Tyranny of SMALL in India

Ever since I began documenting (with data) the fragmented nature of India’s farms and factories that militate against scale, efficiency and productivity, I had tried to understand its origins. Doubtless, it will have several. I am still in the search mode. One of the answers I found was inspired by Andrew Batson. But, these are all hypotheses. Learned and sober comments most welcome.

So, when does someone turn into a capitalist? When he employs eight or more workers! That was Karl Marx’ insight. I stumbled upon it in Andrew Batson’s blog. Interestingly, I discovered his blog because good friend Niranjan Rajadhyaksha sent me a link to his post on the death of a 102-year old Chinese economist, Du Runsheng.

So, perhaps, this helps explain India’s fixation with seven workers. That is why the Trade Unions Act 1926 prescribed this:

4. Mode of registration.-

(1) Any seven or more members of a Trade Union may, by subscribing their names to the rules of the Trade Union and by otherwise complying with the provisions of this Act with respect to registration, apply for registration of the Trade Union under this Act. [Link]

Important amendment in 2001:

However, the Trade Unions Act 1926 has been amended from time to time and the most important being the Trade Unions (Amendment) Act, 2001. This Act has been enacted in order to bring more transparency and to provide greater support to trade unionism in India. Some of the salient features of the Trade Unions (Amendment) Act, 2001 are:-

No trade union of workmen shall be registered unless at least 10% or 100, whichever is less, subject to a minimum of 7 workmen engaged or employed in the establishment or industry with which it is connected are the members of such trade union on the date of making of application for registration.

A registered trade union of workmen shall at all times continue to have not less than 10% or 100 of the workmen, whichever is less, subject to a minimum of 7 persons engaged or employed in the establishment or industry with which it is connected, as its members. [Link]

So, Indian capitalists generate production in units that have six or less workers, except where size is inevitable. It is not a small mind that has generated this outcome. Or, perhaps, it is.  It is the small capitalist mind that has sought to circumvent the Government of India’s Marx-inspired Trade Unions Act by opting for small size.

Clearly, our laws are incompatible with our capitalist instincts.


One thought on “Tyranny of SMALL in India

  1. Ananth, interesting point and logically possible that “Indian capitalists generate production in units that have six or fewer workers, except where size is inevitable”…

    But firm distribution analysis (based on either employment share of numbers of firms) does not reveal any discontinuity at either 7 (where Union registration starts) or 100 (the ID Act kicks in at 100). The graphs are at http://gulzar05.blogspot.in/2015/09/is-there-no-missing-middle-in-indias.html

    The story may be more complicated… A more plausible explanation could be that union registration requirements, ID Act, etc add to the layers of costs associated with going formal and bigger…


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