Employment relations in India
| Pages | 132-148 |
| DOI | https://doi.org/10.1108/01425450310456442 |
| Date | 01 April 2003 |
| Published date | 01 April 2003 |
| Author | Pawan S. Budhwar |
| Subject Matter | HR & organizational behaviour |
Employee
Relations
25,2
132
Employee Relations
Vol. 25 No. 2, 2003
pp. 132-148
#MCB UP Limited
0142-5455
DOI 10.1108/01425450310456442
Received December 2001
Revised August 2002
Accepted August 2002
Employment relations in India
Pawan S. Budhwar
Cardiff Business School, Cardiff, UK
Keywords Employee relations, Human resource management, Developing countries,
Internal labour market, India
Abstract This paper examines the employment relations (ERs) scenario in Indian
organisations. The investigation is based on a questionnaire survey of 137 Indian firms in the
manufacturing sector. The analysis of existing literature highlights the role of three key actors
(management, unions, and the state) in the management of ERs in Indian organisations. It also
shows the significant impact of the competitive pressures created by the liberalisation of the
Indian economy in the changing nature of ERs in Indian firms. The study has key implications
both for academicians and for practitioners.
Introduction
Developments in the field of employment relations (ERs) are now well
documented in the western literature (e.g. Cappelli, 1995). However, there is a
scarcity of research-led literature in this regard for developing nations. With
the ever increasing globalisation of business, both academics and practitioners
are interested in finding out about the patterns of employment relations
systems (ERSs) in different parts of the globe (e.g. Budhwar and Debrah, 2001;
Napier and Vu, 1998). This is due to the widespread involvement of western
MNCs in developing countries (see Budhwar and Debrah, 2001). This is further
complemented by the fact that to manage in an international era now has
become an imperative (Schuler et al., 2002).
Moreover, cross-national investigations into the understanding of ERs will
enable the development of relevant management policies and practices. It can
also become an important training tool for expatriates and for forming
appropriate labour policies of MNCs. Further, it will help to widen the scope of
current research literature, which is predominantly based on practices in
developed countries of the European Union and North America. Indeed, some
attempts have recently been made to examine the ERs of developing countries
(e.g. Frenkel and Peetz, 1998; Kuruvilla, 1996; Lee, 1997; Sheehan et al., 2000;
Ramaswamy and Schiphorst, 2000; Venkata Ratnam and Verma, 1998).
However, despite this there is still a scarcity of such research. This paper
examines the ERs in the newly liberalised Indian economy. Why conduct this
investigation in India?
India liberalised its economic policies in 1991 (for details on reasons for
liberalisation of economy and different reforms initiated by India, see Budhwar,
2001; special issue of Columbia Journal of World Business, 1994). Since then, the
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The current issue and full text archive of this journal is available at
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An earlier version of this paper was presented at the 16th Employment Research Unit
Conference at Cardiff Business School (10-11 September 2001). The author acknowledges the
useful comments of the Conference participants and the anonymous reviewer of Employee
Relations.
Employment
relations
in India
133
economy has responded positively and India is now considered as one of the
more dynamic emerging nations. At present, the ``second generation'' reforms
are in progress and the economy seems to be moving on the right track.
Recently, the World Bank forecast that, by 2020, India could become the fourth
largest economy in the world. Owing to such developments, a large number of
foreign firms have become interested in doing business in India. However, the
existing literature does not provide any updated information on the nature and
type of ERS prevalent in the Indian context.
The liberalisation of economic policies and the increased level of competition
by overseas firms have put a lot of pressure on the personnel functions of
Indian domestic companies. To survive and prosper, they have to prepare and
develop their employees so as to compete with overseas firms in skills,
efficiency and effectiveness (e.g. Sparrow and Budhwar, 1997; Venkata
Ratnam, 1995). In the present competitive business environment, Indian
organisations are feeling compelled from within to reorientate their ERs (see
Budhwar, 2000; Sodhi, 1999). Do such realisations and competitive pressures
significantly challenge the established pattern of ERs systems? If yes, then
what new form(s) of ERs are emerging?
Bearing in mind such developments, the main aims of this paper are twofold.
First, to summarise the key developments in the field of ERs in India till 1990
when the liberalisation of the economy was initiated. Second, to present
empirical results from a survey regarding the scenario of ERs in India in the
new economic environment. In this paper, the term ERs is used in the broadest
sense that incorporates both industrial relations (IRs) and human resource
management (HRM). It incorporates a range of sub-functions and practices that
include systems for workforce governance, work organisation, staffing and
development and reward systems. ERs is then concerned with the management
of all employment relationships in the firm, incorporating the management of
managers as well as non-management labour. The remainder of the paper is
structured as follows. In order to provide the context for the analyses, the next
section summarises the key developments in Indian ERs, both over the last
century and after the liberalisation of the Indian economy. This is followed by
methodology adopted to conduct this study and research approach and
hypotheses. Subsequently, the main results are presented and discussed. The
paper concludes with a discussion on the key theoretical and practical
implications of the research.
Developments in Indian employment relations
One best way of analysing the ERS in India is by adopting Dunlop's (1958)
model which examines the perspectives of three key actors ± management/
employer; employees/union; and the state/government.
The first category of actors is the management. Prior to independence in
1947, the Indian industrial scene was dominated by private owners,
characterised by an autocratic leadership style, as a result of which the issue of
ERs was addressed in an ad hoc manner and mostly as a fire-fighting strategy
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