabus Topic: GS Paper3-Effects of liberalisation on the economy, changes in industrial policy and their effects on industrial growth.

Context: The article discusses how Indian industries rely on cheap labour instead of technology and innovation. Workers work long hours for low wages, especially migrants. This harms productivity and growth. Other countries modernized, but India’s industries resist change, limiting global competitiveness and long-term progress.

For detailed information on Boosting India’s Economy through Innovation and Reform read this article here

What is the Current Working Condition of Workers in India?

1. Long working hours: Many factory workers, especially in Ludhiana, work 11-12 hours daily without breaks during high-demand periods.
2. Low job security: Only 21.7% of workers have regular salaried jobs, and half of them lack contracts, paid leave, or social security.
3. High work hours: ILO (2024) data shows Indian workers work 46.7 hours per week, compared to 38 hours in the U.S. and 36.6 hours in Japan.
4. Rise of contract labour: 56% of new factory workers since 2011-12 are contract workers, earning lower wages with no protection.

How Do Indian Industries Benefit from These Working Conditions?

1. Indian industries benefit by keeping labour costs low instead of investing in technology and innovation.
2. Big firms shift production to small, unregistered enterprises, avoiding labour laws. Over 70% of manufacturing workers are in such units.
3. 56% of new factory workers since 2011-12 are contract workers, receiving lower wages and no labour protections.
4. Factory sector profits increased from 31.6% (2019-20) to 46.4% (2021-22) while wages stayed low.
5. Industries avoid modernization, limiting growth, as seen in India’s stagnant 3.1% global garment export share.
6. These practices reduce costs in the short term but hurt long-term competitiveness.

What Challenges Do Small Firms Face?

1. Delayed Payments: Big firms delay payments to small businesses for several months after receiving supplies, causing financial distress.
2. Low Prices for Parts: Large companies refuse to increase payments for parts despite rising material and production costs.
3. Lack of State Support: Small businesses face inadequate access to bank credit and rising competition from cheaper imports.
4. Overdependence on Cheap Labor: 70% of India’s 68 million manufacturing workers (2021-22) work in small, unregistered enterprises (each with fewer than 10 workers).
5. Exploitative Relations with Large Firms: Unlike Japan, where small and large firms cooperate, India’s small firms face exploitative conditions that weaken them.

What Are the Long-Term Consequences?

1. Depending on cheap labour hurts innovation and economic growth. Even in new industries like IT, low wages slow progress.
2. Workers with low wages cannot buy much, which reduces demand in the domestic market.
3. Industries that focus only on short-term profits will struggle to grow in the long run.
4. Indian businesses must modernize and invest in technology to remain competitive.

Question for practice:

Evaluate how India’s reliance on cheap labour instead of technology and innovation impacts long-term economic growth and global competitiveness.