Contract labour share at 27-year high in India’s organised manufacturing sector: Report

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The share of contract workers in India’s organised manufacturing sector has surged to its highest level in nearly three decades, at 42 per cent in 2023-24, Business Standard reported, citing the latest Annual Survey of Industries (ASI). This is more than double the 20 per cent share seen in 1999-2000.

The report said the share of contract labour has increased by nearly 8 percentage points in the past decade. The last decline was in 2013-14, but since then, contractualisation has risen every year. The ASI data, released on August 27, covers employment in the formal manufacturing sector.

Contract workers generally earn lower wages and have fewer social security benefits, such as a provident fund and insurance. According to Business Standard, economists attribute the steady rise in contract jobs to the gradual easing of labour laws at both the central and state levels. Amit Basole, professor of economics at Azim Premji University, said slackness in the labour market ensures companies always find workers willing to take up contractual roles.

The report also cited concerns from experts about stagnant real wages and the rise of contractualization. While firms may benefit from lower costs, Bino Paul of TISS warned that this could hurt inclusive growth by weakening purchasing power. He said Indian manufacturing must move beyond dependence on cheap labour, adding that the government’s new employment-linked incentives (ELI) scheme could push more formalisation.

Cleared in July, the ELI policy offers first-time employees one month’s wage of up to Rs 15,000, with employers eligible for incentives for up to four years in the manufacturing sector, the report said.

Global comparisons show India’s share of contract labour is far higher than in other regions. Business Standard noted that a 2023 study pegged the US figure at 10.8 per cent, Europe at 12.3 per cent, and Latin America between 10 and 20 per cent at different times.

Legal frameworks such as the Industrial Disputes Act and a Supreme Court ruling on contract workers’ rights have further shaped the trend, the report added.