New Economic Policy and Labour

Presented by:Ayushi SinglaShikha BhatiaShreedha Singh

New Economic Policy, 1991

The process of economic reforms was

started by the government of India in 1991

for taking the country out of economic

difficulty and speeding up the development

of the country.

Objectives Of NEP

To pull the country out of

economic crises

Accelerating the rate of

growth

Contd.• Poor performance of PSU’s• First gulf war caused spikes in oil

prices which caused a major balance of payment crises for India.

• India asked for loan from IMF, in return demanded reforms.

• The New Economic Policy was inaugurated by former Prime Minister P. V. Narasimha Rao under the guidance of the then FM Manmohan Singh.

Reasons for NEP

• Fiscal Deficit was 5.4% of GDP in 1981-82 which rose up to 8.4% in the year 1990-91.

• In 1991 amount of interest liabilities rose further to 36.4% of total government expenditure.

• Country was moving towards debt trap.

• Mounting “Adverse BOP”• Fall in Forex.

Salient Features of NEP

NEP

Privatisation

Globalisation

Liberalisation

Claimed Reforms of NEP

• Devaluation: The brunt of devaluation of rupees would have to be borne by the working class. The country has to pay more for exports and ultimately the burden will be passed on to the consumers.

• Privatisation: It was opined that due to it, employer may be given a free hand to informalise the labour market, increase work load and working hours and violate the existing labour laws (Capital Intensive Approach, Deunionisation)

• Retrenchment: The threat of large scale retrenchment was expected with unbridled privatisation.

• Wage Structure: In the long run, due to upgradation of technology wage levels would increase in the skilled and technical categories. Due to collapse of trade unionand consequent loss of bargaining capacity of workers, they would get lower wages.

Impact on Labour

• Employment growth and elasticityo NEP: A double- edged sword for Indian labouro Sharp deceleration in employment growth:

jobless societyo Certain evidences of increasing capital intensity

in all sectors.• Unemployment rate

o Due to lower participation of women labour till 2000*

* Full employment is not equivalent to zero employment.

– International mobility of labouroMigration across international boundaries.o Brain drain to industrialised countries in service

operations and maintenance.o Reverse Brain drain and flow of unskilled/semi-

skilled workers to middle east.o Boom in IT and software services (BPO’s)oOrganised employmento After NEP, employment elasticity came down

close to zero.o Public sector: Decline in elasticity due to right

sizingo Private sector: Dynamic and improvement in

employment opportunities, even during slow down.

• Women LabouroGreater feminization of workforce.oAcute gender disparity.

• Child LabouroDecline in child labour (5-14 yrs.)o Substitution of labour: WomenoCorrelation between poverty and child

labour is weak.

Impact on IR• Existing centralized and tripartite IR system

replaced by many local bipartite IR systems.• Consultation, Cooperation and consensus.• Taking place of coercion and confrontation.• Increased work efficiency: A striking feature is

that more man-days were lost in lock-outs(mgt.) instead of strikes (workers).

• Opened way for right sizing by way of closure, technological change and restructuring.

• Set in motion various forces operating at multiple levels of IR.