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Sunday, September 8, 2013

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Strikes could hurt India’s investment climate

Devajit Mahanta

Strikes are a strategy used by a group of employees in an attempt to force the employer to meet their demands. But this strategy must be the weapon of last resort because if this right is misused, it will create a problem in the production and financial profit of the industry and ultimately affect the economy of the country.

There are mainly two hypotheses on the effects of strikes on economic growth. First, a negative effect of strikes on economic growth as assumed to be a part of the rent seeking activities of trade unions and political parties and, second, strikes are considered to be the most effective mechanism to curb excessive use of managerial powers and discretion. Very few studies have examined the effects of strikes on economic performance. Now is the time for our academicians and policy makers to think about reconciling both conflicting objectives.

Of all the issues surrounding strikes, the biggest question resolves around the issue of legality of strikes. Much of the debates on the legality of strikes under the Indian Constitution have been on the issue of the right to strike. Constitutionally, strikes may be analyzed through fundamental duties under part IVA of the Constitution. A strike is defined in Employments Rights Acts (ERA) 1996 as, “a concerted refusal, or a refusal under a common understanding of any number of employed persons to continue to work for an employer in consequence of dispute”. Everyone has the right to protest, but when it hampers the growth of the nation and mass people, they need to decide what’s more important.

The history of labour legislation in India is naturally interwoven with the history of British rule, but there is “no right to strike” as such in British rule. In USA, most of the state government employees and medical professionals’ strikes are illegal under the common law. In Marxist-Leninist regimes such as the former USSR or the China, striking is illegal and viewed as counter-revolutionary.

In India, state and company employees strike is already having an impact in several agencies like health, transport, and agriculture. Based on some recent findings, I try to analyze how strikes effect the economic growth. On January 5 when thousands of truckers stayed off the roads after talks broke down with Indian officials to cut taxes and diesel prices ultimately pushed up prices of food and commodities across the country. According to the All India Motors Congress, due to the truckers’ strike, Rs10,000 crores per day loss was incurred by the country’s overall business. To protest against rising prices of essential commodities, the main Opposition National Democratic Alliance (NDA) will form a human chain to observe a countrywide strike. The question arises now whether the BJP-ruled states will also observe the shutdown.

In case of a strike at a healthcare facility, the third party consists of patients who may have neither the ability to switch to another provider nor the power to apply pressure on the employer and employees. Recently, the Jet Airways pilots’ strike was hogging the limelight in most newspapers. Just after 24 hours of the pilots’ strike, both the Left parties and the BJP came out in support of the strike and tried to inject politics. They tried to politicise a purely legal matter relating to the enforcement of contracts.

However, in every civilised society the right to strike is an important element of human rights, but at the same time the objective of economic growth is equally important. Thus, trying to avert costly strikes seems only reasonable. Strike as a weapon has to be used sparingly for redresses of urgent grievances when no other means are available or when available means have failed to resolve it. It is indeed ripe for the Government to enact legislation so that strikes in any sector may be banned, if deemed essential.


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