ABSTRACT
Over the last couple of decades, all economies in the world have witnessed an increasing transformation of the internal organisation of the firm. Development of new technologies, especially information technology (Bresnahan et al., 1999; Acemoglu et al., 2005), globalisation (Antr à s and Helpman, 2004) and labour market institutions (Bertola and Rogerson, 1997; Blanchard and Giavazzi, 2003; Besley and Burgess, 2004) have been seen as influencing factors behind the transformation from traditional integrated firms towards more complex organisations, outsourcing within and outside the country. First, technological developments and globalisation are transforming the internal organisation of the firm. New technologies, especially information technology, are creating a shift from traditional integrated firms towards more complex organisations and outsourcing (Bresnahan et al., 1999; Acemoglu et al. 2005). Second, aggressive trade unions and a high turnover cost push firms more towards delegation and subcontracting on flexible contracts (Bertola and Rogerson, 1997; Blanchard and Giavazzi, 2003; Besley and Burgess, 2004). Third, Maiti (2008) shows an increasing tying up of small producers to the older and reputed firms in order to take advantage of their supply networks. Besides this, how competitive pressure, in the post-reform period, has fragmented labour processes and thus led to the expansion of the informal sector in India through connecting relationships is discussed. These are upcoming issues relating to the internal dynamics of firms in the contemporary world (Williamson, 1985; Hart and Moore, 1990). In spite of growing fragmentation, it is noticeable that the industrial growth in the formal sector has been spectacular during this period, second only to China’s. As a result, it is expected that India could catch up with the Chinese growth rate in the near future (Rodrik and Subramanian, 2004), because it has consistently maintained a growth rate over 7–9 per cent and achieved an even higher rate on the industrial front, in spite of getting frequent external shocks. According to the predominant view, the process of economic liberalisation initiated in the early 1990s has played an instrumental role in accelerating the economic growth of the country (Aghion et al., 2008). However, a host of institutional rigidities has limited the growth. The dichotomy of industrial growth on one hand and the jobless on the other has prompted us to look into the internal labour process of a formal sector firm. Now, the questions are: What is level of integration? How are contracts executed to use flexible workers? What is the overall economic condition of those workers? This chapter would like to address these issues by looking closely at the changing pattern of labour relations in the industrial sector for possible answers, drawing information from field surveys.
