The International Labour Organisation's World Labour Report for 1997-98 has pointed out that the Indian industrial relations system has low collective bargaining, at only about two per cent of its workforce unionised, excluding the civil service and some public sectors not covered by collective bargaining. The report says that the absence of collective bargaining is made up by a plethora of state regulations, which are, however, hardly ever implemented. Extensive state regulation of the relationship between management and labour is a legacy of the state-dominated system which exists in the country. Red tape has merely served to enrich petty bureaucrats rather than help workers. In fact, outside the organised sector, India has always enjoyed the benefit of "flexible" labour.

The problem with the labour movement in the country is that it has led to the creation of a labour aristocracy which has shared in the rents available in a protected economy. High wages, subsidised housing and medical care for all workers are available in most of the organised sector, in sharp contrast to conditions in the informal sector. Working conditions in diamond cutting, in the leather industry and even in the garments trade, all notable forex earners for the country, are hardly conducive to health. Since liberalisation, however, all that is changing. Unions now seem to realise that they will survive only if their companies survive--witness the once-powerful bank unions agreeing to lower allowances to protect the bottomlines of some of the weak banks. This is a welcome trend, and can only be good for the economy.