Kamal Ghorui
For the past few days, Noida, UP, has been rocked by industrial workers’ protests large enough to disrupt industrial functioning and civic life. The UP govt has already agreed to one of the main demands of the protesting and striking workers — an increase in the minimum wage rates. Like all stories, this too will eventually disappear from the news cycle. But like all events out of the ordinary rhythm of life, it gives us a chance for deeper reflection and an opportunity to change course for the better.
Despite remarkable recent progress in some areas, such as smartphone assembly and semiconductors, India’s manufacturing story has not yet caught the world’s attention as did China’s. As per the most recent labour force survey (2025), manufacturing accounts for 12% of our workforce (as much as construction, but much less than agriculture at 43%), and this number has not changed much for many years. When China was at our current level of GDP per capita (around 2001), its share was not too different from what ours is now (around 15%). But over the next 15 years, Chinese manufacturing boomed, and the share went up to nearly 30%.
Even if manufacturing has not taken off, India has done well in terms of GDP growth by relying on services such as IT-BPO, banking, insurance, real estate, etc. But this growth has primarily benefited college degree holders (and that too not all of them). It has not created enough productive employment for nearly 80% of the workforce that is without higher education. The experience of economies that have successfully undergone a structural transformation shows that the expansion of manufacturing creates productive jobs for the average worker. It also enables other sectors to grow by creating demand for their output and through technology spillovers. Finally, manufacturing is a tradable sector, i.e. every manufacturing industry is potentially an exporter. Hence, it is not constrained by local demand conditions and can catch up faster to the global productivity frontier. Most service industries do not share these properties.
Back in Noida, several of the industrial units here, as in other parts of the NCR industrial belt, are part of global supply chains, often manufacturing for multinational brands and procuring inputs from small and medium enterprises. These firms operate in a highly competitive environment where their bargaining power vis-à-vis their customers (other firms) is low. Add to this, costs imposed by poor-quality infrastructure and regulations, and employers find it easy to resort to wage cuts (or non-increases) to remain competitive. Since India has a large surplus labour force (a consequence of prior failures to create enough jobs), the pressures of the supply chain fall on the weakest link — workers.
None of these problems is unique to India. But the authoritarian ways in which labour was controlled in East Asian countries should not be the way we do it. We justly take pride in our democracy. But democracy is not limited to periodic elections. It must be practised daily in the guaranteeing of freedoms (including the freedom to protest) and in the settling of differences through dialogue. We need a solution that works for our unique situation. The UP govt has come under criticism from employers for giving in too quickly to workers’ demands. From another perspective, this is democracy doing its work. Elections are not far away in UP when relatively powerless workers will become powerful voters. Of all the election-time measures that govts take to support fragile livelihoods (think cash transfers), giving workers their due wages is the least open to any criticism.
We should keep in mind that the wage rates under discussion are extremely low by any standard — around Rs 10,000 to 15,000 per month. The recent disruptions in LPG supply have triggered a serious livelihood crisis on top of the daily struggle to make ends meet. These are not people who will risk their jobs and incomes unless pushed to the edge.
So, what is the way forward? Despite the uncertainties of a deglobalising world, climate change, and AI, the manufacturing sector and global value chains are likely to remain important if India is to reach middle-income status by the time the republic completes a century. But competitive advantage does not come only from cheap labour. Far more sustainably, it comes from reliable public goods (affordable healthcare, transport, and housing to take three obvious examples), from well-managed and functional (not ‘world class’) infrastructure, and an enabling business environment. These allow employers to share productivity gains with workers in the form of better wages, which, in turn, increases productivity as well as demand for industrial output. Such virtuous circles are always behind the success stories.
To be sure, both the central and various state govts have been taking steps in this direction. More needs to be done. There are no shortcuts here. But alongside tangible investments in services and in people, we need a new mindset that does not treat democracy and development as contradictory ideas. A worker and a voter are the same person, after all.
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