Corporate social responsibility in India : a tradition rooted in philanthropy

1

Master Thesis

June 24th ₂₀₁₆

--- Corporate Social Responsibility in India:

A Tradition Rooted in Philanthropy

---

Author: Supervisor:

Aileen Ozay Luc Fransen 11127325

The hand of a power-loom operator, Kolhapur, India, April, 2016 Photo: Manish Modak

i

Table of Contents

3.2.1 Religious Plurality and Philanthropy as CSR ... 19

3.2.2 All in the Family ... 21

3.3 A Continuum of Formalities ... 22

3.3.1 Formal/Informal Dichotomy ... 22

3.3.2 Auto versus Power-Looms ... 23

3.3.3 The Factories Act ... 24

3.4 Industrial Focus of Indian Policies ... 26

3.5 Conclusion ... 28

ii

4.1 Why CSR? ... 29

4.2 Indian CSR: Philanthropic Roots ... 30

4.3 Respondent Input on Indian CSR ... 32

4.4 The Companies Act ... 34

4.5 Filling the Gap ... 36

4.5.1 Vocational Training and Community Engagement ... 36

4.5.2 Impact Investment ... 37

4.6 What this Means for Labor in Kolhapur ... 38

5.0 CONCLUSION ... 39

5.1 Statement of Findings ... 39

5.2 Future Outlook ... 40

5.3 Implications for Literature ... 41

5.4 Implications for Policy Making... 41

5.4.1 Indian Regulations ... 41

5.4.2 Transnational CSR ... 42

5.5 Shortcomings of Research ... 42

5.6 Suggestions for Further Research ... 43

6.0 REFERENCES AND APPENDICES ... 43

6.1 References ... 43

6.2 Interview Respondent List ... 49

1

1.0 Introduction

1.1

Discussion of Topic

Questionable labor practices among factories in developing nations have been an area of much debate over the course of the past few decades. In light of the rising tides of globalization, manufacturing of all sorts has shifted offshore from the world’s most active consumer populations to nations where production costs are low and labor standards are lax. By subcontracting services, large firms have long participated in the driving down of standards and wages without needing to take on any legal responsibility or ethical accountability (Jaffee 2010). Having felt the pressure from consumers, internal auditors, international rights groups, and other actors in the global labor sphere, corporations around the world have relied heavily on Corporate Social Responsibility (CSR) agendas to accomplish various ends. These ends include but are not limited to increasing profits, heightening internal efficiency, and preventing public regulatory intervention (Nadvi 2010). Many businesses have committed to using private voluntary regulation to ensure that the goods they eventually market are not made under unethical production conditions. In this way, they are attempting to regulate issues which are typically regulated by governments or labor organizations (Locke 2013).

As corporations have begun putting a greater emphasis on what they call ‘socially responsible business practices,’ some theoreticians such as John Locke and Matthew Amengual have endeavored to focus their research on the effectiveness of CSR strategies in addressing those issues that are most relevant to local populations. Attention has been shifted to the power disparities highlighted by a lacking link between labor advocates of countless varieties and the people whom such advocates aspire to protect (Bartley 2015). Supply chains are becoming ever more multifaceted and are subsequently subject to a multitude of forces that have an impact on the likelihood of successful labor protection. An undeniable tension exists within global supply chains where diverse conflicting interests among key actors are common. While some scholars believe that CSR initiatives, despite their shortcomings, can lead to a positive “change in climate” (Gokhan & Fransen 2009), others are convinced that CSR and similar private regulatory tools only result in a “race to the ethical and legal minimum” (Yu 2007, 524).

There are multiple elements that make India a useful example for a discussion about labor disparities, their embeddedness in uniquely local circumstances, and their relationship with transnational CSR efforts. Despite its upcoming economic status, India is wrought with sweeping inequalities and intense corruption at every level of governance (Jeffrey 2002). As the world’s fastest developing nation, it easily represents and encapsulates the obstacles and passages that a country must face considering the current political economy of developing nations with

2

extensive export-intensive industries. India is developing ever more rapidly and while demand for products is there, the infrastructure at multiple stages of formal and informal governance has not adjusted with the times. The unfortunate truth is that international firms are attracted to nations with shaky infrastructures because there is less regulation to stand in the way of fast and cheap production (Jaffee 2010).

India is also among the world’s top exporters of textiles. From 1990 to 2011, India’s total apparel exports alone increased 49 percent (Nadvi 2010, 370). The global textiles industry has the potential to stand as a poster child for the atrocities of careless consumerism and corporate exploitation. Take apparel production as an example: it is a labor intensive procedure and often times workers are women who are paid ‘by the piece,’ contributing to an overall atmosphere of exploitation and overwork (Jaffee 2010). After the agricultural industry, the textile industry is recognized as the only other industry that has generated mass employment for both unskilled and skilled labor in India (Rinaldi 2016). There are a lot of people employed by textile factories in India, a large number of which are not treated in such a way that abides with intentionally set standards. For this reason, focus will be placed on labor protection and CSR strategies specifically in the Indian textiles context.

1.2

Reader’s Guide

This paper outlines the design and results of research that was conducted for a Master’s thesis project focusing on the local dynamics of CSR and labor protection in the textile manufacturing industry in India. By using a district in India that is known for hosting an extensive textile industry as a case study, a multi-layered landscape of labor protection can be dissected and in turn, bolster or weaken conceptions about the broader universe of labor protection in India as well as the effectiveness of transnational and national CSR efforts there. Generally, the objective of this research project is to achieve three main goals: First, reach an understanding of the formal and informal dynamics which are privy to the textile industry and its relation to CSR in Kolhapur, India. Second, observe findings from 10 interviews and an extensive literature and policy review in order to extract prominent trends and noteworthy behavior. Third, provide practical recommendations based on the findings and propose options for further research.

The study is structured and presented in six chapters. This preliminary chapter elaborates on the reasons for carrying out the research while providing an introduction to the subject matter. The second chapter will serve the purpose of providing a comprehensive backdrop for the empirical analysis. A deeper understanding of the research focus will be outlined both literally and theoretically, and the methodological component will be described. Due to the inductive nature of the project’s research, primary and secondary research will comingle throughout the course of the empirical sections in order to complement one another. The reader will have a thorough understanding of the project’s aim and its means of deducing certain conclusions by the end of

3

the second chapter. Chapter three will present the first taste of the project’s findings. The decision to separate the empirical portion of the paper into two sections (Part One: Background and Part Two: CSR in India) was based on the conclusion that a structured background section could prove useful in grasping at a more extensive and grounded understanding of the primary findings in the next section. Therefore, chapter three will have largely to do with describing the landscape that CSR and labor protection in India are embedded within and will deal mostly with secondary research. The bulk of the findings that serve to answer the project’s research question and sub-questions will be addressed in Chapter Four. Chapter five will serve the purpose of wrapping up the research, drawing conclusions from the previous chapters, and making recommendations for the future.

2.0 Research Framework

2.1

Theoretical Framework

For the purpose of this project, Blowfield and Fryna’s definition (2005, 503) of CSR will be used. They deem CSR as,

“an umbrella term for a variety of theories and practices all of which recognize the following: (a) that companies have a responsibility for their impact on society and the natural environment, sometimes beyond legal compliance and the liability of individuals; (b) that companies have a responsibility for the behavior of others with whom they do business (e.g. supply chains); and (c) that business needs to manage its relationship with wider society, whether for reasons of commercial viability or to add value to society.” While the textiles supply chain is transnational in scope, it is also entrenched in domestic settings in ways that are very significant. It seems probable that third party regulation such as CSR and global standard setting cannot bypass the state and transcend traditional configurations of power without first being filtered, renegotiated, and compromised by a country’s one of a kind political economy (Bartley 2010). An evaluation of how exactly CSR initiatives are filtered by the formal Indian state, which CSR policies are the most popular among businesses, which policies the Indian state finds the most worthwhile, and exactly how they are renegotiated (if at all) will aim at an understanding of what role CSR plays in the Indian political, social, and economic climate. In order to go a step further and dissect the backdrop that such initiatives are channeled into, the institutional context of labor protection in India will be analyzed. Local governance is clearly much more than formal institutions, especially in a country like India where trust linkages and micro social networks are commonly present in the political and business cultures. The simple dichotomy of state and non-state has proven to be a terribly ineffective categorization in the

4

discussion of governance models. Therefore, a firm grasp of the interests and modes of various sub-levels of governance in carrying forth CSR initiatives in India can offer useful insight into the interaction of such models with an array of similarly diverse regulatory models of labor protection (Steurer 2013).

Substantive research exists regarding the role of CSR, especially as it pertains to sustainable supply chain management, in developing economies. The existing institutional account of emerging markets and CSR tends to highlight the role of institutional voids, deeming that attempts at CSR are undermined by weak or absent institutions which generate an increased degree of uncertainty within the business environment (Silverstre 2015). Under this view, institutions can be viewed as formal rules, informal norms, and enforcement characteristics that can positively or negatively impact innovation and economic performance (ibid). Puffer et al. conducted research based on the tendency for informal and personalized networks to fill the space left by institutional voids. In her study, informal systems that existed within reciprocal relationships and family affinities lead to a practice of “mutual back-scratching” that businesses relied on in the absence of an organized formal network (Puffer 2009, 442). This tendency to rely on informal structures in the absence of formal governance was witnessed often over the course of the research and will be referred to in length in the background section of this paper.

An emphasis will be placed on CSR as pursued by sustainable business practices and supply chain management. The term ‘supply chain’ loosely refers to a sequence of interdependent transactions that can add value to a particular product for the final consumer (Christopher 2005 and Lazzarini et al. 2001). Supply chain sustainability is not accomplished overnight, and an increasing number of scholars and business professionals are realizing that the trajectory for reaching a more sustainable supply chain model in any particular case is evolutionary in nature and requires a substantial amount of trial and error. The hope is that “supply chains learn to evolve” (Silverstre 2015, 160). Seeing as supply chains face an increased degree of complexity in landscapes plagued with institutional voids, it only makes sense that the barriers and obstacles to sustainable supply chain management are numerous. The role of large, focal multi-national corporations (MNCs) are believed by some to play a pivotal role in managing issues such as deciphering ambiguity in CSR regulations, stimulating supply chain learning, and promoting innovation that can lead to enhanced supply chain performance. In order to strike at more effective and progressive supply chain management practices, integration can be viewed as a positive tool for coordinating mechanisms that connect different networks within a supply chain. Collaboration can also be used to allow for the sharing of ideas, resources, risks, and rewards so that more sustainable practices can be achieved. Innovation is then required to move forward and employ more effective practices (Silvestre 2015). The use of such tools will be analyzed in the Indian CSR context.

5

The term ‘institutional sophistication,’ refers to “both the top-down maturation of the regulatory system that standardizes firm behavior and the bottom-up diversification and intensification of grassroots initiatives that redefine stakeholder membership” (Zhao et al. 2014, 670). It alludes that the evolutionary move towards increased sustainability and labor protection cannot be gauged solely in terms of formal institutional capacities and growth. Instead, bottom-up activity such as union pressure and grass-roots organization ought to be considered in order to understand the environment that CSR can thrive within. Considering that pressure to improve labor conditions and move towards heightened CSR in India is emanating from the ‘top’ as well as the ‘bottom,’ Zhao’s take on institutional theory and CSR will be crucial in deciding the future outlook for Indian CSR and labor conditions in Kolhapur.

To understand the impact of CSR initiatives, it will be useful to examine how their implementation links to strategies of actors at the point of production. Seeing as the dynamics of local industrial relations are multi-dimensional in nature, attention will be guided towards the dichotomy of formal and informal employment, the identification and discussion of which will function as a crucial analytical tool. Textile products are often subcontracted for reasons related to excess demand of product, the need for easy and quick access to diverse manufacturing technologies, and/or to reduce labor costs (Gokhan & Fransen 2009). Subcontracting relationships transpire between institutions who employ formal as well as informal workforces. What this means is that textile transactions can occur across a continuum of various levels of formality, spanning from small-scale hand-sewing sites to mid-scale power looming factories, and on to large scale corporatized branding entities. Defining the relevance of each level of formality and whom each level conducts business with in Kolhapur will hopefully illustrate the dynamics of the textiles sector. The analysis will allow for a deeper discussion of how CSR interacts with each level as well as how it interacts with formal governance structures.

When planning this project and endeavoring to pin down its particular aim, it became immediately evident that the variety of inductive research which was to be employed would likely result in a substantial amount of findings. Whether such findings would contribute to some cohesive story about Indian CSR --or whether the findings would span the discussion of various trends involving the role of CSR in developing nations-- was completely unknown. Obviously, many institutions and actors interact in the making of labor conditions in all types of labor scenarios whether located in emerging economies or not. The inductive approach to this research has required an initial prioritization of factors depending on each factor’s relationship with labor protection and CSR in the case study. There were some continuities that were mostly expected considering the repository of research already available on CSR in developing nations: continuities such as elitist unions, corrupt officials, unsafe working conditions, and so on (Bartley 2015). The more fascinating and state of the art findings from the interviews revolved around a

6

marked penchant for Indian CSR of all varieties to focus on philanthropic missions rather than sustainable supply chain management.

The Merriam Webster Dictionary defines philanthropy as “the desire to promote the welfare of others, expressed especially by the generous donation of money to good causes” (2015). This definition is loose and can preface various interpretations of the concept. Political theorists and sociologists alike have quarreled over the intention and effect of philanthropic activities. Antonio Gramsci goes so far as to posit that philanthropy is an instrument of hegemony by which the capitalist class maintains a stronghold on the market, workers, and peasants, and one which “serves to avert attention away from the malevolence of the rich and the concentration of wealth in the hands of the few” (Morvaridi 2012, 1193). Gramsci speculates that philanthropy is often times politically and ideologically committed to market-based social investment through partnerships, efforts that make the market work better for capital (ibid). Phrases such as ‘venture philanthropist’ and ‘strategic philanthropy’ are found frequently upon conducting a simple Google search. One might find it ironic that despite extensive philanthropic activities as set forth by international non-profit organizations and private capitalists, inequality and absolute poverty have increased significantly the world over (Morvaridi 2012). When having a discussion about the conceptualization of philanthropy, one must consider questions such as: “Whose interests are being served?” and “What is the political and/or ideological motivation of the philanthropy?” The assimilation of CSR and philanthropy in India is problematic at best, for it challenges many preconceived notions regarding the scope and operationalization of traditional CSR. After all, philanthropy and CSR lie worlds apart from one another conceptually. Philanthropy is often associated with individual giving and is not about private regulation as such (Mcalister 2002). In the Indian context, the idea of moral discretion and upholding certain moral responsibilities through philanthropy is notably common. This project will demonstrate that such ideas pose obstacles for collaboration in a systematic way and often times reinforce existing power relations that actually hamper progressive justice. If CSR is to travel to developing nations, and if companies in emerging economies are going to start embracing different forms of CSR, the Indian public’s perception of CSR as philanthropy is a form of embedding that must be thought about in greater detail.

2.2

Literature Gap

Existing literature tends to focus on institutional voids in an effort to illustrate why sustainable business practices and CSR face challenges in emerging economies (Silvestre 2015). Emphasis is placed on how CSR is undermined in weak institutional contexts but little attention is paid to particular social aspects of CSR in practice (Zhao et al. 2014). This project draws on a few constructs of institutional voids to describe a specific local context where labor protection is

7

being blatantly perpetuated by the formal Indian state. Details gathered from the local context will be discussed as it relates to the larger universe of CSR, supply chain management, and labor protection in India. This project seeks to make a critique regarding where India stands in terms of evolving towards sustainable supply chain management as a form of CSR.

The entire concept of institutional voids assumes that there is in fact a void to be filled. What is meant by this is that institutional void theories assume that advanced capitalist political economies set the precedent for institutional functioning, and an analysis of other economies are compared to this model. In this regards, the “advanced capitalist model is the minimum requirement for the proper functioning of CSR” (Zhao et al. 2014, 671). The weak institutional context of developing economies and its mismatch with the CSR of the global North has been written on in great length. This paper will explore whether Indian CSR is actually endeavoring to practice CSR in a way that complies with some Northern standard, or whether they are pursuing CSR in a way that intersects more with Indian social and business realities.

Current literature expands on the idea that most corporate governance structures choose to pursue CSR solely through channels of corporate philanthropy, but little academic attention has been paid to the role of philanthropy as perceived as CSR in developing economies (Brammer et al. 2012; Amaeshi 2009, 2010; Crouch 2006). The relevance of India to this area of potential research is high, for there exists a very deep tradition for philanthropy in India as well as a complex web of socio-cultural, historical, and economic drivers that encourage philanthropy. Current research is also limited in that most studies focus on the efforts made by single buying-firms or particular codes of conduct programs. These studies, while reviewing challenges of implementation, fail to account for the dynamic position of actors engaging with industrial relations in a local context (Amengual 2009). For this reason, pressure from and interactions between supplier managers, labor unions, national labor laws, buying firms, and regulatory organizations need to be analyzed at greater length. For this project, CSR in India will be analyzed as a national matter that has its own unique characteristics, drivers, and needs. Efforts that firms are making to pursue CSR in India’s one of a kind institutional context will be unpacked with special attention guided towards philanthropy and its relationship to sustainable business practices.

2.3

Research Question

The research sub-questions were structured in an open-ended fashion, so as to allow for the interview respondents to guide the conversation of labor protection and CSR in Kolhapur in a way that was meaningful and intuitive for them. Great effort was made to form the research question and sub-questions so as not to presuppose any factors relevant to the local circumstances in the

8

case study location. The idea was to allow the respondents to express themselves freely with the subtle guidance of very loosely formed sub-questions that presented subject matters for discussion. Luckily, respondents covered areas very relevant to the sub-questions and it was at that point that the direction of this research project became clear and secondary data was collected. It was decided that certain themes from the interviews would take priority and other pertinent and additional data would play a supporting role. Because the research was conducted in this fashion, it was decided that a systematic approach to the sub-questions would not do any justice to the development of the findings. Rather, mention will be made regarding what sub-questions are to be addressed in particular chapter introductions.

RQ: To what extent do interactions among CSR initiatives, formal, and informal

institutions affect labor rights protection in the textiles industry in the Indian city

of Kolhapur?

Sub-questions:

1. Which labor disparities do local actors find to be the most prominent and urgent in the textiles industry in Kolhapur?

2. What is the social and informal context that the named labor disparities are embedded within?

3. How do the formal laws and policies that govern labor protection address such disparities? 4. How do organizations below the national level, private, public, or otherwise, shape

initiatives to address such disparities?

5. What CSR strategies are most commonly found in India? 6. How do such strategies affect labor protection in Kolhapur?

7. What suggestions can be made in terms of more effective CSR policies and practices?

2.4

Case Selection

2.4.1 Unit of Analysis Rather than focusing on a specific factory or supply chain as the unit of analysis, this project will use largely descriptive insights into the formal, informal, legal, social, and transnational institutions that have a hand in labor relations in the city of Kolhapur, India in an effort to strike at the efficiency and influence of such institutions and their interactions with one another. The purpose of breaking down the analysis in such a way is to isolate the dynamisms which are privy to each particular unit. This way, the deeply entrenched and complex systems of labor relations in the Indian textiles industry can be dissected and linked to the broader subject of Indian CSR. It is important to define which institutions and actors are revalent to the discussion of this topic. Falling under the umbrella of formal institutions is the law and varying governance structures.

9

Informal institutions are composed mainly of social and cultural regularities related to religion, class, expectations, and traditions. Prominent actors include agents pulled from both the formal and informal camps and include MNCs, manufacturing units, government officials, factory managers, labor unions, union representatives, factory workers, lawyers, philanthropists, and transnational labor advocates. Descriptive categorizations of what is what in the world of ‘institutions’ in India can lead to a deeper understanding of predispositions among varying actors in the CSR realm as well as the likelihood of certain actors and institutions to engage with one another. For example, actors embedded largely within an informal landscape will likely be influenced by informal institutions since they have less access to formal institutions. In this way, the socio-cultural milieu of the informal sector is more likely to have an effect on actors within the informal sphere. This is because they lack access to informal institutions and are more likely to be led by informal relations of power.

Cities can act as a powerful representation of the social and economic landscape of a particular region or nation as a whole. Urban environments such as cities are those which are distinguished by density and diversity (Rossi 2011). Not surprisingly, political action, power relations, and economic interactions are concentrated in many of India’s cities. Dynamics between rural and urban populations, formations of political control, the role of a city in national politics, and power struggles between social classes are only a few topics that can be analyzed by using a particular city as a proxy (Brunn 1973). According to the McGinsey Global Institute, cities in India are projected to generate 70 percent of net new jobs, 70 percent of the Indian GDP, and draw a near fourfold increase in per capita income across the nation by 2030 (McGinsgley Global Institute 2010). As Indian cities are functioning in an increasingly globalized context, they have become more multi-networked, progressively stretched across transnational spaces, and dispersed through a greater multitude of economic flows (Rossie 2011). With a swelling urban population, it makes sense to utilize a relatively large Indian city as representative of a multifaceted physical, relational, and governmental space especially as it pertains to potential interactions with transnational players.

2.4.2 Population

The main population that this project will be concerned with is emerging economy cities with sizable and rapidly evolving textiles manufacturing sectors. In 2014, India emerged as the world’s second largest textile exporter worldwide, overtaking Germany and Italy (Times of India 2014). Manufactured textiles and garments account for more than 15 percent of India’s merchandise exports. Textiles are typically classified as low-technology manufactured items in oppose to mid and high-technology items such as metals or technology. Low-tech manufacturers typically have stable, well-diffused technologies that are embodied primarily in capital equipment (Anand 2015, 21). Such capital equipment is concentrated in lively manufacturing zones. Cities are common sites for manufacturing of all sorts, though some cities carry more heft than others insofar as

10

their contribution to the landscape of textile exports in general. Kolhapur is not only renowned for its rapidly developing textiles industry, but also for other industries such as industrial machinery and agricultural goods (The Economic Times 2006).

2.4.3 Sample

As Political Scientist John Gerring puts it, “a case study is best defined as an intensive study of a single unit with an aim to generalize across a larger set of units” (2004, 342). Kolhapur will be used as a case study to generate new theories while also examining and probing a few existing theories in regards to labor protection measures that are local and transnational in scope. Kolhapor can provide an example of a “Typical Case” in terms of representing a city in a developing nation with an export-intensive textiles industry. Kolhapur is an Indian district located in the state of Maharashtra and is among the top textile export districts in India. According to the 2011 census, Kolhapur has a population of 3,874,015 ranking it the 65th _{largest out of 640 Indian} districts. As of late, industry professionals and government officials have initiated a campaign called “Kolhapur Goes Global” in order to attract potential global investors to the area (Kolhapur Goes Global).

The Kolhapur economy is driven in part by the textile industry, and Chalkaranji is a city in the Kolhapur district that is home to one of the oldest textile industries in India. This city has nearly 5,000 textile factories and is famous for being one of India’s largest centers for small scale industry. In the early 1990s, Kolhapur switched gears from producing mostly Indian textiles in small to mid-sized factories to producing apparel for well-known international brands such as Armani, Hugo Boss, and Banana Republic on a very large scale (Business and Economy of Kolhapor). “For the past one year or so, the city has played host to global manufacturers looking for a lower cost of production”, says Kiran Patil, joint managing director of Ghatge Patil Textiles Limited. Ghatge Patil Industries is a mid-sized manufacturing plant of textiles and foundry units in Kolhapur. "Of late, we have begun to receive large export orders directly from original manufacturers, not through their Indian operations. For the past one year, we have had people walking in from all over the world, looking for a lower cost of production," he added (The Economic Times 2006, 2). Indo Count is another, larger textiles manufacturing operation that is based in Kolhapur. Set up in 1991, it is a ‘fully integrated’ plant that targets US and European buyers/traders. Indo Count alone had one lakh (10,00,00) power looms in their Kolhapur plant in 2006 (ibis).

2.5

Societal Relevance

An understanding of the formal laws that govern Indian labor will enable a conversation about the societal and institutional consequences of such laws. The same will go for measuring the usefulness of local circumstances, transnational, and state-run initiatives in securing enhanced

11

labor protection. A purported grasp on the thick web of social mechanisms in which all institutions are embedded will widen the breadth of understanding of labor practices in India and will construct a well-developed narrative of labor relations there.

Furthermore, it appears clear that more attention must be guided towards the role of the state and its relationship with private regulatory initiatives. Whether or not CSR and Indian state regulators seem to be cooperating and to what end will be decided. Such an analysis will tie in nicely with suggestions regarding the optimal strategies for states and private regulatory bodies in relation to one another (Amengual 2009, Locke 2013). An inquiry into the effectiveness of CSR initiatives across the various levels of actors, industrial practices, and institutional types will work towards a better understanding for whether CSR initiatives actually instigate a figurative “change in climate” where labor norms and practices will evolve with norm-setting CSR practices setting a common precedent (Gokhan & Fransen 2009).

As the Indian state gains economic momentum, state and non-state actors will surely have the ability to exercise increased bargaining power and will play a more central role in critical economic and political negotiations. Such power shifts could have sweeping effects on the sphere of CSR by impacting the organization of production chains, the organization and impact of private labor regulations, and labor conditions themselves (Fransen 2012, 179). India’s increasingly elevated role in the supply chain means that the more traditional top-down function of private firms in instigating labor regulations might need to be revamped. The private regulation of labor standards could begin to depend more on bargaining between Indian suppliers and Northern parties and since supplier management has not historically been the most accommodating actor in terms of promoting labor rights, this newly formed dynamic could have sweeping implications on the effectiveness of current regulatory models as well as the shaping of future regulatory models (ibid). An observation of current trends and/or shifts in India’s formal and informal institutions can help to question this forecast and provide suggestions for new regulatory prototypes.

More than half all workers in developing countries and more than 70 percent in some parts of South Asia find themselves in ‘vulnerable employment’ which translates to informal employment—employment that is poorly paid, and that does not provide workers with fundamental labor rights, a ‘voice’ at work,’ or job security (Locke 2013, 17). Although most companies operating in global supply chains do not themselves employ measures such as forced labor or unpaid overtime, many partake in such practices through their second or third tier suppliers (Locke 2013). This research project is theoretically and societally relevant for the reasons mentioned above, yet what one might say is this project’s most valiant contribution, though admittedly broad, is that it seeks to paint a clearer picture of models aiming to alleviate labor disparities, their relation to one another, and the effectiveness of such models in a city

12

whose inhabitants often work in conditions that simply do not meet globally accepted human rights standards.

2.6

Key Concepts

2.6.1 Currency

o The Indian Rupee is the official currency of India. In this paper, the term ‘Indian Rupee’ will be abbreviated to ‘INR.’ 67.22 INR is the equivalent to one US Dollar and 74.86 INR is equal to one Euro.

o A ‘crore’ is a unit of the Indian numbering system equal to ten million. It is written in India as 1.00.00,000 with the local style of digit group separators. One crore equals a hundred lakhs, 148,800 US Dollars, and 133,600 Euros.

o A ‘lakh’ is equal to one hundred thousand and is written as 1,00,000. It equals 1,488 US Dollars and 1,336 Euros.

2.6.2 Geography

The state of Maharashtra is one of 29 Indian states and has an inhabitance of 110 million people. Maharashtra accounts for 25 percent of India’s industrial output. Made up of 36 districts including Kolhapur, Mumbai is Maharashtra’s capital and largest city. Kolhapur has a population of 561,837 inhabitants, and is made up of forty-four cities. Ichalkaranki is a district in Kolhapur that is known for its textile industry. Ichalkaranji is among the Indian districts having the highest per capita income in the country (Info Please 2016). Below, Figure One highlights Maharashtra’s geographical location within India and Figure Two illustrates the location of Ichalaranji as situated within the city of Kolhapur. Though most of the textile industry is located in Ichalaranji, the trade of such goods occur all throughout Kolhapur. For this reason, the city of Kolhapur will be used as the case study.

13

2.7

Methodology

This project’s methodological component will incorporate a combination of literature review, policy and legal review, interviewing, and process-tracing to get a grip on the labor protection framework in Maharashtra and to what extend CSR strategies affect local labor issues. The research that will be carried out in this project is inductive in nature and this research design has been formulated in such a way that allows findings in earlier stages of research to inform strategies of data gathering in later stages (Fransen 2012). CSR arrangements, as they relate to labor protection in India, will be analyzed through an in-depth literature review of the topic area. Existing literature revolving around the role of the global South’s connection to CSR movements will be dissected and special attention will be paid to India’s unique role among rapidly developing nations as a hot spot for textile exporting. By gathering what knowledge and research is already available on the subject matter and analyzing it through a lens which aims to strike at the effectiveness of existing CSR arrangements, the multilayered relationship between labor protection in India and transnational private initiatives will be breached. The landscape of labor protection in India will be further unpacked by analyzing what civil society arrangements are in place there. By assessing formal laws at a national, statewide, and citywide level and by taking stock of what initiatives and projects are already in motion, the environment surrounding local labor initiatives will be gauged. Critical attention will be paid to the multi-layeredness of regulations and institutions which exist in Maharashtra as they relate to worker’s rights at a local, national, and transnational level.

In order to look at India’s vibrant informal governance sector and ascertain information regarding the social arrangements that are part and parcel of the Indian labor setting, interviews will be conducted. The purpose of interviewing individuals who are in some meaningful way connected to the apparel industry in Maharashtra is to procure the sentiments of such interviewees in order to draw linkages that can speak to the atmosphere of labor protection in Maharashtra and India at large. Respondents will include: a business representative such as a factory owner, a government official, an NGO representative, a union member, and factory workers. These interviews will aim to hone in on how citizens of one export-intensive district feel about the climate of labor protection and the effectiveness of labor protection mechanisms (or lack thereof).

In terms of the interviews themselves, semi-structured interviews were conducted at various textile manufacturing sites throughout Kolhapur by an Indian native. Respondents were free to communicate in Hindi, Mahrati, or English. The interviews were translated into English thereafter. Questions were fashioned in a way that guided respondents towards relevant topics while still allowing them the flexibility and freedom to include other information that they saw fit. This way, the respondents were not colluded to address matters that were not relevant to them, yet were still aware of the issues that they are being asked to concentrate on. Though

14

areas such as working conditions and the general character of the textiles industry were addressed, the meat of the interviews focused on the role of formal and informal hierarchies and institutions and their role in helping or hindering labor protection among workers in the textiles industry.

The interviews are classified and categorized in order to identify themes and connect interrelated data. Based on the collected data, suggestions will be made in terms of what institutions at every level of governance can do to improve their functionality to better support labor needs in Maharashtra. The research will aspire to make associations regarding the state of labor protection in one Indian city to the larger universe of labor protection in India and among other rapidly developing nations. A continuum of institutions will be assessed insofar as their relationship to one another, from local informal arrangements at the very base level to CSR arrangements at the ultimate level.

Process-tracing will be utilized in order to emphasize the causal processes that are inherent to the supply chain and to varying institutional structures. Special attention will be paid to dichotomizing various levels of industry such as the international/ domestic and the formal/ informal. Process tracing can be used as a valuable approach to building a theory based upon particular case samples in a comprehensive manner (George 2005). For example, the question will asked: How does “X institution” produce a series of conditions that come together in some way (or do not) to promote solutions to the most prominent labor disparities in Kolhapur? The term “X institution” can refer to laws, state policies, or CSR arrangements. Process tracing within the institutional context will allow for a discussion of exactly what mechanisms are/aren’t in place at various levels of governance and supply chains and what populations are within the reach of CSR and state initiatives. The labor conditions at particular manufacturing sites will be assessed and their proximity to CSR arrangements and foreign buyers who pledge to maintain certain labor standards will be gauged.

2.8

Reliability Concerns

The common perception of interview data’s reliability suggests that less structured interviews provide less reliable data. Standardization is difficult when dealing with diverse answers to open-ended questions (Burnett 1998). Beyond that, respondent selection is of extreme importance, and the more respondents a researcher interviews, the more reliable the data is as well (Conway 1995). Seeing as this research is mostly inductive, all results will have the status of findings only in relation to the chosen cases (Fransen 2012). Since this project will focus on accounts by a small pool of pre-selected individuals who can speak to specific sides of the textiles industry in India, there is a high possibility that each interview will turn out more or less unique. Making sure that respondents address subject areas in a way that is both meaningful and unbiased will surely be a challenge.

15

In order to reconcile challenges related to the interview process and minimize discrepancies, each respondent will be very carefully selected and will be urged to provide unbiased input. Given that respondents tend to be influenced by both verbal and nonverbal behavior, it seems likely that an interview conducted in Hindi or Mahrati by a fellow Indian will allow for a more credible exchange than if the interview was conducted in English with a mediator. Moreover, the portion of this project that requires the gathering of information about laws, projects, and case specific literature should work to create a well-developed setting for the respondents’ accounts to fit into.

2.9

Validity Concerns

The validity of this project’s findings is threatened by the fact that the small pool of chosen respondents could potentially lack power in numbers. When a pool of respondents increases in size, common trends are able to reveal themselves more clearly and suppositions can be assumed to be less bias. To account for such validity concerns, respondents will be selected from diverse areas of the playing field so that they can act as representatives across multiple subsets of labor arrangements in India and beyond. The use of one Indian city as a case study will accelerate an approach to validity that is grounded in one relatively small geographical sample, lending itself to a comprehensive understanding of arrangements at a micro-level.

3.0 Background Research

Upon conducting this project’s research, it became immediately clear that there were some continuities between the data collected and a few generally agreed upon issues that are privy to labor conditions in developing nations. These continuities will be described so as to offer a brief introduction to the overall state of labor protection in the textiles industry in Kolhapur. This section contributes to answering sub-question four in part, “How do organizations below the national level, private, public, or otherwise, shape initiatives to address such disparities?”

Section (3.2) serves the purpose of highlighting a few socio-cultural observations that must be recognized in order to have a complete understanding of the environment in which CSR in Kolhapur (or lack thereof) is rooted. Important links between topics such as religion and family business dynamics will be interpreted in light of particular CSR practices.

The next section in this chapter (3.3) will provide the reader with a bit of background regarding what aspects of industrial systems and governance in Kolhapur are not conducive to the successful deliverance of CSR there. A point will be made to demonstrate that entire portions of the supply chain are often neglected by what meager CSR does exist.

16

An understanding of why particular segments of society are neglected by the state will set the scene for section 3.4 where a historical conversation about the industrial evolution of the textiles industry in Kolhapur will draw links between the specific industrial scenario and the likelihood of labor protection. Sections 3.2, 3.3, and 3.4 address research sub-question two, “What is the social and informal context that labor disparities in Kolhapur are embedded within?” as well as touching on details relevant to sub-question four, "How to formal laws that govern labor protection address labor disparities?”

Section 3.3 will draw attention to one specific policy, The Factories Act, which has been the subject of much debate in the industry as of late. It is important to mention this policy because of its direct correlation to the perpetuation of the industry’s poor labor conditions. The Factories Act is relevant to this project’s discussion of CSR because it demonstrates that the scope of CSR and labor protection in India is decided directly by the state. Information pertinent to sub-question four will be revisited with the discussion of the Indian state’s role as a hindrance to labor protection. The use of a specific an example will set the scene for chapter four where the industrial focus of Indian CSR policy will be touched upon in greater length. Research sub-question one, “Which labor disparities do local actors find to be the most prominent and urgent in the textiles industry in Kolhapur” will be tackled here as well.

The formal governance environment of the Indian textiles industry will be sketched out in section 3.4 so as to provide a deeper understanding of the context that CSR in the textiles industry is implanted. A point will be made to highlight an off-balanced approach by the Indian government who, rather than focusing on topics related to labor protection, are resolutely committed to projects aimed at increasing industrial output. Material crucial to sub-question three, “How do formal laws and policies govern labor protection address labor disparities?” will be provided. Without highlighting the contextual nuances mentioned in this chapter, an understanding for the conditions of CSR and labor protection in Kolhapur could not be meaningfully gauged. The objective of this chapter is to paint a picture of the current state of labor protection in Kolhapur in order demonstrate explicit neglect of poor conditions by the state and to highlight social and infrastructural challenges that make the landscape in Kolhapur hostile for labor protection and inaccessible by CSR.

17

3.1 Continuities

It was mentioned earlier that when setting out to conduct the research for this project, there were some ground realities which were more or less expected. Of these continuities, lack of government involvement, corruption, and disorganized elitist unions will be discussed so as to expose a few prominent environmental trademarks of the textile industry in Kolhapur. Unpacking these continuities is not the priority of this research project. That said, the mention of some such continuities allows for a more comprehensive understanding of labor relations in Kolhapur while raising questions and discussion points that will be addressed in chapter four; questions like: ‘What explains the Indian state’s behavior towards labor?’, Are there any efforts being made on behalf of labor and by what parties?’, ‘How effective are such efforts?’ and ‘What explains the current climate of Indian CSR?’ just to name a few.

India has recently witnessed a series of corruption scandals which have brought public attention to the potentially unsavory landscape for investment there (O’Hare 2011). To say corruption in India is a new trend would be laughable considering the tradition of providing ‘baksheesh’-- literally translated to ‘an out-right bribe’-- has been a method of corrupting officials since biblical times and remains commonly practiced today (ibid). Officers of the law, auditors, judges, and policemen are very likely to take bribes and act in a way that does not abide by the law. When labor union Chairman Ajit Suryavanshi was asked about any loopholes that might exist in Indian labor laws, he responded,

It is the responsibility of the government, labor officers, even the responsibility as our union (to protect labor). If we keep fighting we can but the government itself protects their officers. Law makers need to follow laws, but they do not obey laws…There is no incident to show that anyone follows labor laws. We file petitions before the High Court, Supreme Court. The courts mostly protects owners. It is the duty of the law maker to protect their laws.

Textiles trader and business owner Shamsundar Mardhawas asked the same question regarding loopholes in Indian laws. He proclaimed,

To show loopholes it is the duty of a government officer who will guide and rectify problems. They first see how they are wrong and then impose a penalty, and then all loopholes are settled by way of corruption.

When textile factory manager Balasheb Magdum was asked if there was any help with labor disputes from government agencies, he replied,

18

No, government does not help. We made an application but there is no action. Finally, we need to seek protection with the help of labor unions. They are all corrupt, they need money to adjust everything. I am working in textile industry since 47 years, I know. The consensus among the interviewed factory owners, lawyers, and union representatives was that the government is more or less absent in industrial labor relations and that most negotiations and disputes are settled by way of corruption. Union involvement and protests were two channels that labor sited as options for communicating their qualms. When asked, “What is the aim of a union?” Mr. Magdum explained,

To remove injustice, for hikes in wages, these are the main objectives of the union. It is after summoning both the parties for deciding on issues related to wages through negotiation, so the employer-employee relation doesn't break.

Q: It is observed that many of the laborers are not involved in unions. What is the reason behind this?

There is no specific reason. If in any moment they face any problem, such as mental harassment, they come to the union and take up the membership.

Q: There was a two month strike. What happened?

We had a negotiation with the owner and resolved the issue.

Mr. Magdum’s input reveals the critical role that unions play as an intermediary and dispute resolution mechanism between parties. Factory worker Pramod Rahunath Natre explained that he went to his labor union for support when he had a work related dispute, “Two years back we demanded salary increases. We got salary increases but not by much.” What can be observed here is that factory workers are left to rely on assistance from individuals or groups in society who fulfill roles outside the scope of labor. They cannot represent themselves. Veteran labor lawyer and union representative Sandeep Shinde was asked,

Q: What would you name as the most prominent obstacle to union membership?

The mushroom growth of the union is the obstacle in implementing the labor laws. The worker is at liberty to do so but the collective bargaining must be centralized to reveal the labor welfare and the service conditions of the labor(ers) who (are) working on the machines… Now-a-days the obstacle is mushroom growth because the unions are meant for leadership and not for the welfare of the worker to achieve their political aim… To create the reforms it is not the pressure created by the needy persons… The one who gets exploited is hesitating to raise their voice against it, hence the third person who fights for those exploited people does something hypothetical.

19 Mr. Suryavanshi responded to the same question,

There are no such obstacles (to collective bargaining). Their only fear is that they would become unemployed... Nowadays unions are rarely joined by laborers… (Then again,) it is not affordable for labor to seek justice in the court of law.

The respondent testimony provided in this section is vital because it highlights a less than ideal situation for textile workers in Kolhapur. On the first look, it appears that there is little to no government involvement or oversight of labor. Secondly, labor does not have the means, know-how, or power-position to seek relief in the court of law. Thirdly, labor unions have filled the void left by the state and is thereby bequeathed with the burden of acting as an alternative dispute resolution mechanism. In this way, they unions are illustrating a form of “institutional sophistication” whereby bottom-up and grass roots parties rise to the occasion when more formal networks are lacking (Zhao 2014). Fourthly, most of these unions are governed by elites and the interests of labor are rarely communicated. This information’s main purpose is to illustrate how inhospitable the labor environment is for effective labor protection in Kolhapur, whether through CSR or other activities.

3.2 Socio-Cultural Implications

When having a conversation about social and cultural capital in India, one typically doesn’t have to struggle to find something to talk about. For the sake of this project, it is crucial to underline some socio-cultural realities that effect CSR there, how it is perceived, and how it is delivered (if at all). Since items such as religion and the prominence of the family unit are cultural artifacts which are held at an extremely high regard in India, the discussion of such items will prove useful in deciphering a link between social-cultural nuances and concrete labor practices. It will be made clear in this section that the Indian state lacks institutional mechanisms to protect labor and that informal and self-made networks defined by religious and family dynamics have created shaky frameworks to reconcile the lack of labor protection.

3.2.1 Religious Plurality and Philanthropy as CSR

India is a country of immense ethnic and religious diversity. To further complicate things, classism is rampant with divides distributed across various ethnic and religious cleavages. Such divisions have roots in the caste system which is now officially unrecognized yet still holds sweeping repercussions for the people designated to India’s countless social sects (Pradhan 2015). The vast socio-cultural implications of religion and caste on an Indian individual’s life choices are immeasurable. The discussion of such implications could span many lifetimes of intense social research. By reviewing the expansive repository of literature that exists on the topic, one

20

immediately realizes that religion and social standing in India are highly materialized in national practices and are inextricably bound to conceptions about what kind of career a particular individual ought to or is able to pursue. Research suggests that intense social divisions are reinforced in areas of urbanization, especially among elites (Stroope 2011). Seeing as textile industrialization projects are centralized in urban environments, it should come as no surprise that such sites reinforce age-old Indian social divisions and expectations. Consequently, variations of indigenous entrepreneurial traditions are practiced across pockets of social groups and unique business communities.

Religious affiliation has notable effects on a person or a community’s business interactions as well as their likelihood to pursue community-based activities such as philanthropy or union activism. To briefly highlight this reality, it is useful to consider the nature of business networks among one religious community-- the Jain’s – a community and religion closely associated with Hinduism. The Jain community is traditionally involved with the textile industry as well as the lapidary industry. An important tenet of Jainism is philanthropy which is practiced as a form of competitive gift-giving. Philanthropy of this kind works as a tool for ascertaining social prestige and for gaining creditworthiness within the community. Philanthropic activities can be engendered as a reproduction of “supra-local vehicles for potential regional, national, and international recognition” (Smedley 1995, 2). The Jain community’s “sociocultural milieu and its commercial practices form an embedded economy” where “the religion/business nexus posits a conflation of prestigious religious and secular expenditure” (ibid). It is important to note this tendency towards philanthropy, for it is intrinsically linked to the Indian public’s conception of CSR. The research that was conducted reveals a marked penchant for Indian businesses, individual capitalists, and the like to group philanthropy and CSR in the same category.

It is not only the Jain community that exhibits distinct philanthropic traditions in response to unique religious and social traditions. Being one of the most religiously diverse countries in the world, India represents a mix of Hindu, Muslim, Christian, Buddhist, Sikh, and Jain beliefs (Pradhan 2015). To go a step further, each of these religions hosts a myriad of ‘competing’ denominations that seem to branch off into a state of infinitude. For Islam, the sectioning off of denominations doesn’t just stop at Sunnis and Shias. Rather, it branches through both religious channels into a multitude of additional sects, creating religious schisms that span over hundreds of diverging belief systems. Some share comparatively similar traditions while others lie worlds apart. Thousands of religious sects fall under the umbrella of Hinduism alone. Sociologist Rodney Stark argues that religious pluralism leads to more vibrant religious communities and a boost in religious mobilization (Shea 2011). This is partly a result of ‘in’ and ‘out’ group tension which adds to an overarching competitive atmosphere among religious groups. Under these circumstances, philanthropy inhabits the role of an ethical currency to be used by religious groups to reinforce

21

their group’s designation and competitively claim their place as devotees in the public sphere. The result is a figurative case of ‘keeping up with the Jones’ – err shall we say ‘Jains.’

An interesting observation was brought to light by Mr. Shinde when asked what he thought about CSR in India. He articulated,

There are very less number of industries who invest on social and rigorous activities for workers. People are making fun on social work done for them. For example, in Vaari at Pandharpure more than 100,000 worshippers walked towards Pandharpur but here people donate one dozen of banana for them, clicks photograph and shows it as they have done religious activity.

In this excerpt Mr. Shinde talks about Pandharpur Wari, a religious pilgrimage where Hindus walk to Pandharpur, Maharashtra to visit the temple of a popular deity. This pilgrimage occurs once yearly and devotees are traditionally expected to bring donations for the poor whom are looked after under the temple’s jurisdiction (Warisantanchi 2014). It appears that Mr. Shinde finds the donations that devotees make to be self-serving—almost as if the devotees make a mockery out of the institution of giving and turn it into some bazaar and ironic opportunity to display their religious devotion in the public domain and receive recognition in return. Moreover, his testimony clearly illustrates his intuitive assimilation of CSR with religious philanthropy.

3.2.2 All in the Family

Family owned businesses are viewed as the backbone of the Indian economy. They make up two-thirds of India’s GDP, account for 90% of gross industrial output, and employ 79 percent of organized private sector labor (KPMG 2013). With family owned businesses, it is often the case that the family itself acts as the central hub connecting all of its members, stakeholders, and the external environment. Any resources that are allocated for growth, development, or CSR are provided by and rationed by the family. Business partnerships are often links that arise out of gratitude and friendship, where qualities such as trust and reciprocity are held at a high regard (Sharma 2012, 762). The corporate governance philosophy of a family-controlled business diverges quite significantly from typical corporate governance. Business strategies are decided at the family level, outside of the holding company or a group company. Such decisions are likely formulated based on family needs, such as a succession plan, and naturally reflect the aspirations of the family. This practice clearly violates the basic principles of ‘limited liability’ corporations which require that the liability of a shareholder in a company is limited to the amount that the shareholder invests (Bhattacharyya 2016). Naturally, family owned business have diverging interests from more corporatized entities as well. Traditional Western corporations might pursue CSR to help the internal dynamics of the company function more efficiently or to increase value chain efficiency. In contrast, family owned businesses in India have been observed to pursue CSR largely in order to enhance a feeling of pride from its stakeholders and increase shareholder

22

involvement. They do so by engaging stakeholders in local communities and by strengthening the brand reputation in order to retain such stakeholders (Sharma 2012, 763).

3.3 A Continuum of Formalities

In order to strike at the alignments between CSR strategies and their effect on labor protection, distinctions will need to be made in regards to various sub-levels of industry in Kolhapur and beyond. Textile manufacturers in the informal sector employ an informal workforce, and it is this population that is most exposed to poor labor protection. An explanation of how the supply chain stretches across various points of formality will help to demonstrate how CSR cannot reach the bottom rungs of the textiles supply chain and why this is especially the case in Kolhapur. The state has went to great lengths to keep informal employees from transitioning into the formal sector, and situational factors related to industrial modernization has placed labor in an exceedingly vulnerable position. Such realities are central to the discussion in chapter four of why CSR is not present among many textile firms in Kolhapur and what the forecast is for future CSR schemes and their effectiveness in protecting workers.

3.3.1 Formal/Informal Dichotomy

Most global supply chains are defined by fragmented and globally dispersed production, multiple tiers and actors within each supply chain, and suppliers producing for multiple brands (Locke 2013). For textiles manufacturers to secure foreign contracts, they must be at least partially visible in terms of legal accountability. Manufacturers on the very low end of the formality spectrum rarely if ever have direct relationships with foreign firms despite their appeal insofar as offering the lowest labor costs. For this reason, foreign firms tend to utilize domestic subcontracting so as to exhaust manufacturing resources at a very informal level while still appearing to foster relationships with subcontracts that at least minimally subscribe to some legal guidelines (Gokhan & Fransen 2009). Though most companies operating in global supply chains do not themselves employ measures such as forced labor or unpaid overtime, many partake in such practices through their second or third tier suppliers (Locke 2013). Within these activities, the line between formal and informal industry is blurred and accountability for labor at the bottom end of the spectrum disintegrates. Under such arrangements, the likelihood that already sparse CSR measures at the higher end of the spectrum will trickle down to the bottom is quite low.

More than half of all workers in developing countries and more than 70 percent in some parts of South Asia find themselves in ‘vulnerable employment’ which translates to informal employment—employment that is poorly paid, and that does not provide workers with fundamental labor rights, a “voice at work,” or job security (Locke 2013, 17). For the sake of this conversation, the term ‘informal economy’ – sometimes referred to as the ‘grey economy’ or ‘ghost economy’—can be understood in two ways: 1. A coping strategy undertaken by individuals

23

in dyer situations in order to survive or 2. A means of conducting business in a way that evades official legality and regulations (The World Bank Group 2016). The latter activity can provide jobs where underemployment is an issue, but such jobs are more often than not low-paid, offering poor job security and lax regulatory commitments in relation to taxes and/or labor (ibid).

3.3.2 Auto versus Power-Looms

Consequences arising from the textile industry’s gradual progression from power to auto-looming equipment have proven problematic to textile workers. In the early days of the textile industry in post WWII India, a freeze was put on the uptake of power looms so as to protect an informal sector that relied on such equipment. Restrictions were imposed on the installation of auto looms as well, purely to protect employment. In 1977, restrictions were relaxed, but a large section of Indian industry remained using low-tech machines. The textile industry was India’s first organized industry, appearing in clusters in some states. This made it an early target for generating revenue for government of all levels. Taxes on textile reached an all-time high of 29%, reducing demand for fabrics and prefacing a hostile and inflationary economic environment where the formal sector was undermined. Price subsidies were emplaced to protect consumers while labor disparities between the formal and informal sectors widened ever more. There existed no link between productivity and wages. Over the course of the past decade, the Indian state has implemented top down strategies to facilitate a drastic shift away from the stagnant industry of old and towards a more modern and internationally appealing framework (Mayanathan 1994). All at once, the Indian textile industry was overhauled with modern auto-looming equipment, forcing contrived industrial updates in environments where training was unavailable. Mr. Shinde describes,

Initially it was hand-loom. Then, it converted to power-loom. When rationalization began, hand-loom converted into power-loom and power-loom converted into auto-loom which decreases the number of employees but increases the production… Basically, the industry is for the manufacturing of the goods, not only to provide jobs to the workers. When the manufacture is increased, it doesn’t matter if there is a decrease in employees.

Auto-loom operator Santosh Chavan explained that he managed sixteen machines total; quite a large amount considering some power-looms require one employee per machine. As the interview with Mr. Balashep suggests, an auto-loom complex requires approximately one fourth of the man power needed for a power-loom complex. Due to modernized operational methods requiring less man power, the move from power to auto-looms ended up putting many people out of work and left many others untrained to do the work that was available to them. Mr. Magdum says,