1. New Economic Policy and
Labour
Presented by:
Ayushi Singla
Shikha Bhatia
Shreedha Singh

2. New Economic Policy, 1991
The process of economic reforms was
started by the government of India in 1991
for taking the country out of economic
difficulty and speeding up the development
of the country.

3. Objectives Of NEP
To pull the
country out of
economic crises Accelerating the
rate of growth

4. Contd.
• Poor performance of PSU’s
• First gulf war caused spikes in oil prices
which caused a major balance of payment
crises for India.
• India asked for loan from IMF, in return
demanded reforms.
• The New Economic Policy was inaugurated
by former Prime Minister P. V. Narasimha
Rao under the guidance of the then FM
Manmohan Singh.

5. Reasons for NEP
• Fiscal Deficit was 5.4% of GDP in 1981-82
which rose up to 8.4% in the year 1990-91.
• In 1991 amount of interest liabilities rose
further to 36.4% of total government
expenditure.
• Country was moving towards debt trap.
• Mounting “Adverse BOP”
• Fall in Forex.

6. Salient Features of NEP
Globalisation
Privatisation Liberalisation
NEP

7. Claimed Reforms of NEP
• Devaluation: The brunt of devaluation of
rupees would have to be borne by the
working class. The country has to pay more
for exports and ultimately the burden will be
passed on to the consumers.
• Privatisation: It was opined that due to it,
employer may be given a free hand to
informalise the labour market, increase work
load and working hours and violate the
existing labour laws (Capital Intensive
Approach, Deunionisation)

8. • Retrenchment: The threat of large scale
retrenchment was expected with
unbridled privatisation.
• Wage Structure: In the long run, due to
upgradation of technology wage levels
would increase in the skilled and
technical categories. Due to collapse of
trade unionand consequent loss of
bargaining capacity of workers, they
would get lower wages.

9. Impact on Labour
• Employment growth and elasticity
o NEP: A double- edged sword for Indian labour
o Sharp deceleration in employment growth:
jobless society
o Certain evidences of increasing capital
intensity in all sectors.
• Unemployment rate
o Due to lower participation of women labour till
2000*
* Full employment is not equivalent to zero
employment.

10. – International mobility of labour
o Migration across international boundaries.
o Brain drain to industrialised countries in service
operations and maintenance.
o Reverse Brain drain and flow of unskilled/semi-
skilled workers to middle east.
o Boom in IT and software services (BPO’s)
o Organised employment
o After NEP, employment elasticity came down close to
zero.
o Public sector: Decline in elasticity due to right sizing
o Private sector: Dynamic and improvement in
employment opportunities, even during slow down.

11. • Women Labour
o Greater feminization of workforce.
o Acute gender disparity.
• Child Labour
o Decline in child labour (5-14 yrs.)
o Substitution of labour: Women
o Correlation between poverty and child
labour is weak.

12. Impact on IR
• Existing centralized and tripartite IR system
replaced by many local bipartite IR systems.
• Consultation, Cooperation and consensus.
• Taking place of coercion and confrontation.
• Increased work efficiency: A striking feature is
that more man-days were lost in lock-outs(mgt.)
instead of strikes (workers).
• Opened way for right sizing by way of closure,
technological change and restructuring.
• Set in motion various forces operating at
multiple levels of IR.