Informality in Automobile Value Chains in India

Abstract

India's automobile sector has emerged as an important growth engine of the Indian economy. The Northern automobile cluster in Haryana is not only the center of the automobile sector, but also a center of industrial unrest. This article questions informality in India's automobile sector through the application of commodity chain analysis to explain why India's automobile sector is beset by informality, low wages, and insecure working conditions. The article illustrates how leading firms in India's automobile industry, with the connivance of the Indian state, exploit the automobile commodity chain to marginalize both subordinate firms and the contract and casual workers who now make up the majority of the industry's workforce. The very structure of India's automobile industry locks many workers and firms into insecure work, where productivity gains are eaten up by leading firms, further reducing the margins of lower level suppliers and the wages of workers. While the automobile sector, and the demand for vehicles in India is growing, the wages and conditions of the workers in the sector are not improving. This qualitative study of Haryana's automobile sector attempts to explain why this is the case. The article concludes that India's industrial relations regime has long ceased to reflect the actual balance of power between labor and capital, institutionalizing noncompliance with the labor law and providing the basis for the industry's informalization.

India's “Informal Sector”: Demystifying a Problematic Concept

“…By creating intense competition among suppliers, they consistently put downward pressure on them to reduce the prices of parts. There are also large fluctuations in orders that buyers place with specific small‐scale units; therefore, it is extremely difficult for the small‐scale units to engage workers on a regular basis (Kerswell and Pratap , 544). The strategy within the small units is then to increase the vulnerability of labor and intensify labor exploitation to reduce the prices of parts, along with ensuring significant profits for themselves (Kerswell and Pratap , 550).…”