Thursday, September 24, 2009

Labour pain: Chinese workers in India

China and India are two of the largest countries in the world, by, with well over a billion people in each. If there is one thing that is available in plenty in both countries, is labour, that is people willing to work.

There are 30,000 people Chinese working in India today. But these are not people who have come to work on Chinese projects in India. I did not even know that Indian companies, particularly those working on short term projects and contracts, are hiring Chinese workers to work in India. And these are not high skilled professionals, but relatively low skilled workers, mostly working on power projects across India. Why is India importing labour from China?

From all accounts, there are two reasons why firms are opting to import labour. First, and most critically, India’s archaic labour laws—which the broader polity has little interest in reforming—are a huge disincentive for firms to hire workers on their payroll. For firms which work on a project to project basis, it is impossible to hire labour on a ‘permanent’ basis, as is required by our labour laws, which frown upon ‘hire and fire.’ Given that constraint, firms are forced to outsource their labour requirements to another party. This, of course, raises the cost—the firm which gets the outsourcing deal will obviously charge a commission above the regular charges for labour. It also creates a larger principal-agent problem, because the outsourced, contracted labour does not have a direct stake in the firm or project they are working on.

Add to this the fact that Indian labour—and this is the second reason for importing labour—in general works at lower productivity levels than similarly skilled labour from China. Anecdotal evidence suggests that Chinese workers put in longer hours and complete projects at a much faster speed than Indian workers do. This is not to argue that Indian workers are inherently less competent or hardworking—it’s just that work ethics and working cultures are different.

However, for senior management at profit making companies, what matters most is efficiency, not culture and nationality. They are, therefore, making the right decision by importing labour from China. As far as projects get completed faster, it involves a huge benefit to the Indian economy at large... ... ...

It may seem cruel to equate human labour with physical goods but the economic construct is the same—trade is good and free trade is optimal. Look at what years of trade protectionism did to the quality and standards of our industry and look how they have lifted their game after liberalisation. Competition is always good and that goes for labour as much as for physical goods and services. The government has missed this important nuance by simply banning the import of unskilled and semi-skilled Chinese labour. Instead, the [Indian] government should focus on skill upgradation and training of locals so that firms hire them out of free choice... ... ...

If the government is really serious about helping low skill Indian labour, it should reform labour laws immediately, rather than play populist politics.

Please read the originaly article "Bad solution for Chinese labour pain" by Dhiraj Nayyar in the Financial Express. While there is a lot of negotiations at WTO on movement of skilled labour, and professionals, hundreds of millions of workers in India are paying the price for a labour policy that has privileged the 10% of the over 450 million workforce in India, at the cost of the latter. Import of low skilled Chinese workers by Indian companies is a telling illustration of the high cost of indigenous labour due to "protective" labour laws. The price of this protectionism is being paid by the vast majority of Indian workers, Indian companies, and Indian consumers. Yet, any discussion on reforming labour laws, and lowering the cost of hiring is seen as politically sensitive, because of the political muscle of the small minority of workers who form the organised labour in India.


  1. Chaoliang submitted this comment:

    Yes, it has been confirmed that near 25 thousand Chinese labourers working in India have been banned to receive their visas there, and the Chinese workers issue has been given more attention with the chimney accident breaking out.

    And I'd like to share two points around it:

    First, as for the chimney accident, certain Chinese company director in charge of the project has tried to immune Chinese engineers and construction workers from any accountability with the tragedy by indicating that the project had been subcontracted to an Indian firm. []

    Second, as for the reason why India once felt like importing so many Chinese workers now that it possesses a great deal of labour resources itself, a brief analysis ensues:

    a. many employers, including Chinese and Indian as well, regard the imported Chinese workers as more competent than the local laborers, in terms of skills, efficiency, or activeness. It is even estimated that the productivity of one imported Chinese worker can amount to that of four Indian local ones. 【】.

    b. besides, it is harder to manage local laborers than Chinese. For example, Chinese would not be unhappy with few holidays and extra work; on the contrary, local laborers tend to be more demanding over the rights to rest, which is unblameable of course but often disliked by employers in fact. A data tells of the number of Indian holiday, that is, 120 days per year.[] what is more, Indian laborers, quite different from Chinese ones, would not sacrifice their rest or spare time to be engaged in additional work, even under the incentive of much more pay whereas Chinese workers would like to.

    c. Indian policy tendency also plays a role for the situation. For example, while Indian high-end IT industry is obviously advanced, the employed number is rather limited, say, no higher than 2 million. By contrast, when China decided to open to the world, its focus had been on labor-intensive industry, such as manufacturing, which could create large number of jobs. And then , the employed workers could have chance to be trained and become increasingly skilled and efficient.

    And when it comes to the development of the issue of Chinese workers in India, Dhiraj Nayyar’s ideas in Financial Express sounds nice: “Competition is always good and that goes for labour as much as for physical goods and services; and trade is good and free trade is optimal.”By the way, Indian workers in China also have climbed to 20 thousand.[]

  2. Dear Sir,

    Can i have procedure for importing chinese labour? What is rules and regulation for foreign labour in India.

    Please mail to me on