Macroeconomic Processes, Gender and Labour in India

Chirashree Das GuptaAmbedkar University, Delhi

Introduction: Two Stories in the Economics of Gender and Labour

• The plug-in narrative: Insert gender as a variable (Sinha 2009)• in standard market models – based on the dichotomy

between equity and efficiency in goods and factor markets• in CGE models using Social Accounting Matrices

• The inclusion narrative:– Estimates of Exclusion in• public expenditure/resouces (health, education,

nutrition etc and taxation)• access to credit and financial markets

Problems in these narratives

• Gender discrimination in labour markets and share of resources demonstrated but not explained

• Women’s labour no different from any other form of wage labour

• Homoeconomicus prevails• Fragmented approach to macroeconomic policy• Patriarchy is external to the macroeconomic process.

Our point of departure – Patriarchy: a macroeconomic construct (Dewan 2011)– Women’s labour (paid and unpaid) central to the

accumulation regime under capitalism (Elson 1979; Fine 1992; Hirway 1999; Mazumdar 2007; Ghosh 2009)

Responsiveness of Growth to Policy Regimes in India : 1955-56 to 2011-12

Growth (%) in Gross Fixed Capital Formation in India

Continuities

•The cyclical nature of growth and capital formation is persistent in its systemic dimension regardless of policy regime.

•Entails structural constraints (agrarian, technology, capital and fiscal) and points to the secular nature of the structural dimensions of accumulation in the post independence period.

Outcomes of the Regime of Accumulation in India (Factory Sector: ASI Data)

1989-90 1994-95 2000-01 2004-05 2009-10Profit/Net Value Added (%) 19.07 34.29 24.86 55.64 56.23Wages/Total Value of Output (%) 6.54 5.57 4.19 2.84 2.57Net Value Added/Wages (%) 283 376 370 547 618

Rate of Profit (%) 21 25 17 18 18Material Inputs: Wages (%) 12.5 14.2 20.2 29.7 32.8

• The evidence from the formal factory sector shows that for a product worth Rs 100, labour value was Rs 2.57 in 2009-10 (Acknowledgment: Surajit Mazumdar). In 1989-90, it was Rs 6.54.

• Profit to net value added increased from 19% to 54% in the same period.

• So the neoliberal rhetoric of India’s labour laws being a reason for high labour cost in India is a complete figment of the imagination. Given the links between the formal factory sector and the large informal sector, the restructuring of the labour process under neoliberalism was the key to this achievement.

• How was this achieved? The strategy was to repress wages, informalise formal sector employment, and resort to semi-feudal forms of labour oppression and exploitation on the pivot of patriarchy.

Wage Outcomes in the Recent Period

1.The net increase in men’s agricultural wages (subtracting the food-grain yield growth rate from real agricultural wage growth rate) stands at 1.7% for the period 1999-2004 and 0.6% for 2004-2009. Thus, 2004-2009 effectually experienced a lower rate of increase in agricultural wages once the growth rate in yield is netted out. (Mahajan 2012)2.After subtracting the rate of growth in food-grain yield, Tamil Nadu and Karnataka in fact show negative growth rates in men’s agricultural wages in 2004-2009 though they had positive net growth rates in 1999-2004. The women’s wages also show very low or negative net wage rate growth in Karnataka, Maharashtra and Tamil Nadu among the states that show higher rate of growth in women’s real agricultural wages. (ibid)3.Even at the all India level, growth in net female agricultural wages is a modest 2.4% in 2004-2009 in comparison to the 1.1% in the 1999-2004. (ibid)4.There is a significant decrease in gender gap by 8-10 percent in ploughing and sowing between 2008 and 2011. Gender gaps are persistent at their levels in all other agricultural occupations. (NSSO data , various years)

Structural Continuities and Changes in Labour Processes

1.Real wages in casual work in rural India other than public works, has increased merely by 20 percentage points between 2004-05 and 2009-10. Disaggregated by sex, real wages for rural males have increased by a mere 14 percent while that for the women have increased by 22 percent, (albeit wages for women were much lower in 2004-05 and is still substantially lower than the male wages in absolute terms). (Mitra 2011)

2.Between 2008-09 and 2011-12, while real wages for non agricultural occupations like masonry (4%) and blacksmithing (4%) , have seen a modest increase in rural areas, most other occupations have registered either stagnating (carpentry and cobbling) or falling real wages (sweeping and unskilled labour). (NSSO data, various years)

Structural Continuities and Changes in Labour Processes

1.Women’s labour force participation has declined by almost 14 percent and rural women’s participation shows a decline of 15 percent between 2004-05 and 2009-10 (Mitra 2011 based on NSSO data) – problem in NSSO method – regional variation?

2.Semi-feudal forms of labour processes in the fastest growing sites of accumulation – eg brick kilns, garment industry, construction sites – family labour and various types of bondage (Neetha and Mazumdar 2012; Kumar 2013)

Indian Capitalism: Myth and Reality

Myth: Stringent labour laws in the organised sector the most significant barrier to competition (demand for ‘second generation economic reforms’).

Reality: Capitalism has advanced in India solely on the basis of labour cheapening based on caste and gender hierarchy.

Four means of labour cheapening

• Labour hierarchy and discrimination• Depressed wages• Unpaid labour• Semi-feudal labour regimes– Undergirded by institutionalised patriarchy and the

labour surplus inherited from the colonial economic legacy.

Continuity of Institutions in facilitating labour cheapening

• Corporate Governance• Property, Personal and Tax Laws • Labour Laws • Financial Laws ( not part of this discussion)

Institutionalised between 1947 and 1961. Spans all policy regimes in independent India

Patriarchy and Institutions of Macroeconomy

• Basis 1: Jurisdiction of labour laws - Trade Union Act and Industrial Disputes Act– Who is a worker?– What is a workplace?

• Basis 2: Interstices of property, personal and tax laws – the case of the HUF (Das Gupta 2013)

The First Five Year Plan laid down that an abrupt increase in wages was detrimental to the economic stability of the country, as it would get reflected in the costs of production and, consequently, in the rise in prices of products.

From the Second Plan period, however, wages had come to be determined by industrial tribunals whose approach reflected the growing strength of the labour movement.

So by 1960, the doyens of industry were already appealing to members of parliament and legislatures to ‘bend their legislative energy to review and rationalise the present Acts and regulations’ (FICCI 1960).

The Industrial Disputes Act 1947 had applied to all cases where one person was employed by another irrespective of the type of employment, the resources of the employer and his income from his business.

Thus in the period of liberalism between 1946 and 1955, an Act had actually envisaged the formalisation of all employer-employee relations in India at least on paper. Indian capitalists wanted this to be changed and industry needed to be defined very specifically.

The 1953 amendment did not include this even though there was pressure from the organised sections of the industrial top brass to do so (FICCI 1954).

Due to pressure from the leading trade unions (Ranadive 1990), the Act widened the definition of “workmen” to cover supervisory personnel drawing up to Rs.500/- per month.

Ambit of Labour LawsShah in 1954 as President of the All India Organisation of Industrial Employers argued:

The multiplicity of trade unions is a serious obstacle to smooth industrial relations. Any 7 persons can join together and get themselves registered as a trade union under existing legislation. So there are as many unions as there are political parties. No sooner than the employer has settled a dispute with one Union, workers belonging to another union put up fresh demands, these demands being naturally higher than those already conceded. (AIOIE 1954: 7)

On the definition of workplace in the original draft of the Industrial Disputes Act:

…a university, a hospital, a restaurant, a boarding house, a shop, a circus, a theatre, a zoo, a charitable institution and even an educational institution have come within its scope. If a liberal interpretation is given to the definition, it will be within the law to include a church, a temple and a mosque or other places of worship and a private dwelling house. (FICCI 1954: 9)

The right of trade union formation could not be denied. But flexible corporate governance structures ensured narrow ambit of TU formation.

The definition of worker and work place where workers could take recourse to the provision of industrial disputes law and forming trade unions was narrowed down to definitions based on scale; power consumed and type of economic activity.

• The adjudication machinery powered by the labour movement had made a serious effort to cover the entire area of labour exploitation encompassing the informal sector under the Industrial Disputes Act. However, resistance from capital, led to multiple amendments that significantly reduced the scope of adjudication based on a narrowing of the definition of industry to the formal factory sector. This was the institutional basis of sustained informalisation of the labour force without any adequate legal option for taking retributive action in all sectors of the economy.

• The net result was the reinforcement of the capitalist dependence on the state for disciplining labour. Thus the first two decade after independence entailed two crucial victories for the capitalist class – first, the entrenchment of the Hindu family owned business group as the primary unit of organisation of capital and second, the prevention of universalisation of labour rights in India.

• The capitalist class were also wary of the process of adjudication. The biggest resistance from capitalists came in addressing labour demands for wage standardisation and social benefits through the setting up of a welfare state in India.

Corporate Governance - Structure of the business group

The family run business group consisted of a plethora of corporate entities:• employment was distributed across companies to prevent trade union formation • created institutional basis of linkage between formal and informal sectors to facilitate wage repression

Narrow definition of the work-place and the worker in labour laws

Laid the basis of informalisation and denial of recognition of work and worker:• Institutionalised unpaid work• Facilitated denial of conditions of ‘decent’ work and ensured continuity of semi-feudal labour regimes based on hierarchies of caste and gender

HUF and Monopoly Capital in India

• The ‘family run business group’ as the basic institutional unit of organisation of Indian monopoly capital (Hazari Report).

• Two routes to family control:– Corporate governance structures– HUF

• Company law, tax law and personal law together underwrite the unique legal entity of the HUF – but hardly under the critical scanner .

Who is a Hindu?

Definition of the Hindu in the Hindu Code Bills:

a Hindu was defined as anyone who was not a Muslim, Christian, Parsi or Jew and thus by default included followers of other institutionalised religions like Buddhism, Jainism and Sikhism as Hindu, not to mention theistic practices outside the domain of organised religion like those of adivasis.

To quote Dr Ambedkar,...The result is that if a tribal individual chooses to say that he is not a Hindu it would be perfectly open to him under this Code to give evidence in support of his contention that he is not a Hindu and if that conclusion is accepted by the Court he certainly would not be obliged by anything contained in this Bill...(Constituent Assembly. (Leg.) D.L Vol. I, 17th November 1947, p. 41.)

Outcomes of codification of Hindu Personal Laws

• Abolition of polygamy• Recognition of Dayabhaga and Mitakshara• Adoption and succession was to be defined in jurisprudence

by ‘custom laws’ institutionalising male lineage of descent as the ‘natural’ inheritors of property and the expropriation of any right to property of children born outside marriage.

• Legal space for any Hindu male to break away from the ‘joint family’ and start a new ‘Hindu Undivided Family’ as long as he was married .

Thus, even as families went nuclear, the ‘HUF’ could be perpetuated as a legal entity as each nuclear family marked the beginning of a new ‘HUF’.

HUF as a legal tax entity• The Hindu Undivided Family was institutionalised as a legal tax entity separate and

distinct from individuals and corporate entities recognised by Section 2 of the Income Tax Act 1961.

• This preserved the patriarchal rules of limiting inheritance rights of women to property and assigned the ‘Karta’ as the patriarch of the family with legal powers to represent and structure the holding of property (Sachdeva 1987).

• The Hindu Succession Act before the 2005 amendment made provision for a Hindu Undivided Family to ensure that property remains with the male line of descent. A son got a share equal to that of his father; a daughter got only a share in her father's share.

• She could not reside in the family home unless she was single or divorced, and could not claim her share of property as long as the men of the family continued to live in it. Further, a woman's right to agricultural property was restricted to “prevent fragmentation of landholdings”.

• The amendment gave Hindu women equal inheritance rights in the Mitakshara Joint Family Property, but not Dayabhaga property. It also gave women the right to be co-parcenaries in an HUF (Singh 2005).

• However, the status of the ‘Karta’ and the HUF as a form of property holding in a body incorporate were not affected by the amendment.

Peculiarity of Tax Exemption

• A Hindu male can be a ‘karta’ for more than one HUF accounts. Despite scores of judicial decisions, the circumstances in which a HUF comes into existence has been the subject of debate and controversy.

• Under the Income Tax Act, 1961, a HUF is assessed for income tax as a distinct unit of assessment.

• In case law, a HUF consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters; while a Hindu coparcenary is a much narrower body including only those persons who acquire by birth an interest in the joint or coparcenary property.

• A member of a HUF is not taxable at all in respect of any sum which he receives as such member out of the income of the family, even though the family may not have paid the tax on its income.

• Thus the general principle of tax law that income from an individual members' property thrown into the family coiffeur is taxable, as the income of the joint family, does not hold for a HUF. All definitions and interpretations of HUF are based on Hindu personal laws.

• A Hindu Undivided family (HUF) cannot enter into a partnership with other persons, as it is not a legal person, but the karta of a HUF can.

• No one can make a profit out of oneself. This is axiomatic in tax law.

• The concept of the Hindu Undivided Family (HUF) is an exception to this principle.

• The same person can act as the karta of the HUF and also make profits in his individual name.

• An HUF member cannot be taxed in respect of any sum which s/he receives as such member out of the income of the family, even though the family may not have paid the tax on its income (Ramanujam 2006).

According to Ramanujam (2006: 6), a former Chief Commissioner of Income Tax:

The HUF is an entity peculiar to the Indian tax law. The law recognizes it and there is nothing sham about it. Surprisingly, the Government carries out any amount of amendment to the Hindu law without looking into the revenue loss caused by the recognition of the HUF as a separate taxable entity. The HUF may be a boon to the taxpaying Hindu. But it is definitely a bane to government revenues.

• Both ‘old’ and ‘new’ capitalist business houses of Hindu origin use the provision of HUF to consolidate family holdings and ensure the control of capital within the family through transactions between the HUF and individuals within the HUF who held key positions in the share-holding and managerial patterns of the companies within the fold of the business house.

• No such provision was available to business houses held by Muslims or other religious minorities.

• No ‘reform’ has been ever advocated of this peculiar favour to the majority religious group in a democracy whose constitution guarantees no discrimination on the basis of caste or religion and equality of men and women.

The HUF has often been considered to be a legalised tool for tax evasion and its importance in the holding structures of assets for the family owned business groups have not been sufficiently investigated.

It is also often argued that the importance of HUF has declined in contemporary times and so there is no need to dwell on it.

However, our survey of 150 business groups carried out between 2003 and 2005 reveal otherwise:

1.Judicious use of provisions in these two legislations where each group consists of some or all of the legal forms of partnership firms, private limited companies, unlisted public limited companies and listed public limited companies. 2.The holding structures comprises of individually owned stocks, followed by stocks held under Hindu Undivided Family accounts (except for the two business groups of ‘non-Hindu’ origin in our Survey – Cipla and Akbarallys), and a number of ‘group’ companies spread across the four forms of firms .3.The Kartas of the HUF or other HUF members however hold stocks in the publicly listed companies.

4. Thus the payouts to the HUF as well as to the individual who is part of an HUF is simultaneously maintained.

5. At the same time, the HUF can hold other property eg houses, cash, gold, share certificates, fixed deposits which would not be considered in the asset accounting of the business group.

6. The income and wealth holdings in HUF do not get counted in the business group’s accounting of ownership and control of assets.

7. The central role of legal facilitation of holding structures of family owned business groups and the continuing provision of Hindu Undivided Family accounts in the personal laws that ensured assets remained within the male line of descent of family and insulated from business risk has seen no significant change in the period of transition to neoliberalism.

8. It ensures corporate and individual income tax exemption over and above the other universal forms of exemptions.

9. No such provision was available to business houses held by Muslims or Christians, Parsis and Jews.

• Within the structure of the family owned business group, the importance of Hindu Undivided Family assets have not declined even as the groups in question have forged relationships based on technological dependence and spates of mergers with and acquisitions of both indigenous and foreign companies.

• It has only meant that the wealth holdings in HUF cannot be used for controlling stakes in the merged entity as opposed to the wealth held through ‘corporate governance’ structures.

• This means that family owned business groups were transforming themselves into multi-nationals without an increase in their total corporate liability through vertical and horizontal integration. This is possible because the laws of the land have been suitably altered to facilitate such transformation of firms in the period of neoliberal globalization.

• However, the laws relating to holding structures of companies remain flexible enough to accommodate the requisites of change in corporate governance but unchanging in its function to provide the legitimate basis of family owned business groups spanning the entire domain of ownership, control and individual and family based appropriation of profit in favour of the ‘Hindu’ defined as anyone who is not a Muslim, Christian, Parsi or Jew.

• In the post liberalisation period, it also provides yet another channel of tax-saving on income and wealth for not only the upwardly mobile ‘Hindu’ families in India but also NRIs.

Violation of both Constitutional and Fundamental Right

• Positive economic discrimination in favour of the majority religion through tax law was institutionalised between 1954 and 1961 in India.

• The HUF is one of the most blatant and unquestioned discriminatory structural continuities in the realm of property rights in independent secular India that spans corporate governance, tax laws and ‘personal’ law.

• In upwardly mobile contemporary Hindu India, middle class nuclear families are proliferating Hindu Undivided Family accounts to avail tax exemptions. HUF have registered a far higher rate of proliferation compared to individual and corporate tax accounts between 1996-97 and 2011-12.

• Thus the modification of the right to property as a universal right and the fundamental right to equality guaranteed by the Constitution, in favour of Hindus privileging Hindu men through the perpetuation and sanction of the legal entity of the HUF, was the most significant and blatant violation of both constitutional principles and fundamental rights in independent India.

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Conclusion: Continuity and change in macroeconomic processes from the period of dirigisme to neoliberalism?

Thank You