Introduction
India's informal sector contributes two-thirds of the country's GDP and employs more than 90 per cent of its workforce: as such, it occupies a central position in any study of the Indian economy. Worldwide, the informal sector has been defined in different ways, with much debate about its essential characteristics. Earlier models treated the formal and informal sectors as separate, self-contained economic realms; later studies have shown that the two are in fact intertwined, calling for a sharper focus on the employment relationship (rather than the unregistered enterprise) in order to define and understand informality.Footnote 1
Another closely linked theme comprises forms of regulation. The absence of the state in regulating capital accumulation, the labour market, and capital–labour relationships has been identified as one of the defining characteristics of the informal sector. Scholars see social structures such as caste, religion, and gender as taking over this role. However, recent studies point to a more nuanced relationship, arguing that state and social regulations do not work in opposition, but co-exist, accommodate, and complement each other.Footnote 2
This article explores some of these questions from a historical perspective. In most contemporary studies, the existence of the formal and informal sectors and/or employment relationships is taken for granted.Footnote 3 My aim is to explore the origins of this divide in India's modern economy as far as practicable. In this attempt, my principal focus will be on one key aspect of informality, namely the absence of any form of legal protection for its workers.
Historical work on the question is somewhat sparse. Peter Robb explains the exclusion of most of the workforce from the ambit of labour laws by arguing that the informal sector is essentially a residue of older indigenous forms of labour regulation and control that remained unaffected by new forms of regulation introduced by the colonial state. Colonial officials were able to make only a marginal impact upon modes of labour organization, labour relations, and control: state regulation failed to transform conditions in production regimes and the legislature's powers ‘proved puny in the face of caste on the one hand and “informal” coercive employment on the other (based on personal ties and extra economic relations)'.Footnote 4
In similar fashion, Micheal Anderson argues that legislation on work emerged in strictly limited areas of the economy: the category of workers was recognized and described solely in terms of industrial production and wage labour, leaving the actual organization of most forms of productive activity to local mechanisms and ‘organic’ elements of civil society (such as land, caste, and family). He does concede, however, that these local and organic elements operated under the pressure of expanding cultivation, commercialization of agriculture, and intensified revenue extraction,Footnote 5 and elsewhere points to the role of judicial interpretation and case law in classifying workers and the working class. By interpreting terms such as ‘artificers, workmen and labourers’ in the context of the Workman's Breach of Contract Act, the judiciary helped classify a ‘new social grouping, defined in legal terms, that anticipated the emergence of an industrial working class in India'.Footnote 6
The contention that colonialism had little impact on labour regulation has been challenged by Prabhu Mohapatra, who argues against the identification of the informal sector with the absence of state regulation. He explores the role of nineteenth-century legislation in creating informality (which he calls ‘regulated informality') by shaping capital–labour relations and privatizing labour regulation, granting the employer a wide range of disciplinary powers. In his view, this helped to create the so-called ‘spontaneous and natural’ character of informal relations between labour and capital.Footnote 7 Without focusing primarily on law, Douglas Haynes illuminates the role played by the state, through its interaction with weavers, master-weavers, and merchants, in shaping the contours of the informal economy.Footnote 8
My article seeks to build on and extend Mohapatra's argument in some new directions by examining labour legislation in the twentieth century for workers in small industries. I explore the relationship between the colonial state and labour in such industries as beedi-manufacturing, handlooms, arecanut-processing, and hotels through a detailed study of four labour laws enacted in the late 1940s: these industries were to become emblematic of the informal sector not long afterwards. I examine different facets that make up the realm of labour legislation: the formulation of law—debates in the legislative assembly and outside it; the process of administrative implementation (and non-implementation); and judicial interpretation at sites of litigation and arbitration (such as industrial tribunals and courts).
My discussion takes South India—what was the Madras presidency before 1947—as a case study.Footnote 9 Labour was (and continues to be) a concurrent subject: both central and provincial (later state) governments played an active role in legislating and implementing labour laws during this period. Two laws discussed in this article—the Madras Non-power Factories Act 1947 and the Madras Shops and Establishments (MSE) Act 1947—were passed by the Madras government. Two—the Factories Act 1948 and the Industrial Disputes Act 1947—were enacted by the central government. The actual implementation of all four laws, however, remained the responsibility of the Madras government. Thus, it is only by examining the life of legislation at the provincial level that we can best comprehend the relationship between law and workers in small industries.Footnote 10
The sections that follow examine these four laws at various levels: I begin with current debates around their formulation and enactment, go on to their administrative implementation, and look at interpretative implications that emerged at sites of jurisdiction and litigation. I also examine the role played by broader political forces including employer associations, trade unions, political parties, and civil society at large during this process. Briefly speaking, I argue that the various and complex ways in which these laws were formulated, interpreted, implemented, ignored, amended, and subverted played a key role in the classification of two distinct groups of workers: those who came to be protected by them and those who did not. I contend that it was not the state's failure or incapacity to transform existing structures of production and labour regulation in a very large sector of the economy that led to a widening division between the formal and informal sectors during this formative period. The opposite occurred: state policy and legislative actions entrenched and reinforced the formal–informal dichotomy, with workers in certain industries consciously denied any form of protection.
The industrial landscape
Data relating to the industrial landscape of South India during this period (apart from large factories) are noticeably scarce. However, scattered information can be combined to give some sense of scale and proportion. According to data collated by the commissioner of labour, there were no fewer than 43,347 ‘non-power factories’ in Madras province in 1930: small industrial units that used no electricity. Listed under this category were food-processing units milling grains and pulses and processing cashew and coffee; industries such as handlooms, leather-working, tile-making, jewellery-making, carpentry, printing, and binding; motor repairs; beedi and match factories; and so on.Footnote 11 In comparison, large-scale factories registered 14 years later in 1944 (under the Factories Act of 1934) numbered only about 4,300.Footnote 12 It should be noted that the war years (1939–45) saw rapid expansion of industrial production in the province, particularly in small-scale units that required low levels of investment—it is likely therefore that the figure of 43,347 non-power factories in 1930 had increased considerably by 1944.
Several of these industries could be described as ‘traditional', but this does not imply that they were in any sense relics of the past. The handloom industry has a history that goes back several centuries; in the 1940s, it employed the largest number of people outside agriculture and formed the largest proportion of non-power units. But it was far from being a holdover from an older economy. Elsewhere, I have argued that its organizational structures were fundamentally transformed during the late nineteenth and early twentieth centuries (when it came to be integrated into the structures of colonial capitalism). Some production moved to factories and small workshops—but weavers working from home also produced on capitalist principles.Footnote 13 Another example is the tanning industry, which was also transformed during the same period.Footnote 14 Beedi- and cigar-making units, match factories, printing presses, and metal workshops were more recent industries—products of the colonial economy, organized in units of varying sizes. It may be possible to isolate yet another category—of independent (not sub-contracted) artisans, producing for local consumption. However, data for them are exceedingly sparse.
Some non-power factories were large in size, employing hundreds of workers. They were usually ‘low roofed and ill-ventilated, unsuitable for carrying on any industry. Provision of latrines, urinals, drinking water and washing places are mostly absent in them'.Footnote 15 A large number of units were very small, often housed in homes, employing family labour, supplemented on occasion with hired workers. For example, the beedi industry was estimated to have 1,656 establishments in 1946, of which 386 (or 23 per cent) were relatively large. One factory in Bellary employed as many as 714 workers, but units employing 50–60 workers were much more common.Footnote 16 Many small workshops employed only a handful of people.
Most workers in these industries were kept on piece-rates (paid according to output) or daily wages. Very few were employed on a long-term basis (or paid monthly wages). Both work and wage payments were structured so as to make the labour of women and children invisible. This was linked to the wages of male workers, effectively subsidizing the profits of the enterprise. In the beedi industry, wages to male beedi-rollers included payments to women and child assistants.Footnote 17 In the handloom industry, women who did preparatory work and assisted in weaving cloth were not paid separately from weavers.
There were significant differences in the caste and gender composition of various industries: these were to change over time thanks to social, economic, and political developments. By the late nineteenth century, the majority of handloom weavers (and especially those who worked from home) came from specialist weaving castes. However, the middle decades of the twentieth century saw an increasing number of entrants from other castes into the industry. Meanwhile, weavers from the so-called ‘untouchable’ groups (particularly the Parayars of Tamil Nadu), once found in large numbers during the early nineteenth century, had almost disappeared from the scene by the 1940s.Footnote 18
In tanneries, the workforce was dominated by Parayars, regarded as ‘traditional’ leather-workers and presented as such. However, Shahana Bhattacharya has shown that their entry into the industry was a fairly recent phenomenon.Footnote 19 In the beedi industry, the workforce changed from being predominantly male to overwhelmingly female in the course of just a few decades (from the 1930s to the 1980s). In other words, labour was segmented along caste and gender lines in many industries—but the lines were fluid and capable of rearrangement. They were not the result of ‘primordial’ or unchanging factors, but stemmed from a constant interplay of social, economic, and political forces—among which the state also figured.
The birth of labour legislation for small industries: the Madras Non-power Factories Act and the MSE Act
Colonial officials were well aware of endemic exploitation and terrible conditions of work in small industries and workshops from early on: from time to time, suggestions to regulate these workplaces were made.Footnote 20 However, the first concerted demands for legislation emerged during the course of the 1930s when the Royal Commission on Labour recommended special legislation for unregulated and non-power factories.Footnote 21 In 1932, an attempt to introduce a private member's bill for artisans in the Madras Legislative Council was rejected.Footnote 22
Repeated demands from unions and recurrent conflicts in handlooms, beedi factories, and tanneries forced the first Congress government in Madras in 1937 to extend the Factories Act to some non-power industries.Footnote 23 However, the beedi industry was soon removed from the schedule on the grounds of impracticality: the commissioner for labour complained that owners of beedi-making establishments made it very difficult for factory inspectors to enforce the law by frequently shifting their premises.Footnote 24 The demand for special legislation to cover small industries was revived and began to be officially discussed around 1945: the commissioner for labour recommended a law to cover non-power factories with a system of licencing to prevent them from moving around.Footnote 25 The Madras Non-power Factories Act was enacted along with the MSE Act in 1947. After being introduced, the bills were sent to a select committee and subsequently debated on the floor of the Madras Legislative Assembly for four days. The government presented them as a path-breaking attempt to safeguard the interests of thousands of ‘voiceless’ workers in unorganized small industries, shops, hotels, and other establishments.Footnote 26
The bills met with little open opposition but a great deal of indirect resistance.Footnote 27 Some members warned that ‘there are certain provisions which, if applied will paralyse these cottage industries’.Footnote 28 They expressed the fear that large capitalists would push out those ‘with modest means', who would not be able to meet the new statutory conditions. The bills were presented as a threat to the very existence of small and cottage industries and petty traders. It was argued that Madras province, the home of cottage industries, should safeguard them instead of bringing hardship upon ‘small people'.Footnote 29
Considerable differences of opinion emerged during the debate on the bills on the floor of the assembly. Communist members argued that they were vaguely worded and weak: some specific criticisms made by them were supported by representatives of the Muslim League and a few from the Congress. One of them rebutted the government's claim that the MSE Act contained all possible safeguards for workers—in his opinion, it contained ‘everything and nothing'. He pointed out that it did not even specify a minimum living wage and gave sweeping powers to the state to grant exemption from its provisions. Nor did it provide security of employment: safeguards against arbitrary dismissal were linked to continuity of service, which could easily be subverted by sacking workers before the prescribed period and rehiring them.Footnote 30
The question of paid holidays proved particularly contentious. Communist representatives, joined by some members from the Congress (elected from seats reserved for labour and trade-union representatives), advocated writing 15 days’ casual leave, 15 days’ privilege leave, and 15 days’ sick leave into the bills (they provided only ten days’ leave in total under all three heads). Others argued that granting more holidays to workers would be unfair to employers (the small trader/producer) and have the effect of ‘paralysing industry'. One member described small employers fulsomely as ‘the real backbone of trade, they are the entrepreneurs, they are the agencies of industry and commerce of our Province. They are men of self-reliance and self-effort. I do not know why the government instead of coming to their rescue should propose measures restricting the scope of industry’.Footnote 31
Another argument held that the need of the hour was to increase production. It was already difficult to attract investment in manufacturing; the new provisions would only ‘prejudice the flow of capital'.Footnote 32 Once the country reached a certain stage of development with regard to production, workers would be justified in demanding more holidays but not before.Footnote 33 Another member argued that too many holidays would lead to ‘indiscipline and loss of production'.Footnote 34 In his opinion, shop assistants and workers in small establishments were ‘a contented lot', unlike workers in mills, and had a good relationship with their employers with whom they came into close contact every hour and every minute of the day. Yet another member wondered what workers would do with so many holidays: such idleness could only lead to mischief!Footnote 35 Members supporting the amendment argued that workers in small establishments should have the same rights as those employed in larger factories, railways, and government service. Finally, the minister for labour proposed a compromise of 12 days each of casual, privilege, and sick leave, which was accepted.Footnote 36
Three sets of voices are visible in this debate. The dominant viewpoint explicitly called for limiting workers' rights on the grounds that labour protection would only increase costs and hamper industry, particularly for small owners. Another set of voices supported the bills on the grounds that they extended protection to workers who lay outside the ambit of already existing legislation—but its proponents were willing to limit this protection and keep specific provisions vague in the interests of the greater common good (or the nation). Finally, a minority viewpoint argued that the laws had too many loopholes and would fail to achieve their intended effect. Its proponents pressed for a wider definition of ‘factory', more stringent provisions in favour of workers, and more comprehensive legislation addressing wage rates, bonus, and the right to union representation.
Foundational flaws
What kind of protection did the bills provide? The two laws were complementary: one sought to regulate working conditions in non-power factories (defined as any premises where ten or more workers were employed), the other regulated shops and commercial establishments (without any threshold in terms of number of employees). The regulations defined opening and closing times and number of hours of work and rest, and mandated health-and-safety regulations (such as the provision of sufficient light and ventilation), weekly and other holidays, conditions of dismissal, fines for negligence, and so on.
What the bills did not address is equally notable: wage rates, a minimum wage, social-security measures or the recognition of trade unions, were not mentioned in them. These omissions were criticized by some members of the assembly. The Madras government took the stand that minimum wages and Provident Fund contributions were ‘very big issues’ that would be addressed through other laws, not enacted yet but being contemplated by the central government. The right to trade-union representation was dismissed as being outside the scope of the bills.Footnote 37
Both bills contained some glaring loopholes: there seems little doubt that these were deliberately inserted. The application of the Non-power Factories Act to establishments employing ten or more persons is one example. Both during the debates and in the proceedings of the select committee (consisting of members from different political parties), it was predicted that employers would evade the law by splitting their businesses to keep the number of workers below the threshold.Footnote 38 One member of the select committee suggested lowering the threshold to establishments employing five or more people and the suggestion was repeated during the assembly debates.Footnote 39
The right to holidays was linked to continuity of service: only those employed continuously for 12 months in the same establishment could claim holidays in the subsequent year. It was pointed out that this provision could easily be circumvented by dismissing employees before their year of service ended and rehiring them after a short break.Footnote 40 Although the legislation made no distinction between daily-wage or piece-rate workers and those paid monthly wages, the stipulation of continuity made it almost impossible for the former to claim their benefits: employers could argue that their contract was only for short periods (as short as a day). An analogous stipulation nullified provisions against arbitrary dismissal: only those employed in an establishment continuously for at least six months were entitled to a notice of one month before dismissal for ‘reasonable’ causes (or one month's wages in lieu of such notice).Footnote 41
Quite apart from these loopholes, the bills gave the state extensive latitude in action. It could, at any time, exempt any industry or establishment from the scope of either law temporarily or permanently: this provision too was criticized during the assembly debates.Footnote 42 A number of other provisions were vague and imprecise, with many issues left to the discretion of factory inspectors: the inspector decided how much ventilation was sufficient and how much light workers needed (without any guidelines to test his decisions). Finally, the punishment for evading the law was paltry, consisting of very small fines: unions pointed out that these barely amounted to a day's profit even for moderately prosperous owners.Footnote 43
Two features of the Madras bills—the ascription of discretionary powers to the state, and weak and vaguely worded provisions—were to become the defining hallmarks of labour legislation in India. In 1948, the Memorandum on the Revision of the Factories Act (a central legislation) had this to say: ‘Many essential points are now left to the rule making powers of provincial governments. It is desirable that all the essential provisions should be covered by the substantive provisions of the statute itself’ and ‘The outstanding defect of the Act is that it leaves a very great deal of what would be prescribed in the Act itself to the discretion of the Inspectors’. The memorandum noted that, in essential matters relating to health, safety, and welfare, there was little justification for differentiating between industrial undertakings on the basis of number of workers or employees.Footnote 44 But this was exactly what the Madras bills did.
Wider responses
An opinion piece in a newspaper pointed out that, since the Madras government had espoused a policy of supporting small-scale industries, it should take steps to protect their workers as well, for the most abject working conditions were often found in these industries. It argued against limiting the scope of labour legislation to establishments employing more than ten workers: it would be best to have no threshold at all but, if considered absolutely necessary, the minimum number should be set at five. This would go a long way in preventing the subdivision of factories into small units to avoid legal sanctions.Footnote 45 Unions welcomed the new laws, warning at the same time that factory owners would try their best to evade them; they also called for speedy implementation of the more comprehensive recommendations made by various courts of enquiry into working conditions in different industries.Footnote 46
Affected businessmen immediately began lobbying the Madras government against the bills. Even before they were passed, several employer associations had begun writing to the government warning that application of the proposed laws to this or that industry would have the effect of destroying it. Each association had its own set of arguments. Beedi-factory owners passed formal resolutions stating that, if the Madras government truly wanted to promote ‘indigenous’ and ‘cottage’ industries, it could not afford to bring them under such laws: the tobacco industry was the backbone of many districts, employing lakhs of workers; labour legislation would destroy it entirely. They objected to the proposed system of licencing, statutory stipulations on health and safety, and even the ban on child labour: in their view, abolishing it would not only harm the industry, but also affect child labourers for the worse! Since poor families could not afford to send children to school, forbidding these children from working was to prevent them from learning a skill that would equip them for the future.Footnote 47
The South India Tanners and Dealers Association objected to a weekly holiday for workers on the grounds that tanning was a continuous process that could not be disrupted; since tannery workers were usually employed on a piece-rate basis and ‘could come and go as they pleased', it was impossible to regulate hours of work.Footnote 48 Associations of handloom factory owners claimed that the Non-power Factories Act would raise establishment costs and render them uncompetitive vis-à-vis the mill industry.Footnote 49
The implementation and after-life of provincial legislation
Of the two laws, the Madras Non-power Factories Act had a very short life. It came into operation on 1 January 1949. Before this, the Madras government had permanently exempted all non-power factories belonging to or under the control of the Government of India from its provisions.Footnote 50 The state, instead of setting an example, led the way in denying its workers statutory protection. The law was repealed less than five months later, on 22 April 1949, following the passing of the Factories Act of 1948 by the central government. The stated reason was that it was ‘unworkable in view of the leave facilities provided therein which are far more liberal that those contained in the new Factories Act'.Footnote 51
It should be pointed out that the central legislation was expressly designed for larger factories. It only covered units employing 20 or more workers (if they did not use electricity) and ten or more workers (if they used electric machinery). Instead of retaining a law specifically devised for small factories, the Madras government chose to replace it by a central legislation meant for much larger units. At the same time, it promised to bring small factories within the ambit of the Factories Act by using its inherent powers under section 85(1), which gave provincial governments the authority to declare any premises a factory.
This retrofitting inevitably opened the door to legal challenge. When the Madras government passed a notification classifying all non-power units employing 10–19 workers as factories, two beedi-making units promptly moved the High Court. The court ruled that, under the Factories Act, the provincial government had the authority to declare specific establishments factories, but not a whole class of industries.Footnote 52 This meant that the Madras government now had to trace and identify every one of tens and thousands of individual units and reclassify each as a factory by name. Only then could it be forced to take out a licence. This was clearly impossible. Under the Madras Non-power Factories Act, every factory had been obliged to apply for a licence. Its repeal meant that the vast majority of units escaped regulation—the very purpose for which it had been enacted was decisively defeated in a very short time.
The MSE Act: a saga of exemptions
The MSE Act proved equally ineffective, albeit for somewhat different reasons. The process of granting exemptions began immediately after its passage: all establishments belonging to the Government of India were exempted permanently from its provisions.Footnote 53 Advocates' chambers, doctors' consulting rooms, dispensaries, nursing homes, and hospitals were also exempted.Footnote 54 So were offices of registered chartered accountants and auditors, income-tax practitioners, educational institutions, and hostels—all establishments run by the India Coffee Board, offices of the agents of the labour department of the United Planters Association of Southern India, and so on.Footnote 55 Certain establishments were exempted from closing once a week; others had stipulated opening and closing hours relaxed for them.
The Madura Betelnut, Beedi, and Cigarette Merchants' Association petitioned the government for exemption from the weekly holiday. Some trade unions (such as the Commercial Employees Union, Devakotai) objected to this, arguing that all shops, big or small, should be closed once a week and complaining that no inspector actually enforced this provision.Footnote 56 From the very beginning, all those employed on contract for fixed periods were exempted from the provisions of section 41 of the act, which stipulated that employees could not be laid off except for a ‘reasonable’ cause after one month's notice or wages in lieu of such notice.Footnote 57
Soon after the passage of the act, the Madras government put forward a proposal exempting establishments employing fewer than three people from the act. The commissioner of labour objected on the grounds that the act was designed for ‘the weal of unorganized labour in establishments not covered by the Factories Act'; if it was to be amended at all, the aim should be ‘to better the lot of labour without distinction rather than [curtailing it] in scope'. The government asked city corporations and municipalities for their opinion: a majority of them supported the proposed amendment. Business associations like the Madura Ramnad Chamber of Commerce passed resolutions in support of the government's proposal.Footnote 58
The secretary to the Madras government argued that the question was one of objectives. The government would have to decide whether it wanted ‘to serve the interests of the small trader who is willing to cater to the interests of the poor if he is freed from vexatious rules and officers …. The petty trader is as much entitled to sympathy and assistance as the employee’. It was argued that, from the administrative point of view, a large staff was needed for implementation, which was simply not available; numerous prosecutions had to be withdrawn, as the offenders could not be traced.
In 1952, master-weavers from Udipi passed a resolution calling for the handloom industry to be exempted from the act; similar petitions were also received from the Mangalore Handloom Owners' Association and Salem Carpet Manufacturers' Association. They objected to the compulsory weekly holiday on the grounds that weavers were paid on a piece-rate basis: the holiday only served to deny them a day's wages. Their petitions were supported by the member of the Legislative Assembly from Udipi. A memorandum by the Development Department noted that the strict application of the act had subjected owners of handloom factories to ‘a lot of restrictions and hardships'. But it felt that protests by ordinary weavers might erupt if the whole industry was exempted from the act. The commissioner of labour was asked to look into the matter.Footnote 59
The commissioner noted that establishments run by family members were already exempt from the weekly holiday, as were independent weavers. He pointed out that the act was eminently reasonable: since the provisions for casual leave, sick leave, and so on applied only to those who had been continuously employed for 12 months, it was unlikely that piece-rate workers would benefit from them. The weekly holiday was the only benefit they got. He was of the view that ‘whilst the handloom industry deserves special treatment and encouragement from the state it must not be at the cost of labour employed in that industry'.Footnote 60
The commissioner's objection was overruled. An official in the Development Department held that the compulsory grant of leave and holidays to piece-rate workers tended to reduce their earnings; the survival of the handloom industry depended upon cutting costs of production in order to compete with mills. The minister for industry and labour favoured exempting the industry for a year to begin with. Finally, an order was passed exempting all persons employed on contract in handloom establishments and all piece-workers from the act. Henceforth, the only clauses that would apply to the handloom industry were the prohibition of child labour and keeping premises clean and well ventilated.Footnote 61
Like master-weavers, jewellery-workshop owners also petitioned the government for exemption from the act. They were supported by a member of the Madras Legislative Council, who tabled a private resolution recommending the exclusion of all workshops (pattarais) employing fewer than five workers.Footnote 62 To this, the commissioner of labour observed that ‘all employers of all trades’ found it ‘irksome’ to observe the provisions of the act and sought exemptions from it. On the other hand, employee associations wanted it to be ‘enforced with rigour, unmindful of the adverse consequences to the trade, general public and to the employees themselves'. Therefore, the government needed to hold the scales even by keeping exemptions ‘to the barest minimum'.
The Madras government ignored this advice and decided not to oppose the resolution. The secretary to the government and the minister for industries and labour recommended reviewing the law (on the basis that numerous complaints had been received against it). A special officer was appointed to investigate its working: he recommended that shops and establishments run by owners (and members of their families) be exempted from its provisions, and also workers employed on contract and piece-rates if they applied for such exemption themselves. Finally, he recommended against restricting its application to establishments employing more than three people.Footnote 63
These recommendations were also set aside. Family-run shops and establishments were exempted, but also all those employing fewer than three workers and all workers employed on contract and piece-rates.Footnote 64 With this, small workshops of every kind were let off the hook: owners could subdivide their enterprises, claim they were run by family members, or keep their workers permanently on piece-rates. After 1954, the MSE Act was mainly cited by unions of white-collar workers in large enterprises and, somewhat surprisingly, by hotel workers.
Hotel workers, especially in the larger towns and cities, were relatively well organized during this period. Their petitions reveal the variety of methods used by hotel owners to evade the law. These included defective record-keeping, shifting employees between branches (in order to avoid showing continuous employment), firing and rehiring them after a break, and so on. These complaints were verified by an enquiry commission. Following its report, a separate law was passed to protect workers in hotels, restaurants, and catering establishments—only for the process of vaguely worded provisions, built-in loopholes, and ineffective implementation to be once again repeated.Footnote 65
The gradual breakdown of central legislation: implementation of the Factories Act
A textbook example of the subversion of the new Factories Act is provided by arecanut-processing factories. By the terms of the original notification extending it to small factories, all arecanut-processing units employing ten or more workers were declared as factories. The High-Court judgment annulling the notification forced the Madras government to take action on a case-by-case basis.
In 1950, an assistant factory inspector drew up a list of arecanut-processing units in the Mettupalayam area of the Madras presidency and issued a notice classifying them as factories. Their owners were merchants who processed, sorted, and graded arecanuts before selling them. This work was usually carried out in yards and buildings adjoining their houses. Prosecutions were launched against 16 owners for not complying with various provisions of the Factories Act. They immediately began lobbying the government through the Mettupalayam Agriculturists Association.
The association argued that the units could not be notified as factories, for arecanut-processing was agricultural and domestic in nature, not industrial. It did not fundamentally alter the state of the produce and therefore could not be defined as manufacturing. Finally, each unit claimed to employ only two or three workers for fumigation (workers who did the sorting and the grading were said to be sub-contracted through an intermediary). Since each unit employed fewer than ten workers, according to them, it could not be classified as a factory.Footnote 66
The Madras government gave orders to proceed slowly with prosecutions (by instructing its lawyers not to object to repeated adjournments of the case at the request of the affected owners). When the district judge put his foot down at this, officials in the Development Department asked for directives on how to proceed. The commissioner of labour was opposed to exempting the units, but the minister of industry and labour had a very different opinion. After visiting the area (at the invitation of the Mettupalayam Agriculturists Association), he expressed surprise that the units had been declared factories in the first place. According to him, some of the women employed in them (whom he claimed to have spoken to) seemed satisfied with their working conditions. For this reason, he recommended the withdrawal of all prosecutions under the Factories Act and exemption of all units from its provisions. A departmental memo noted that it was the policy of the government ‘that the provisions of the Factories Act should not be applied rigidly on establishments like arecanut factories'. In the end, both prosecutions and the notification under the Factories Act were withdrawn.Footnote 67
The matter did not end there. The factory inspector tried to take action against the units again, this time under the MSE Act. Once again, the Mettupalayam Agriculturists Association took the matter up with the government. It argued that, just as their premises were not factories, they could not be classified as shops either. There were no permanent structures for storage and the whole process was seasonal. The ‘coolies who do piecemeal work’ could not be called ‘workers', for the work was neither permanent nor did it require any ‘skill’: ‘deft fingers’ were sufficient and ‘women who have no other work to do at that time, visit our houses and offer their services quite casually to earn a few more coppers'. The work was ‘personal’ and there were no muster roles.
The commissioner of labour rejected these contentions: he argued that arecanut ‘mundies', as they were called, employed many workers (up to 50), mainly women, but also children, to split, boil, dry, and fumigate produce. This processing was carried out for sale (and not personal consumption), bringing them under the purview of the MSE Act. This fresh attempt to regulate the industry also failed: the Madras government issued an order that ‘establishments concerned with curing and storage of arecanuts cannot be termed “shops”’.Footnote 68
Thus arecanut-processing units were officially declared to be neither factories nor shops or commercial establishments. The state accepted the owners' contention that work performed in them was not work; that those who performed it were not workers according to the law's definition. Much earlier, during the Madras assembly debates, a member had drawn attention to the abysmal conditions of work in arecanut-processing units, and the chronic lacerations on the fingers of women and children who worked in them.Footnote 69 But, precisely because they were women, their contribution could easily be stereotyped and set aside, described as unskilled, part-time, and so on. This is not the only instance when gender played an important role in debates about labour legislation, reinforcing segmentation of the labour market.Footnote 70
The failed attempt to regulate arecanut-processing units demonstrated the social dominance of small-factory owners and their enduring political influence. This was one of the rare instances when an officer actively tried to enforce workers’ rights—however, the owners simply went over his head to the political leadership of the Congress to win their case.
The beedi industry
When the Non-power Factories Act and Madras Shops and Establishment Act were debated in the Madras assembly, some members objected to their application to women working from home: in their opinion, this would lead to the destruction of whole industries, leaving women unemployed.Footnote 71 Women rendered vulnerable by poverty and patriarchal structures were perceived to need protection from labour laws rather than through them. The beedi industry is a classic case, and its radical restructuring in response to labour legislation is a textbook study in the state-sanctioned creation of informality.
Beedi manufacture began expanding from around the time of the First World War: a fairly large proportion was carried out in factories employing as many as 50 to several hundred workers. In some areas (such as Tinnevelly district), beedi-rolling by women at home was already common. Elsewhere, it was carried out in workshops, predominantly by men: women and children did accessory jobs such as cutting the leaf and tying thread. Factories were over-crowded, with hardly even room to stand upright and almost no light or ventilation.Footnote 72 It was labour mobilization in the beedi industry that originally led to demands for legislation to protect workers in small industries. These agitations were strongest in the Malabar region, but the 1940s saw many strikes across the Madras presidency.Footnote 73
As a result, the Madras government declared all beedi-making establishments factories under the Factories Act of 1934. But factory owners regularly shifted location to avoid inspectors and the beedi industry was excluded from the purview of the act in 1941.Footnote 74 The next attempt at regulation came when it was brought under the Madras Non-power Factories Act. During the assembly debates, a member pointed out that beedi manufacturers were already splitting their enterprises into smaller units in anticipation of its provisions.Footnote 75 Soon after the act was passed, an industrial tribunal noted that beedi manufacturers had begun giving their workers raw material to take home to roll into beedis. The reason was that children (in this case young boys) could not legally be hired as assistants on factory premises: outsourcing production was a way of retaining cheap child labour.Footnote 76 When the Non-power Factories Act was repealed, beedi establishments employing more than 20 workers came, nominally at least, to be covered by the new Factories Act of 1947.
In 1953, some members of the Legislative Assembly criticized the failure of the Madras government to protect beedi workers, pointing out that manufacturers were pushing production into homes in order to escape labour legislation. They demanded that the law be extended to units with two or more workers. Upon this, the chief minister, C. R. Rajagopalachari, replied that ‘the whole of this business, as far as I am able to see, depends upon home labour and if factory laws are applied it would create great distress'.Footnote 77
A report by a special officer appointed to investigate labour conditions in the industry in 1955 reported that ‘a scheme of organized fragmentation of the once-large factories was put through by the big manufacturers'.Footnote 78 By adopting a structure of indirect employment through agents (called branch managers), the owners avoided direct dealings with workers. On paper, these were shown as employees of the branch manager. The branch manager was usually a loyal employee of the owner, lacking the financial wherewithal to function independently, but presented as an independent contractor in order to evade the law. The report explained how the MSE Act had also failed to protect beedi workers: it could be enforced only in urban municipalities and large panchayats: smaller establishments were officially exempted from its provisions. Finally, it did not apply to ‘the homes of workers where this industry has taken refuge'.Footnote 79 The special officer proposed the enactment of a new law for the beedi industry, with the objective of preventing sub-contracting and home-based work. He suggested restricting beedi manufacture to licenced premises and incorporating wider definitions of employer and employee.Footnote 80
There was strong opposition to the idea. When the proposed legislation—the Madras Beedi Industrial Premises (Regulation of Conditions of Work) Act—was finally passed in 1958, owners argued that it would put them at a disadvantage vis-á-vis beedi manufacturers in neighbouring states. They were told that all they needed to do was register and apply for licences: the law would not be enforced until other states brought similar legislation!Footnote 81 One of the first acts of the Madras government was to exempt women from the requirement of obtaining a licence in order to roll beedis at home. A large section of the industry continued to thrive and expand on home-based workFootnote 82 and the state took no action to prevent owners from modifying production methods.Footnote 83 This trend continued until, by the 1980s, the bulk of production was performed by home-based workers and most male workers had been replaced by women.Footnote 84
Other industries
There is plenty of other evidence to show that the Madras government actively advocated lax implementation of the Factories Act where small industries were concerned. Handloom factories in Karur were exempted for three years from section 16 of the act (stipulating floor space per worker). Many handloom workshops were sited in houses and horribly over-crowded.Footnote 85 Other provisions were freely flouted: no daily-wage or piece-rate worker ever got a paid holiday, for example.Footnote 86 Factory owners argued that weavers in their establishments could not be called ‘workers', as they were hired on piece-rates and had no fixed hours (or days) of work.Footnote 87 In the end, handloom factories were exempted from the Factories Act.Footnote 88
Let us take another example, from the tanning industry this time. The South India Tanners and Dealers Association of Ranipet requested exemption from the weekly holiday stipulated by the Factories Act. It argued that tanning was a continuous process and could not be stopped, and also that most tannery workers were on daily wages and preferred working seven days a week (for, otherwise, they would lose a day's wages). The commissioner of labour demolished both arguments without much difficulty: if tannery workers felt the loss of a day's wages so acutely, this meant that their earnings on the other six days were not enough and should be increased to cover the weekly holiday. This could be provided in rotation to avoid shutting down the factory and keep production going.
The Madras government disagreed with its own commissioner: it was of the opinion that granting a weekly holiday in rotation would involve employing more workers, and small factories could not afford the extra cost. Instead, it asked the central government to amend the Factories Act so as to ‘allow piece rate and daily rate workers to work overtime and without holidays at their option'. The Government of India opined that this would be a retrograde step, but was willing to place the proposal before the Tripartite Conference.Footnote 89 Until the matter was satisfactorily resolved, the secretary of the Development Department suggested that the commissioner be issued executive orders not to enforce weekly holidays on casual workers in tanneries if they were willing to work.Footnote 90
The Industrial Disputes Act 1947
The years immediately after the Second World War saw widespread labour unrest. In response to agitations in the handloom, beedi-making, and tanning industries, the Madras government set up courts of enquiry for each sector. These were conducted by a single appointee who submitted a report with recommendations. All the reports recommended that profit-making firms increase their workers' wages and pay bonuses to them. Unions began agitating for the implementation of these recommendations. The government argued that, since they were not legally binding, it could do no more than encourage employers to implement them. One official expressed the prevailing view when he wrote that ‘no employer was prepared to give effect to them and as a result such recommendations only contributed to further labour unrest by giving labour unions material for insidious propaganda against employers and the government’.Footnote 91
As a way out of the deadlock, the Madras government decided to appoint tribunals for whole industries/sectors under the Industrial Disputes Act (on the grounds that their decisions could be legally enforced). This was done for textile mills as well as some small industries (beedi factories and engineering firms), usually when unions became vocal. When tannery owners refused to implement the recommendations of a Court of Enquiry, labour agitations commenced and the government convened a conference with owners and unions. When the owners still refused to yield, the government referred the issue to an industrial tribunal.Footnote 92
Factory owners approached the Madras High Court, challenging these collective references. The court ruled that general references for adjudication without specifying the disputes, or the firms in which disputes had arisen, were invalid under the Industrial Disputes Act.Footnote 93 This meant that all awards already passed by special tribunals became invalid, putting the Madras government in a quandary. A conference of trade unions decided that, if immediate steps were not taken to validate them, a general strike would be called.Footnote 94 The government hastily passed an amendment to the act giving it the power to make general references and validating awards already passed. This was challenged in the High Court—once again, the court held the amendment to be contrary to the basis of the original act and struck it down.Footnote 95
Meanwhile, the Madras government began referring individual disputes to tribunals set up under the act. Several unions were agitating for bonus payments (as recommended by courts of enquiry), the creation of a Provident Fund, and implementation of the provisions of the Non-power Factories Act, the Payment of Wages Act, the Maternity Act, and so on.Footnote 96 All these demands came before the industrial tribunals through individual cases referred to it by the Madras government.
Disputes taken to industrial tribunals generally dragged on for years: employers adopted delaying tactics (such as not appearing for hearings, failing to produce documents, trying to get proceedings stayed by the Madras High Court, and so on). These tactics were repeated when the state prosecuted employers for not implementing awards. One tribunal observed of a case before it that, while the management of the firm in question had put forward an experienced lawyer able to make legal arguments effectively, the workers were represented by the assistant secretary of their union, who had little knowledge of either English or case law.Footnote 97 Resources and staying power were needed to fight cases in tribunals but labour in small and dispersed industries lacked both. Collective referrals made things a bit easier but, once these were invalidated, fewer cases came to be pursued.
The Industrial Tribunals Act, like other labour laws, vested a good deal of discretion with tribunals. Essentially, the tribunal acted as arbitrator: more often than not, its decisions were made not on points of law, but on the basis of what was considered ‘reasonable’. In the beginning, conflicting decisions in very similar cases were passed by different tribunals: one might recognize an employer–employee relationship between master-weavers and workers while another would not.Footnote 98 Some tribunals awarded bonuses while others refused them; some favoured profit sharing while others dismissed the idea.Footnote 99 The act itself laid down no guidelines on bonus payments, wage increases, and dismissals: it was left to each tribunal to decide these demands on a case-by-case basis. While determining wage rates, some tribunals based their recommendation on what workers were willing to accept, others on the capacity of the industry to pay, requirements of survival, wages paid in co-operatives, and so on.Footnote 100 Other decisions were equally arbitrary.Footnote 101
In most cases, tribunals ended by ruling that workers in small industries were ineligible for a bonus or Provident Fund. In one dispute between beedi workers and their employers, a tribunal rejected any increase in wages and payment of dearness allowance on the grounds that it would lead to losses for management. It held that, because workers were paid by piece-work, a Provident Fund could not be instituted, compensation for non-working days could not be allowed, and house-rent allowance could not be granted. Workers could not claim paid-weekly or even festival holidays.Footnote 102 During another dispute over wages in beedi factories in Tinnevelly district, a tribunal noted that several owners were employing women working from home. Even though the government had asked it to rule on wages in general (for the whole district), the tribunal restricted its ruling to factories where workers were represented by a union—on the grounds that only in those cases could a dispute be shown to exist. As far as women working from home were concerned, their wages could not be fixed, for their grievances had not been formally represented by anyone!Footnote 103 Unsurprisingly, it soon became almost impossible for workers in small units to get relief under the Industrial Disputes Act.
Towards a conclusion
Who is a worker?
The central issue in the tussles around labour legislation during this period concerned the very definition of ‘worker'. On it depended the claim to rights and protection. Whether an individual was granted the status of a worker or not depended on many factors. Different laws incorporated different definitions: he or she needed to fit them in order to claim protection. And, even after his or her status was acknowledged, different levels of protection were set, with different standards governing eligibility. Certain vulnerable categories were persistently denied legal standing as workers: piece-rate workers, women working from home, daily-wage workers. In the end, all workers in small industries found that they could claim very little by way of statutory rights.
The tendency to ignore piece-rate workers is particularly evident in the handloom industry. Tribunals under the Industrial Disputes Act gave conflicting rulings on the relationship between weavers and master-weavers/factory owners irrespective of whether they worked from home or in workshops.Footnote 104 The owners argued that they ‘sold’ yarn to weavers and ‘bought’ finished cloth: therefore, the relationship was contractual; weavers worked when they pleased; they (the owners) exercised no control over the production process. They went to the Madras High Court to stop tribunal proceedings on the grounds that, without an employer–employee relationship, no dispute could be said to exist.Footnote 105 After a number of cases had gone to court, a rough legal consensus emerged. It recognized an employer–employee relationship between weavers and master-weavers but this did not deter employers from continuing to deny it. Even if the denial did not withstand scrutiny in the long run, it was effective in delaying legal proceedings. In 1957, when a dispute over wages and bonus erupted in Madurai, owners put forward this legally discredited argument and the local labour officer accepted it. It was only after further petitioning by unions that the decision was overturned and the dispute referred for adjudication.Footnote 106
In the case of workers brought together to roll beedis, matters were more clear-cut, but even this did not prevent factory owners from arguing that an employer–employee relationship did not exist.Footnote 107 An effective way to cloak it, as we have seen, was through sub-contracting. In 1954, the Industrial Tribunal of Madras ruled that the definition of workmen under the Industrial Disputes Act did not include contract labour: therefore, workers ostensibly hired by branch managers (intermediaries) were not workers or employees under the law.Footnote 108 Rulings by other tribunals and decisions handed down in court successively narrowed this definition by excluding all those employed on a ‘casual’ basis. This meant that all workers in small industries were effectively excluded.Footnote 109 In 1962, the Supreme Court of India ruled that beedi workers employed on contract, whose work was not directly supervised by the employer, were not ‘workers’ as defined by the Factories Act either.Footnote 110
It should be noted that recognition as employees/workers did not automatically confer statutory entitlements. The very process of implementing labour legislation created a hierarchy within the broad category of worker. Those paid monthly salaries had a stronger claim to better entitlements than daily-wage workers. Last of all were those on piece-rates. The law itself—in this case, the Industrial Disputes Act—did not make any distinction between these categories; they were created and reinforced by specific rulings which held that piece-rate workers (in beedi-making, handlooms, and so on) were not entitled to Provident Fund, bonus, or paid leave.Footnote 111
Another way of denying workers' rights was to exclude whole industries and categories of workers from the scope of legislation. Most laws applied only to establishments employing more than ten workers (and some only to those with more than 20 or 50). Workers in smaller enterprises had no rights at all. We have already seen how, in the case of beedi-making and arecanut-processing, women workers were systematically denied protection. Other examples could be cited to reinforce this point. The Madras Catering Establishments Act defined hotel employees quite broadly as any person employed in or in connection with any catering establishment, exempting only family members and those in managerial posts. But, after lobbying by hotel owners, the Madras government decided to exempt women engaged in grinding batter (who ostensibly worked part-time) from the law's provisions: they had to be entered in muster rolls but that was all.Footnote 112 This meant that they were not entitled to benefits such as Provident Fund or maternity and paid leave.
Owners in the coir industry (where most workers were women) argued that their primary occupation was housework: they worked in factories during their ‘spare’ time and were not the principal earners in the family. According to them, women were ‘casual’ or ‘faltu’ (literally worthless) labour, employed irregularly and paid on a piece-rate basis: therefore, they did not qualify for benefits (this applied to women who had worked for as long as 20 years).Footnote 113
Aditya Sarkar, in his thought-provoking study of early labour legislation in India, argues that protective labour law is based on the principle of exclusion—a division between those entitled to the protection of law and those excluded from it. However, while the principle of exclusion is stable and consistent, its content varies. In the case of early labour legislation, it was the adult male labourer who was excluded: only ‘vulnerable’ groups such as children and women were deemed to require legal protection. This was the natural outcome of an ideology of free labour with its stress on freely contracted relations between employer and employed.Footnote 114
In the Madras presidency during the 1940s and 1950s, the central issue (in debates over the content of labour legislation, during its implementation and in the context of subsequent litigation) was the definition of a worker/workman/employee. But, by this period, the discourse around legitimacy had shifted: vulnerable workers no longer received any particular attention. Instead, the emphasis was on arriving at a more or less standardized and stable definition of ‘worker'. This inevitably involved exclusion, and the process of exclusionary definition occurred at three sites: during the formulation of labour laws, their executive implementation, and in courts and tribunals, where they were challenged, debated, and adjudicated. From this process, a core category defined narrowly and restrictively was gradually created: a category entitled to legal protection even as the rest of the workforce was excluded from it.
Protecting the ‘small man’
Alongside conflicts over the definition of a ‘worker', arguments about the need to protect certain kinds of entrepreneurs played an important role in shaping labour legislation. These entrepreneurs were presented as being as deserving of protection by the state as their workers. The ‘small men’ of trade and industry became a catchphrase, repeatedly used by employers to resist regulation. At every stage, from drafting to implementation, employers did their best to prevent workers from gaining access to protective legislation. They petitioned, lobbied, moved the High Court, hired lawyers, delayed proceedings, and sought to tire out unions. A key argument deployed at every stage of this process was the necessity for protecting cottage industries—meaning their owners: ‘small men’ presented as the epitome of entrepreneurial spirit. Ironically, arguments for protecting these ‘small men’ or underdogs were made in order to deny protection to those even ‘smaller'—their workers. It was argued that labour legislation would lead to destitution of workers. They were infantilized by the assertion that employers treated them like family members, obviating the need for legal protection.Footnote 115 Women workers in particular were presented as needing protection from labour laws.
In this rhetoric, Madras was depicted as the home of cottage industries.Footnote 116 Government support was defined as exemption from any form of regulation.Footnote 117 This viewpoint fed into wider arguments—one that stressed the need to support industry in order to strengthen the economy; the other that tapped into the Gandhian ideology of encouraging decentralized village industries. The first discourse was that of nationalist development. It was used by the prime minister, Jawaharlal Nehru, to call for a truce between capital and labour: the need of the hour was to encourage industry and help the economy grow. This argument was repeated endlessly by small and large capitalists and their political supporters.
Small-scale industry began receiving state support well before 1947. Tyabji shows how the colonial state encouraged manufacturing during the Second World War in order to meet war demand. By the war's end, small capitalists were recognized as a separate group, with aid agencies and programmes developed specifically for them.Footnote 118 After independence, economic planning as espoused by Nehru's government was dominated by the vision of large-scale factory production, at least in the beginning. The place of small-scale and village industries (usually conflated with each other) remained uncertain for a time. They attracted strong support within the Congress but were relegated to the margins in the run up to the first Five Year Plan.Footnote 119 By the Second Plan, it was clear that the expansion of large-scale industry would take time, and attention swung back to the small-scale sector. It was this sector that was now expected to play the role of providing employment, and also consumer goods required to meet projected demand.Footnote 120 The revised policy of supporting small-scale industry served to integrate the Gandhian vision of protecting traditional rural and cottage industries into the Nehruvian blueprint. It should be noted that the policy did not limit itself to ‘traditional’ industries by any means, but promoted modern industries, employing new technologies and organized along capitalist lines.Footnote 121
Conclusion
State policy played a significant role in deepening and institutionalizing the emerging divide between the formal and informal sectors in the decades around independence. This is not to imply that the informal sector was created entirely by the state or emerged only in the 1940s. However, legislative action during this period helped to precipitate a distinction between different categories of workers, even as these categories continued to be contested by the workers themselves and their representatives.
There is little evidence for statutory regulation of pre-modern industry in South Asia. The available evidence shows that the state conferred rights or privileges, confirmed customary practices, addressed petitions, and intervened in conflicts between antagonistic actors (merchants and weavers, for example).Footnote 122 In the early phase of colonialism, state regulation took the form of rules and legal provisions aimed primarily at controlling labour: these drew upon Britain's Masters and Servants Act, adapted to a colonial context.Footnote 123
The first factory legislation came into being towards the end of the nineteenth century. Though these laws were very limited and weak, their existence created a division between those entitled to protection under them and the rest of the workforce.Footnote 124 The parameters for inclusion and exclusion changed over subsequent decades but, on the whole, the prevailing tendency, albeit halting and slow, was towards widening the scope of labour legislation, defining categories like worker and factory more broadly. Several factors contributed to this—the emergence of a factory-based industrial sector, labour mobilization and the growth of trade unions, the impact of two world wars, conflicting interests of capitalists in India and Britain (British firms supported labour legislation in India because it drove up the costs of their Indian competitors), and greater global receptivity to workers’ rights encapsulated in the creation of the International Labour Organization.
As workers in large factories began obtaining forms of legal protection, conditions of work in small industries were thrown into much starker relief. Some of these had a long history, but their separation into a distinct category accelerated, becoming much more obvious during the first half of the twentieth century. We have already seen that this category comprised traditional industries (such as handlooms) and relatively new ones (like printing presses and engineering workshops). The handloom sector had already been transformed during the course of the nineteenth century by new economic, social, and political forces unleashed by colonialism. By the middle of the twentieth century, both old and new small industries showed striking similarities in production organization. During the Second World War, they expanded rapidly as a result of wartime demand.
Calls to regulate them had begun to appear in the 1930s but it was only after the Second World War that concrete legislative measures to that end began to be taken. In the late 1940s, the legal status of these industries, their relationship with the state, and the status of workers in them were all fluid, yet to be determined in fundamental respects. It was the nature of labour legislation passed during this period—and its subsequent results—that decisively reinforced the emerging divide between the formal and informal sectors of India's economy. The earlier tendency to widen the scope of labour legislation was abandoned. Different laws were enacted to address different issues. The Factories Act regulated workplace conditions, but social-security measures such as the Provident Fund, payment of wages, compensation for injury, and trade-union representation were the domain of other laws. Each piece of legislation had its own definition of worker or employee and was applicable to establishments of differing sizes.
This fragmentation of key questions of labour welfare and workers' rights was not limited to small industries: workers in large-scale factories also had to navigate a complex maze of legislation. But, for workers in small industries, the results were much more damaging. Some laws did not apply to them (for they did not fit the prescribed definitions) and, when they tried to obtain such elementary rights as fair wages and trade-union representation through others (the Industrial Disputes Act or the MSE Act), they were bluntly informed that these questions did not fall within legal purview.
This brings us to a central contradiction: the importance attached to labour legislation in the newly independent nation (reflected at both central and provincial levels) coupled with limitations placed on workers’ rights in the actual legislation enacted by it. This anomaly can only be explained by taking the broader political context into account. Ravi Ahuja shows how the late 1940s (when all four laws examined here were passed) represented a watershed moment in the history of labour in India, when it emerged for the first time as a legitimate and powerful political category (and also an electoral constituency). The period saw a wave of strikes across the country involving a wide range of industries, and the Madras presidency was no exception.Footnote 125
Evidence of unionization amongst workers in small industries such as beedi, handlooms, and tanneries can be traced from the 1930s. In all essential respects—forms of mobilization, its demands, and forms of protest—it did not differ much from the template adopted by workers in large factories. There were agitations for higher wages and against layoffs coupled with demands for legal protection of all workers in these industries: the application of factory laws, payment of a yearly bonus, and the institution of welfare measures such as a Provident Fund and gratuity.Footnote 126 The war years witnessed widespread protests against rampant profiteering by employers (particularly stark in the case of textile and handloom workers). For other workers, the chronic shortages of food and cloth, coupled with widespread hoarding and black-marketing by traders, fed discontent and became a rallying cry.Footnote 127 The end of the war saw widespread unemployment: wages declined even further, sparking continued protests. Workers were a rising political force. When the Madras Non-power Factories Act and MSE Act were debated in 1947, the first general election with universal suffrage was on the horizon. Several members of the Madras assembly attacked the legislation by accusing the Congress government (and communist members) of playing to the gallery and trying to canvass votes.Footnote 128
But the mid- to late 1940s were also the period when economic policies for the newly independent nation were being formulated—in the face of considerable pressure from various interest groups seeking to influence them. Historians and economists have pointed to the influence of industrial capital in shaping the economic policies of the Congress. Vivek Chibber argues that the Nehruvian vision of a planned economy was subverted by a well-organized capitalist class that sought state support in the form of subsidies but sought to avoid regulation as much as possible. They successfully managed to prevent the government from setting up autonomous institutions to regulate the economy; in the end, even the planning commission was reduced to an advisory role.Footnote 129 For a later period, Das Gupta shows how capitalists successfully lobbied the state to alter its economic paradigm from a planned economy to a more liberal one.Footnote 130
These studies focus solely upon large-scale industry, and the small but influential group of businessmen and managers who ran them. By contrast, this article looks at the relationship between the much larger number of small capitalists and the state (with trade unions forming the third part of the triangle) through a case study of Madras province in the years immediately before and after independence. My evidence points to the enduring influence of capital in small-scale industry: factory owners and their political supporters succeeded in persuading the state to adopt policies that supported their interests and undercut workers' rights. The Madras government deliberately passed imprecisely worded labour laws studded with loopholes, retaining an array of discretionary powers. During implementation, these laws were weakened even further—the end result was to render them virtually meaningless for the vast majority of workers. In the process, the influence exerted by small-scale capital and the ideology of ‘national development’ on the political dispensation (bureaucrats and legislators) was laid bare.
I have tried to show how the state played a key role in ‘ring-fencing’ unorganized labour and creating a whole sector where small capital could be almost ‘a law unto itself’ (to borrow terms used by Barbara Harriss-White) during a formative period in India's history.Footnote 131 Social institutions such as caste and gender continue to play a crucial role in regulating the informal sector: this situation was decisively reinforced in the 1940s and 1950s, for it was during this period that legislation and policy expressed in state action and inaction came together to deny the majority of India's workforce elementary forms of legal protection.
