Indian Industry needs Innovation not Mindless Toil

This blog post is part of ‘The New Heterodox’ series.

Jayan Jose Thomas is a Professor of Economics at the Indian Institute of Technology (IIT) Delhi, where he has been employed since July 2010. Jayan's research addresses development problems, particularly those related to labour and industrialization, from a macroeconomic perspective. He teaches courses on macroeconomics, Indian economy, international economics, and planning and development. He had previously worked as a Member of the Government of Kerala’s State Planning Board (2016-2021) and as a research fellow with the Institute of South Asian Studies, National University of Singapore. Jayan’s research papers have appeared in reputed journals including World Development, Development and Change, and Economic and Political Weekly. His writings appear in media outlets such as the Hindu, Mint, Frontline, and The India Forum. Jayan received his B. Tech in Industrial Engineering from Kerala University and Ph.D. in Development Economics from the Indira Gandhi Institute of Development Research (IGIDR), Mumbai.

Industry Needs Innovation, Not Mindless Toil

By Professor Jayan Jose Thomas

India’s industrial growth has long been fueled by an over-reliance on cheap labor, a strategy that has allowed businesses to thrive in the short term but has stunted long-term progress. While industry leaders often advocate for longer working hours, the reality is that India’s workforce is already toiling under grueling conditions, with little to show for it in terms of productivity or innovation. This reliance on exploitative labor practices has not only harmed workers but has also hindered India’s ability to compete globally. The time has come for Indian industry to shift its focus from mindless toil to innovation, technology, and sustainable growth.

The Plight of India’s Workers

A recent study conducted in Ludhiana, Punjab, revealed the harsh realities faced by industrial workers. Migrant laborers in factories producing garments, auto components, and other goods work 11 to 12 hours a day, often without breaks during peak production periods. Their lives outside the factory are no less exhausting, as they spend their limited free time cooking and commuting. These conditions are not unique to Ludhiana; they reflect the broader reality of India’s labor force.

According to the Periodic Labour Force Survey (2023-24), only 21.7% of India’s workers hold regular salaried jobs. The majority are either casual laborers or self-employed, working in informal conditions without job security, paid leave, or social security benefits. Even among regular workers, nearly half face informal working conditions, lacking written contracts or access to basic labor protections.

Despite these challenges, some corporate leaders have called for even longer working hours, seemingly unaware of the already exploitative conditions faced by most workers. This mindset underscores a deeper issue: Indian industry continues to rely on cheap labor as its primary competitive advantage, rather than investing in technology, innovation, and efficient management practices.

The Global Context: Productivity vs. Exploitation

The contrast between India and developed economies is stark. In countries like the United States and Japan, workers put in fewer hours but achieve significantly higher productivity. According to the International Labour Organization (ILO), the average weekly working hours in 2024 were 38 hours in the U.S. and 36.6 hours in Japan, compared to 46.7 hours in India. This disparity highlights the inefficiency of India’s labor-intensive model.

Historically, developed nations transitioned from exploiting workers through long hours to driving growth through technological advancements and better management practices. For instance, during the Industrial Revolution in Britain, workers endured brutal conditions, but by the mid-19th century, labor unions and technological progress led to improved working conditions. Today, developed economies prioritize innovation over exploitation, a lesson the Indian industry has yet to fully embrace.

The Structural Shift to Informal Labor

Indian businesses have systematically shifted from the organized sector, which is regulated by labor laws, to the unorganized sector, where rules are lax or nonexistent. Industrial clusters in cities like Coimbatore and Ludhiana are dominated by small units with fewer than six workers. These small firms operate in cramped sheds, producing components that feed into larger production networks. Over 70% of India’s manufacturing workforce is employed in such unregistered enterprises, where informal labor practices are the norm.

This shift has created a race to the bottom, with small firms struggling to survive. Bigger companies delay payments for months, refuse to adjust prices despite rising costs, and exploit the lack of regulation to keep wages low. Small firm owners, often former workers themselves, are left with little room for growth or innovation. This dynamic has weakened the entire industrial ecosystem, as small firms lack the resources to invest in technology or improve working conditions.

The Rise of Contract Labor

Another troubling trend is the increasing reliance on contract labor. Since 2011-12, 56% of new workers in India’s factory sector have been hired through contractors, bypassing labor regulations and paying significantly lower wages. Migrant workers, who form the backbone of this labor force, are particularly vulnerable due to their lack of social security, asset ownership, and bargaining power.

While profits in India’s factory sector have soared—rising from 31.6% of value added in 2019-20 to 46.4% in 2021-22—wages have stagnated. This imbalance has created a vicious cycle: low wages reduce workers’ purchasing power, depressing domestic demand and further stifling growth.

The Garment Industry: A Case Study

India’s garment industry exemplifies the pitfalls of relying on cheap labor. Despite being a labor-surplus country, India’s share of global garment exports has remained stagnant at 3.1% for two decades. In contrast, China, Bangladesh, and Vietnam have surged ahead, leveraging better technology and more efficient production methods.

The reluctance of Indian capitalists to modernize their firms has been a major barrier to progress. Instead of investing in innovation, they have focused on exploiting low wages to dominate domestic and niche export markets. This short-sighted approach has left India lagging in a highly competitive global industry.

The Need for Innovation

The easy availability of cheap labor has lulled Indian industry into complacency, stifling innovation and technological advancement. This is evident even in newer sectors like IT, where low wages and long hours have become the norm. The lack of investment in research and development, coupled with poor working conditions, has undermined India’s potential to become a global leader in innovation.

Moreover, the exploitation of workers has broader societal implications. Stretching the limits of the working day leaves little time for rest or personal development, perpetuating cycles of poverty and inequality. In the long run, this approach is unsustainable, as it erodes the very foundation of economic growth: a healthy, skilled, and motivated workforce.

A Call for Change

The time has come for the Indian industry to rethink its strategies. Instead of squeezing more hours out of an already overburdened workforce, businesses must invest in technology, innovation, and employee well-being. This requires a shift in mindset, from viewing labor as a cost to be minimized to recognizing it as a valuable resource that drives growth.

Policymakers also have a role to play. Strengthening labor regulations, ensuring timely payments to small firms, and providing access to credit and technology can create an environment conducive to innovation. Additionally, fostering collaboration between large and small firms, as seen in countries like Japan, can help build a more resilient and dynamic industrial ecosystem.

India’s industrial growth cannot be sustained by mindless toil and exploitation. The over-reliance on cheap labor has not only harmed workers but has also hindered India’s ability to compete globally. To unlock its true potential, Indian industry must embrace innovation, invest in technology, and prioritize the well-being of its workforce. The sooner this realization dawns on India’s business leaders, the better it will be for the economy, the workers, and the nation as a whole.

The path to sustainable growth lies not in stretching the limits of human endurance but in harnessing the power of innovation and creativity. Only then can India truly become a global industrial powerhouse.

A longer version of this blog was originally published in the Opinion page of The Hindu on February 24, 2025.

(https://www.thehindu.com/opinion/lead/indian-industry-needs-innovation-not-mindless-toil/article69255370.ece)