EDITORIAL

Manufacturing Industry
The pattern of human consumption has been changing over the decades and changing
quite fast in recent times. A shift from consumption of (hard) goods to services (soft goods
included) is clearly visible. We also notice a corresponding change in the pattern of
production. In fact, each influences the other. It is, however, true that Manufacturing
Industry has to continue supporting all production processes in a big way. Thus, the role
of ‘manufacturing’ remains quite significant. Of course, with ‘lean manufacturing’ concepts
and practices and with automation in its advanced form, size of manufacturing units in
terms of the number of workers or employees will tend to be smaller in general. This fact,
along with the traditional practice of treating units with at least 10 workers (20 in case
electricity is not used for production purposes) as constituting the “organized
manufacturing” sector, may imply an increasing segment of manufacturing industry units
will be marked as ‘unorganized’. Having said all this, ‘organized manufacturing’ sector
continues to be the anchor of economic activities in the country and this anchor must get
stronger and more accessible to provide a boost to the National Economy.
The Annual Survey of Industries (ASI) being conducted by the Industrial Statistics Wing
of the Central Statistical Office is possibly the only source of credible information about the
organised manufacturing industry in the country, with gradually increasing information
content. And, plans are afoot to cover the Service Industry also in course of time. Once this
expansion in coverage takes place, we will get a much more comprehensive picture about
the production set-up in the country and its contribution to National Development.
One thing, however, has to be realized as circumscribing the contribution of ASI data to a
portrayal of performance of Manufacturing Industry (for the present). This is the inseparable
connections between ‘organised’ and ‘unorganised’ manufacturing. The latter plays a big
role in supplying inputs to the former, while the former in some cases provides technical,
financial and other support to the latter. In fact, most unorganized manufacturing units are
engaged in producing accessories or spares or semi-processed materials or finished
components to large manufacturing units covered by the organised sector. The performance
of any registered factory generally depends on the performance of its vendors including
‘unorganised’ production establishments. At the same time, most small units outside the
purview of ASI depend heavily on demand from and support extended by the organized
sector.
In a somewhat different sense, the performance of any industry sector is affected by
sectors which provide inputs to or receive outputs from this sector. A study of
interdependence among different sectors which are linked in terms of customer-supplier
relations should be undertaken in respect of important dimensions of performance. In fact,
there have been situations where a customer industry had to wind up its operations in the
absence of required inputs coming from the domestic supplier industry. The converse also
has happened with dwindling demands from domestic customer industry sending out
signals or threat of extinction to the domestic supplier industry. Exploring foreign markets
for customers or suppliers may not be convenient or economical in all cases. It is also
interesting to note that the nature and extent of such inter-dependencies have also been
changing over time and deserve appropriate investigation.
ii

Statistics relating to manufacturing industry and meant to portray a reliable picture of this
very significant economic activity should be understood and interpreted in a holistic manner
that provides a balanced view about the intentions of and the contributions by different
players—both domestic and foreign—in the growth and development of manufacturing
industry. Thus, inflow of foreign investment which is often associated with some strings
that pull the recipient industry in a certain direction—not necessarily desired in our
country—is welcome in some sense, inflow of foreign production technologies –some of
which draw upon more energy or generate more pollution or lead to reduction in
employment—in the name of Research & Development initiative may not be always a
welcome move.
All this and many more related issues call for adequate attention of investigators who can
–in their turn—demand more information about different aspects of functioning of
Manufacturing Industry.

September 2016 S. P. Mukherjee

Kolkata Editor-in-Chief
 iii

SECTION I : ARTICLES

Page No.

• Ramaa Arun Kumar 99

Subcontracting and Industrial Agglomeration :
Related Phenomena in India’s Unorganised Manufacturing Sector

• Nilabja Ghosh, Roopal Jyoti Singh and M. Rajeshwor 122

Understanding Demand, Supply and Price Behavior
in the Dairy Sector: Using Official Indian Statistics

• A. K. Panigrahi 138
Contract Workers in India’s Organised Manufacturing Sector

• Sarmishtha Sen and Subrata Majumder 154

Employment-Productivity Profile and Labour Demand Elasticity :
A Preliminary Study of the Organized and Unorganized Indian
Textile and Garment Firms

• Sajal Jana and Maniklal Adhikary 179

On Spatial Concentration of Organized Manufacturing Industries :
A Look at Regional Perspective

• Shiney Chakraborty 192

The Price of Prejudice : Employment Trend and Wage Discrimination of
Women Workers in India

• Panchanan Das, Abhishek Halder and Rahul Dutt 226

Export Competitiveness and Intensity of Technology in
Indian Manufacturing Industries –Analysis with ASI Unit Level Data
13 8 The Journal of Industrial Statistics (2016), 5 (2), 138 - 153

Contract Workers in India’s Organised Manufacturing Sector

A.K. Panigrahi1, Central Statistics Office, Kolkata, India
Abstract
The trend of contract workers in organized manufacturing sector in recent years has
been increased significantly. In this scenario an attempt has been made to examine the
contract workers participation rate and wage difference between direct workers and
contract workers in the organized manufacturing sector in India. The unit level data of
Annual Survey of Industries (ASI) of 2000-01, 2005-06, 2010-11 and 2012-13 have been
used for the analysis. From the analysis it has been observed that the proportions of
contract workers have increased significantly and reached at 34 percent in 2012-13. It
has been observed that industrial activities, namely, tobacco products, where highest
(73.29 percent) proportions of contract workers are engaged in the production process
followed by other non-metallic mineral products (57.98 percent) and manufacture of
coke, refined petroleum products (49.56 percent). Contract workers participation rate
with respect to different States/UTs in India has also varies significantly. States, namely,
Bihar (70.05 percent), Odisha (58.47 percent), Uttarakhand (51.98 percent), Andhra
Pradesh (47.87 percent) and Haryana (47.06 percent) where, significantly higher
proportions of contract workers have been engaged in the organized manufacturing
sector. There is significant wage difference between contract workers and direct workers
has also been observed and this is also true with respect to industrial activities and major
States/UTs in India. From the analysis it has been observed that contract workers average
wage per day is Rs. 156 during 2012-13, whereas, direct workers average wage per day
is Rs. 404. From this analysis it is clearly observed that contract workers are getting 60
percent less wage than that of the direct workers.
1. Introduction
1.1 In the present era, outsourcing, contractualisation, contract workers etc. are the
predominant issues. Most of the organizations are in favour of contractual employment
rather direct employment for smooth functioning of the day today activities. These
contractual workers/labours are available from the market on the prevailing market price
through certain agencies/contractors. There is no direct relationship between the contract
workers and organization where they are contributing their labour. The agencies have to
supply the contract workers and received the commission charges under certain terms and
conditions. The suppliers have to manage all the issue relating to these contract workers.
In this scenario the entrepreneurs are little bit free from issues relating to the contract
workers and prefer to maximize their profit. If the entrepreneurs are not satisfied with the
work done by these contract workers can discontinue their service as and when they like.
These factors are tending industries to hire more and more numbers of contract workers to
have greater flexibility to adjust the number of workforce based on economic efficiency,
better utilization of resources, optimization of profit and bringing cost effectiveness, despite
the risk of lower worker loyalties and lousy pay.
1.2 What are the differences between direct workers and contract workers? Therefore,
it is better to understand the difference between direct workers and contract workers. The
1
e-mail: [email protected]
 Contract Workers in India’s Organised Manufacturing Sector 13 9

major difference between direct and contract workers are discussed here. Direct workers
are directly recruited by the employer whereas contract workers are taken from the
contractors. Recruitment rules are applied for the direct workers whereas no such recruitment
rules are applied among the contract workers. On the aspect of job security, direct workers
are highly secured whereas contract workers are not secured at all. On the basis of working
hours direct workers are benefitted through certain rules and regulation whereas contract
workers do not have any regulation of working hours. Direct workers wages & salaries are
based on certain rules and regulation whereas contract workers wages & salaries are not
regulated properly. On the social security aspects, direct workers are in advantages which
includes medical allowance and sick leave whereas contract workers are not get such
protection. Among direct workers leave rules are applicable whereas among contract workers,
leave rules are not applicable. Finally, direct workers are protected by labour laws including
right to freedom of association and collective bargaining whereas no such rules for the
protection of contract workers.
1.3 Some of the studies have observed that employers in a globalised economic
environment favour flexible labour strategies where they ask for the freedom to hire workers
for a fixed term even for perennial activities and discontinue their services when not needed
(Sood, Nath and Ghosh, 2014). A study by Neethi (2008) has observed that contractualisation
prevails in almost all industry groups and it is highly region-specific and industry-specific
factors have their influence in determining contract work intensity.
1.4 All India Organisation of Employers’ has studied on the issues relating to the
industrial relations & contract labour and observed that during the recent years, employment
of contract labour has become a contentious issue and a key reason for the increasing
labour unrest in the form of strikes and protests. They have cited that the major reasons for
the rise in industrial unrest could be increasing dependence of industries on contract
labour for requirement of flexibility. This segment of worker due to anxiety of job security,
lack of social security, exploitation in the hands of contractors, low wages, unequal treatment
by Trade Unions and even abusive behavior of the permanent workers and supervisors
develop rebellion feelings. This study has also cited some of the instances of industrial
unrest during recent past and conclude that the surge in violence disturbing industrial
relations has become a concerning situation for all. On September 22, 2008 the CEO of
Graziano Transmissioni India, the Indian unit of an Italian auto component maker, was
clubbed to death by a group of 200 workers. In another incidents, in March 2011, a Deputy
General Manager (Operations) of Powmex Steel, a unit of Graphite India Ltd. was killed after
his vehicle was set afire by irate workers, in November 2010 an Assistant General Manager
of Allied Nippon, an auto parts maker, was stoned to death by angry workers, in September
2009 the Vice-President (HR) of Pricol was beaten to death by agitating workers, and many
more. The most recent worst form of industrial unrest was witnessed in the Maruti Suzuki
India Ltd., Manesar plant, where workers went into riotous, leaving its General Manager
(HR) dead and 100 other officials laid up in hospital with serious injuries (http://www.aioe.in/
htm/IndustrialRelations.pdf).
1.5 In this context an attempt has been made to examine the contract workers
participation and wage differentials in organized manufacturing sector in India with the
following objectives.
14 0 The Journal of Industrial Statistics, Vol. 5, No. 2

2. Objectives of the Study

(i) To examine the participation rate by contract workers in organized manufacturing
sector in India.
(ii) To study the differentials in participation of contractual workers with respect
to major industrial activities and major states in India.
(iii) To examine the wage differentials among contract workers with respect to
direct workers.
3. Data and Methodology
3.1 Annual Survey of Industries (ASI) data are available for the organized
manufacturing sector and those industries are registered under the Factories Act. 1948 are
covered in the survey. ASI schedule is the basic tool to collect required data for the factories
registered under Sections 2(m)(i) and 2(m)(ii) of the Factories Act, 1948. Block E of the ASI
schedule collects the information with respect to employment and labour cost including
contract workers in the organized manufacturing sector. In this block, information with
respect to direct workers, contract workers, supervisor & managerial staff, unpaid family
members, other employees, man-days worked, average number of persons worked, wages/
salaries etc. are available. Therefore, in this paper an attempt has been made to examine the
contract workers participation rate and wage differentials in the organized manufacturing
sector. Before analyzing the contract workers participation, we should have better idea
about who are the contract workers? Who are the direct workers? How are they different
from each others?
3.2 Contract Worker: All persons who are not employed directly by the factory
owner/employer but engaged through a third party i.e. agency/ contractor, are termed as
contract workers. Such agency charges from the factory for this job. In ASI schedule,
Block E: item 4 collects the information on workers employed through contractors. In more
specific terms those workers employed purely on contract basis are reported in item 4 of
Block E (Govt. of India, 2014).
3.3 Direct Worker: It includes those workers employed directly by the factory. In
ASI schedule, Block E: items 1 & 2 collects the information with respect to male and female
workers directly employed which include all persons employed directly on payment of
wages or salaries and engaged in any manufacturing process or its ancillary activities like
cleaning any part of the machinery or any premises used for manufacturing or storing
materials or any kind of work incidental to or connected with the manufacturing process
(Govt. of India, 2014).
3.4 In this paper, the contract workers participation rate is defined as the proportion
of contract workers employed in the total workers and contributing in the organized
manufacturing process.
Thus,

Total Contract Workers

Contract Workers Part icipation Rate = × 100
Total Workers
 Contract Workers in India’s Organised Manufacturing Sector 14 1

3.5 ASI unit level data from 2000-01 to 2012-13 have been used for the analysis of
employment composition in the organized manufacturing sector. However for depth analysis
of contract workers participation and their wage rate calculation, the unit level data of ASI
of 2000-01, 2005-06, 2010-11 and 2012-13 have been used.
4. Results and Finding

4.1 Employment Scenario in Organised Manufacturing Sector

4.1.1 It is interesting to analyses the composition of employment scenario in the

organized manufacturing sector. Figure 1 presents the employment scenario in the organized
manufacturing sector during 2000-01 to 2012-13. From the figure it is clearly shown that in
2000-01 the total employment in the organized manufacturing sector was around 8 million.
However, over the period it has increased drastically and reached 13 million in 2012-13. It is
interesting to see the proportions of workers in the total employment. From the figure it is
evident that workers constitute around 80 percent of the total employment in the organized
manufacturing sector and the remaining 20 percent are other than workers, which includes,
supervisor & managerial staff, unpaid family members, other employees those are not
directly involved in the manufacturing process. Over the period both workers as well as
total employees have increased drastically. From this analysis it is clearly understood that
workers in the manufacturing sector are the back bone for the organization for manufacturing
process.

4.2 Contract Workers in Organised Manufacturing Sector

4.2.1 Now it will be interesting to analyse the composition of the workers with respect
to direct workers and contract workers. Figure 2 presents the proportions of direct and
contract workers in the organized manufacturing sector during 2000-01 to 2012-13. From the
figure it is evident that in 2000-01 direct workers constitute around 80 percent of the total
workers and the remaining 20 percent are contract workers. However, during last decade it
has been observed that proportions of direct workers declined significantly and reached at
66 percent in 2012-13. Moreover, the proportions of contract workers increased significantly
and reached at 34 percent in 2012-13. In beginning of the decade there was a big gap
between direct workers and contract workers participation in the organized manufacturing
sector. However, over the period the gap has become narrowed.

4.3 Workers Size vs Contract Workers

4.3.1 An attempt has been made to examine the percentage of contract workers with
respect to the workers size. Figure 3 presents the proportions of contract workers in total
workers by workers size of factories during 2000-01, 2005-06, 2010-11 and 2012-13. From the
figure, it is clearly evident that higher proportions of contract workers are engaged with
respect to higher workers size. It is observed that those factories having 5000 and above
workers, more than 50 percent workers are contract workers. Those factories, where workers
size is less than 50 significantly lower percentage of contract workers are engaged in the
organized manufacturing sector. There is an upward trend of contract workers participation
with respect to workers size in organized manufacturing sector.
14 2 The Journal of Industrial Statistics, Vol. 5, No. 2

4.4 Contract Workers vs Direct Workers

4.4.1 An attempt has also been made to examine the number of factories in operation
with respect to the contract workers size. Table 1 presents the contract workers size class
with respect to factories in operation during 2000-01, 2005-06, 2010-11 and 2012-13. From
the analysis of ASI unit level data, it has been observed that the contract workers are
predominant among the 25 percent of the total factories in the manufacturing sector. It has
also been revealed that around 75 percent of the factories are functioning without any
contract workers. From the table it has been revealed that around 7 percent (11891 factories)
of factories are in operation with contract workers 1-9 followed by 20-49 contractor workers
(6 percent) and 10-19 contract workers (4 percent).

4.4.2 It is surprising to see the number of factories where numbers of contract workers
are more than that of the direct workers. Table 2 presents the numbers of factories in
operation with respect to the contract workers size among those factories where numbers
of contract workers are more than that of the direct workers. It has been observed that in
2000-01 around 9 percent of factories are in operational where numbers of contract workers
are more than that of the numbers of direct workers. Over the period in 2012-13, it is also
interesting to see the huge number of factories (31908 factories during ASI 2012-13), where
numbers of contract workers are more than that of the direct workers which constitute
around 18 percent of the total factories in the organsied manufacturing sector in India. By
examining contract workers size class among these factories, it has been observed that
higher proportions of factories (around 25 percent) are in the size class of 20-49 contract
workers. It has also been observed that there are significant proportions (around 38 percent)
of factories where contract workers are above fifty. It has also been observed that 12
percent (3744 factories) of factories are functioning where more than 200 contract workers
are in the production process.

4.4.3 Table 3 presents the number of contract workers and number of direct workers per
factory among those factories where numbers of contract workers are more than that of the
number of direct workers with respect to contract workers size class. From the table it has
been revealed that in contract workers size class 1-9, where around 6000 factories are in
operational, on an average six contract workers are engaged in the production process and
in the same industry on an average around one direct worker is engaged. Similarly, in size
class 10-19, the average numbers of contract workers per factory are around 14 whereas the
average numbers of direct workers are only 3. Similarly, in size class above 200, the average
numbers of contract workers per factory are around 473 whereas the average numbers of
direct workers per factory are around 117 in 2012-13. From this analysis it has been revealed
that the numbers of contract workers are proportionately increasing with respect to the
contract workers size class. Similarly, irrespective of contract workers size class the average
number of contract workers per factory has significantly more than three times that of the
number of direct workers.

4.5 Industry-wise Variations in Contract Workers Participation

4.5.1 It is interesting to see the industry wise variation in contract workers participation.
Figure 4 presents the industry wise variation in contract workers participation. From Figure
4, it is evident that there is significant variation with respect to contract workers participation
 Contract Workers in India’s Organised Manufacturing Sector 14 3

in industrial activities. Industrial activities, namely, tobacco products, where the highest
(73.29 percent of all workers) proportion of contract workers are engaged in the production
process followed by other non-metallic mineral products (57.98 percent) and manufacture
of coke, refined petroleum products (49.56 percent). Industrial activities, namely,
manufacturing of wearing apparel (12.35 percent), textiles (14.07 percent), and printing &
reproduction of recorded media (16.85 percent), where, significantly low percentage of
contract workers are engaged.
4.6 Interstate Variation in Contract Workers Participation
4.6.1 Figure 5 presents the percentage of contract workers with respect to major States2/
UTs in India. From the figure, it is evident that there is significant variations have been
observed with respect to the participation of contract workers in major States/UTs in India.
Top five States, namely, Bihar (70.05 percent), Odisha (58.47 percent), Uttarakhand (51.98
percent), Andhra Pradesh (47.87 percent) and Haryana (47.06 percent) where, significantly
higher proportions of contract workers have been engaged in the organized manufacturing
sector. However, bottom five States/UTs, namely, Delhi (10.83 percent), Kerala (14.17
percent), Tamil Nadu (19.54 percent), Assam (19.86 percent) and Karnataka (20.09 percent),
where significantly low proportions of contract workers have been engaged in the organized
manufacturing process. It has also been observed that the most industrialized States/UTs,
namely, Maharashtra (40.31 percent), Gujarat (36.55 percent), Uttar Pradesh (35.93 percent)
and Andhra Pradesh (47.87 percent) significantly higher proportions of contract workers
have been engaged in the organized manufacturing sector which is higher than the national
average. However, one industrialized States, namely, Tamil Nadu (19.54 percent) has
significantly low proportions of contract workers have been engaged in the organized
manufacturing sector.
5. Why Contract Workers?
5.1 From the above analysis it has been observed that percentage of contract workers
are increasing over the study periods. But exact reason is not revealed from the above
analysis. There are many reasons behind increasing contract employment in organized
manufacturing sector. However, some of the possible reasons are given below:
i. Contract workers are the substitution against the direct workers:It is argued
that employers facing stringent labour laws do not want to employ more people in
the production process. Employers in a globalised economic environment favour
flexible labour strategies where they ask for the freedom to hire workers for a fixed
term even for perennial activities and discontinue their services when not needed.
ii. For short run/seasonal production: The enterprise may interest for short run
production for some specific kind of job. Therefore, the enterprise may hire contract
workers to meet the short term demand. It may happen that for seasonal items/
production, enterprise may hire contract workers when required and fire them in
completion of the project.
2
Major States/UTs are Andhra Pradesh, Assam, Bihar, Chattisgarh, Delhi, Gujarat, Haryana, Himachal
Pradesh, Jammu & Kashmir, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha,
Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, Uttarakhand and West Bengal. Other States/UTs includes
A & N. Island, Chandigarh, Dadra & N Haveli, Daman & Diu, Goa, Manipur, Meghalaya, Nagaland,
Puducherry, Sikkim and Tripura
14 4 The Journal of Industrial Statistics, Vol. 5, No. 2

iii. Special kind of skilled workers for technical work: It may happen that for
fulfillment of special kind of technical work which may not require regularly. In this
context, enterprises are very much interested to outsource the work through contract
workers.
iv. Minimizing monitoring cost/regulatory cost: Employing contract workers
through contractors minimizes the monitoring cost. It is the responsibility of the
contractor to follow the terms and conditions for specific job. Therefore, contractor
will be very much responsible for the completion of specific job as per the terms
and condition otherwise forfeit the payment.
v. Avoid fringe benefits like annual leave with wages, gratuity, bonus, etc.:
Contract workers are not in the pay-role of the factories. Therefore, leave rules and
other welfare measures such as gratuity, bonus etc. are not applicable for the
contract workers.
6. Wage Differentials
6.1 In the following section an attempt has been made to look into the wage differential
in the registered organized manufacturing sector with respect to contract workers and
direct workers in India.
We define,

Average contract workers wage

Wage Differential Ratio =
Average direct workers wage

6.2 The average wage has been calculated on the basis of total annual wages3 to total
man-days4 worked. So, the average contract workers wage has been calculated on the basis
of total contract workers annual wage to total man-days worked for contract workers.
Similarly, the average direct workers wage has been calculated on the basis of total annual
wage to total man-days worked for direct workers.
6.3 Table – 4 presents the average wage per day, wage difference and wage differential
ratio with respect to contract workers and direct workers. From the table it has been revealed
that the average wage rate per day for direct workers is Rs. 164 in 2000-01. However, the
wage rate has increased significantly during last decade and reached at Rs. 404 in 2012-13.
Whereas the average wage rate per day for contract workers is Rs. 90 in 2000-01 and
increased to Rs. 221 in 2010-11 and Rs. 156 in 2012-13. It has also been revealed that there

3
Wages: Wages are defined to include all remuneration capable of being expressed in monetary terms and
also paid more or less regularly in each pay period to workers (defined above) as compensation for work
done during the accounting year. It includes:
(i) Direct wages and salary (i.e. basic wages/salaries, payment of overtime, dearness, compensatory, house
rent and other allowances;
(ii) Remuneration for period not worked (i.e. basic wages), salaries and allowances payable for leave
period, paid holidays, lay-off payments and compensation for unemployment (if not paid from source
other than employers);
(iii) Bonus and ex-gratia payment paid more or less regularly (i.e., incentive bonuses and good attendance
bonuses, production bonuses etc.).
 Contract Workers in India’s Organised Manufacturing Sector 14 5

is significant wage difference with respect to direct workers and contract workers. Over the
period, the wage rate difference between contract workers and direct workers has increased
significantly. From wage differential ratio, it has been revealed that the contract workers
wage rate is forty five (45%) percent less than that of direct workers wage in 2000-01. There
is an indication of declining wage differential ratio between direct workers and contract
workers over the last decades.
6.4 From the Figure 6 it is clearly understood the wage differentials between contract
workers and direct workers during 2000-01 to 2012-13.
6.5 Wage differential Ratio in Industrial Activities
6.5.1 It will be interesting to examine the wage differential ratio with respect to industrial
activities. Table A3 presents the average wage rate of direct workers, contract workers and
wage differential ratio. From the table it has been revealed that there is significant wage
difference has been observed in coke & refined petroleum products (0.29) followed by
motor vehicles & trailers (0.42) and basic metals (0.46). But there are industrial activities,
namely, recycling (0.93), cotton ginning (0.88), leather & related products (0.86) and products
of wood (0.85) wage differential ratio is comparatively low. It has also been observed that
there are industrial activities, namely; wearing apparel, leather & related products, cotton
ginning contract workers are getting higher wages than direct workers. Activities of wearing
apparel in 2000-01, leather and related products in 2000-01 and 2010-11, cotton ginning in
2005-06 and 2010-11 contract workers are getting higher wages than director workers. It has
also been observed that in 2012-13 the wage rate of contract workers was almost four times
(3.85) of direct workers in the industry of tobacco products. This is in sharp contrast with
the earlier years of 2000-01, 2005-06 and 2010-11 in that activity. It may happen that for
special kind of technical work enterprises are very much interested to outsource the work
through contract workers by paying higher wages.
6.6 Wage differential Ratio in Major States/UTs
6.6.1 Table A4 presents the wage difference in organized manufacturing sector in India
with respect to major States/UTs between contract and direct workers. From the table it has
been revealed that contract workers are always getting lower wage than that of direct
workers. There is significant variation in wage difference has been observed among major
States/UTs between contract and direct workers. States, namely; Odisha, Bihar, Andhra
Pradesh, Uttarakhand, and Maharashtra wage difference is higher than that of other States.

It excludes layoff payments and compensation for employment except where such payments are for this
purpose, i.e., payments not made by the employer. It excludes employer’s contribution to old age
benefits and other social security charges, direct expenditure on maternity benefits and crèches and other
group benefit in kind and travelling and other expenditure incurred for business purposes and reimbursed
by the employer. The wages are expressed in terms of gross value, i.e., before deductions for fines,
damages, taxes, provident fund, employee’s state insurance contribution etc. Benefits in kind (perquisites)
of individual nature are only included(Govt. of India, 2014).
4
Man-days Worked: These are obtained by summing up the number of man-days worked by persons
working in each shift over all the shifts on all days, i.e. both manufacturing and non-manufacturing days.
This figure excludes persons who are paid but remain on leave, strike, etc. Manufacturing days will mean
and include number of days on which actual manufacturing process was carried out by the unit where as
Non-manufacturing days will mean and include number of days on which only repair/maintenance and
construction work were undertaken (Govt. of India, 2014).
14 6 The Journal of Industrial Statistics, Vol. 5, No. 2

It has also been revealed that the eastern region significantly wage difference is higher
followed by central and western region.
7. Conclusion
7.1 From the above analysis it has been revealed that contract workers participation
rate has significantly increased during the last decade. This is also true with respect to
industrial activities and major States/UTs. Because of flexibility in labour laws, contract
workers are engaged as the substitution against the direct workers. There is significant
wage difference has been observed between contract and direct workers.
References
Govt. of India (2014), Instruction Manual: Annual Survey of Industries (Concepts,
Definitions and Procedures). Central Statistics Office (IS Wing) and Field Operation
Division (NSSO), Govt. of India, Ministry of Statistics and PI.
Industrial Relations & Contract Labour in India by All India Organisation of Employers’,
Federation House, Tansen Marg, New Delhi. http://www.aioe.in/htm/
IndustrialRelations.pdf
Neethi P. (2008) Contract Work in the Organised Manufacturing Sector: A Disaggregated
Analysis of Trends and their Implications. The Indian Journal of Labour Economics, Vol.
51, No. 4, Pp. 559-573.
Sood, Atul, Paaritosh Nath, and Sangeeta Ghosh (2014) Deregulating Capital, Regulating
Labour: The Dynamics in the Manufacturing Sector in India, Economic and Political
Weekly, Vol. XLIX, No. 26 & 27, Pp. 58-68.
 Contract Workers in India’s Organised Manufacturing Sector 14 7

Figure 1: Employment Composition in Organised Manufacturing Sector during 2000-01

to 2012-13 in India

Figure 2: Percentage of Direct and Contract Workers in Organised Manufacturing

Sector during 2000-01 to 2012-13 in India
14 8 The Journal of Industrial Statistics, Vol. 5, No. 2

Figure 4: Contract Workers in Organised Manufacturing Sector with respect to

Industrial Activities during 2000-01 and 2012-13.
 Contract Workers in India’s Organised Manufacturing Sector 14 9

Figure 5: Contract Workers in Organised Manufacturing Sector with respect to Major

States/UTs during 2000-01 and 2012-13.

Figure-6: Wage Rate Differentials in Organised Manufacturing Sector

15 0 The Journal of Industrial Statistics, Vol. 5, No. 2

Table 1: Number of Factories in Operation with respect to Contract Workers Size

during 2000-01, 2005-06, 2010-11 and 2012-13.
Contract Percentage of factories in operation
Workers Number of factories in operation (%)
Size Class
2000-01 2005-06 2010-11 2012-13 2000-01 2005-06 2010-11 2012-13
No contract
workers 147531 138312 124449 133486 85.63 80.48 72.28 74.53
1-9 8387 9551 13022 11891 4.87 5.56 7.56 6.64
10-19 4765 6066 8506 7668 2.77 3.53 4.94 4.28
20-49 6138 8213 10928 10831 3.56 4.78 6.35 6.05
50-99 3064 5040 7157 6813 1.78 2.93 4.16 3.80
100-199 1303 2505 4123 3974 0.76 1.46 2.39 2.22
Above 200 1102 2178 3991 4439 0.64 1.27 2.32 2.48
All India 172290 171865 172176 179102 100.00 100.00 100.00 100.00
Table 2: Number of Factories in Operation with respect to Contract Workers Size during
2000-01, 2005-06, 2010-11 and 2012-13 among those Factories where Contract Workers
are more than the Direct Workers .
Contract Number of factories in operation Percentage of factories in operation
Workers
Size Class 2000-01 2005-06 2010-11 2012-13 2000-01 2005-06 2010-11 2012-13
1-9 3278 4079 6865 5894 21.70 17.82 20.15 18.47
10-19 3155 4393 6026 5344 20.88 19.20 17.69 16.75
20-49 4644 6533 8661 8255 30.74 28.55 25.42 25.87
50-99 2322 4135 5932 5477 15.37 18.07 17.41 17.16
100-199 916 2002 3383 3194 6.06 8.75 9.93 10.01
Above 200 793 1743 3202 3744 5.25 7.62 9.40 11.73
Total 15108 22885 34069 31908 100.00 100.00 100.00 100.00
Percentage 8.77 13.32 19.79 17.82
All India 172290 171865 172176 179102
Table 3: Number of Contract Workers and Direct Workers per Factory in Operation with
respect to Contract Workers Size during 2000-01, 2005-06, 2010-11 and 2012-13.
Contract Contract workers per factory Direct workers per factory
Workers
Size Class 2000-01 2005-06 2010-11 2012-13 2000-01 2005-06 2010-11 2012-13
1-9 6 6 6 5 1 2 1 1
10-19 14 14 14 14 4 4 4 3
20-49 31 32 32 32 8 8 7 7
50-99 67 68 70 70 14 14 16 15
100-199 131 130 131 131 33 30 33 33
Above 200 635 504 502 473 103 98 116 117

Table 4: Wage Rate and Wage Differential Ratio in Organised Manufacturing Sector
in India
Wage Rate (INR) per day Wage
Years Contract differential
Direct workers ratio
workers
2000-01 164 90 0.55
2005-06 198 116 0.59
2010-11 313 221 0.70
2012-13 404 156 0.39
 Contract Workers in India’s Organised Manufacturing Sector 15 1

Appendix Tables
Table A1: Percentage of Contract Workers in Organised Manufacturing Sector in India
during 2000-01, 2005-06, 2010-11 and 2012-13 with respect to Industrial Activities.
Activity Description Percentage of Contract W orkers (%)
2000-01 2005-06 2010-11 2012-13
MANUFACTURE OF TOBACCO PRODUCTS 63.39 68.33 67.59 73.29
MANUFACTURE OF OTHER NON -METALLIC MINERAL
PRODUCTS 33.07 49.26 56.05 57.98

MANUFACTURE OF COKE, REFINED PET ROLEUM PRODUCTS 19.25 43.82 49.83 49.56
MANUFACTURE OF OTHER TRANSPORT EQUIPMENT 12.56 31.93 45.23 48.20
MANUFACTURE OF FABRICATED METAL PRODUCTS, EXCEPT
MACHINERY AND EQUIPMENTS 27.70 39.73 46.54 43.89
MANUFACTURE OF BASIC METALS 23.56 33.73 41.40 43.44

MANUFACTURE OF CHEMICALS AND CHEMICAL PRODUCTS 20.12 31.22 38.24 41.79

MANUFACTURE OF MOTOR VEHICLES, TRAILERS AND SEMI -
TRAILERS 11.55 30.79 41.65 39.79
RECYCLING 36.15 46.24 20.84 39.04
MANUFACTURE OF ELECTRICAL EQUIPMENT 12.64 28.04 36.02 38.24
COTTON GINNING, CLEANING AND BAILING 27.57 33.46 49.75 35.48
MANUFACTURE OF COMPUTER, ELECTRONIC & OPTICAL
PRODUCTS 11.46 20.81 33.84 33.86
MANUFACTURE OF MACHINERY AND EQUIPMENT N.E.C. 10.77 22.70 33.66 32.73
MANUFACTURE OF RUBBER AND PLASTIC PRODUCTS 13.28 24.14 30.64 32.61
MANUFACTURE OF FOOD PRODUCTS AND BEVERAGES 20.53 26.15 30.58 30.63
MANUFACTURE OF PAPER AND PAPER PRODUCTS 21.94 27.30 28.59 26.38
MANUFACTURE OF WOOD AND OF PRODUCTS OF WOOD 9.39 24.37 26.48 26.33
MANUFACTURE OF FURNITURE 14.90 17.63 22.77 23.10

MANUFACTURE OF LEATHER AND RELATED PRODUCTS 18.85 19.91 16.01 19.66

PRINTING AND REPRODUCTION OF RECORDED MEDIA 5.71 10.50 19.02 16.85
MANUFACTURE OF TEXTILES 9.17 12.52 14.94 14.07
MANUFACTURE OF WEARING APPAREL 5.79 13.26 14.46 12.35
OTHER ACTIVITES 21.74 24.03 28.09 26.67
All India 20.42 28.54 33.94 34.26

Table A2: Percentage of Contract Workers in Organised Manufacturing Sector in

India during 2000-01, 2005-06, 2010-11 and 2012-13 with respect to Major States/UTs.
Percentage of Contract Workers (%)
State Name 2000-01 2005-06 2010-11 2012-13
Andhra Pradesh 44.88 53.43 48.07 47.87
Assam 7.22 16.33 19.75 19.86
Bihar 38.24 55.24 64.28 70.05
Chattisgarh 24.77 36.08 42.91 40.81
Delhi 6.31 9.21 12.57 10.83
Gujarat 26.91 34.12 36.06 36.55
Haryana 30.26 44.66 46.65 47.06
Himachal Pradesh 15.74 20.19 26.35 29.99
Jammu & Kashmir 25.01 31.09 48.34 44.98
Jharkhand 12.40 12.33 23.24 35.45
Karnataka 11.30 13.48 21.13 20.09
Kerala 4.16 9.22 16.32 14.17
15 2 The Journal of Industrial Statistics, Vol. 5, No. 2

Table A2: Percentage of Contract Workers in Organised Manufacturing Sector in India during
2000-01, 2005-06, 2010-11 and 2012-13 with respect to Major States/UTs. (Contd.)
Percentage of Contract Workers (%)
State Name 2000-01 2005-06 2010-11 2012-13
Madhya Pradesh 23.62 27.49 33.15 33.50
Maharashtra 18.84 31.07 40.51 40.31
Odisha 28.74 42.01 47.97 58.47
Punjab 16.46 27.90 28.52 27.89
Rajasthan 22.73 33.47 36.29 37.22
Tamil Nadu 8.03 14.57 19.95 19.54
Uttar Pradesh 25.21 30.38 36.44 35.93
Uttarkhand 21.22 43.02 50.18 51.98
West Bengal 10.50 18.86 30.41 33.27
Others 21.20 31.16 41.45 39.16
All India 20.42 28.54 33.94 34.26

Table A3: Wage Differenc in Organised Manufacturing Sector in India during 2000-
01, 2005-06, 2010-11 and 2012-13 with respect to Industrial Activities between
Contract and Direct Workers.
Direct workers average wage Contract workers average
per day (Rs.) wage per day (Rs.) Wage Differential Ratio Ave
rage
2000- 2005- 2010- 2012- 2000 2005 2010 2012 2000 2005 2010 2012
Ratio
Activity Descriptions 01 06 11 13 -01 -06 -11 -13 -01 -06 -11 -13
COKE, REFINED
PETROLEUM 521 586 1181 1407 132 197 406 331 0.25 0.34 0.34 0.23 0.29
MOTOR VEHICLES,
TRAILERS 277 349 503 634 116 149 261 200 0.42 0.43 0.52 0.32 0.42
BASIC METALS 274 334 477 637 143 137 236 254 0.52 0.41 0.49 0.40 0.46
246 274 401 555 103 134 240 188 0.42 0.49 0.60 0.34 0.46
MACHINERY AND
EQUIPMENT 228 281 422 572 111 143 267 148 0.49 0.51 0.63 0.26 0.47
CHEMICAL PRODUCTS 200 251 390 504 95 129 235 229 0.47 0.51 0.60 0.45 0.51
COMPUTER &
ELECTRONIC PRODUCTS 194 250 430 555 119 145 254 154 0.61 0.58 0.59 0.28 0.51
PRINTING &
REPRODUCTION 180 214 326 462 98 144 236 65 0.55 0.68 0.72 0.14 0.52
PAPER PRODUCTS 160 200 290 358 96 124 211 116 0.60 0.62 0.73 0.32 0.57
OTHER TRANSPORT
EQUIPMENT 202 284 458 525 129 173 276 281 0.64 0.61 0.60 0.54 0.60
RUBBER & PLASTIC
PRODUCTS 138 180 278 358 95 115 209 151 0.69 0.64 0.75 0.42 0.63
FABRICATED
METAL PRODUCTS 173 202 341 434 94 135 282 236 0.54 0.67 0.83 0.54 0.65
FURNITURE;
MANUFACTURING 161 219 312 392 131 161 298 90 0.82 0.73 0.96 0.23 0.68
FOOD PRODUCTS
AND BEVERAGES 118 139 228 298 85 109 200 127 0.73 0.78 0.88 0.43 0.70
TEXTILES 129 145 222 278 109 127 203 52 0.84 0.87 0.92 0.19 0.70
OTHER NON-METALLIC
MINERAL PRODUCTS 141 172 270 355 99 110 186 347 0.70 0.64 0.69 0.98 0.75
WEARING APPAREL 90 129 215 275 106 130 210 42 1.17 1.01 0.98 0.15 0.83
 Contract Workers in India’s Organised Manufacturing Sector 15 3

Table A3: Wage Differenc in Organised Manufacturing Sector in India during 2000-
01, 2005-06, 2010-11 and 2012-13 with respect to Industrial Activities between
Contract and Direct Workers. Contd.
Direct workers average wage Contract workers average
per day (Rs.) wage per day (Rs.) Wage Differential Ratio Ave
rage
2000- 2005- 2010- 2012- 2000 2005 2010 2012 2000 2005 2010 2012
Ratio
Activity Descriptions 01 06 11 13 -01 -06 -11 -13 -01 -06 -11 -13

PRODUCTS OF WOOD 87 117 194 276 82 123 200 107 0.94 1.05 1.03 0.39 0.85
LEATHER & RELATED
PRODUCTS 101 129 201 258 109 121 231 73 1.08 0.94 1.15 0.28 0.86
COTTON GINNING 73 90 163 248 70 94 169 120 0.96 1.05 1.03 0.49 0.88
RECYCLING 112 166 195 321 95 98 322 198 0.85 0.59 1.65 0.62 0.93
TOBACCO PRODUCTS 72 93 197 211 46 47 68 811 0.64 0.51 0.35 3.85 1.34
OTHERS 129 172 320 431 85 123 268 112 0.66 0.71 0.84 0.26 0.62
All India 164 198 313 404 90 116 221 156 0.55 0.59 0.70 0.39 0.56

Table A4: Wage Difference in Organised Manufacturing Sector in India during 2000-01,
2005-06, 2010-11 and 2012-13 with respect to Major States/UTs between Contract and
Direct Workers.
Direct workers average wage Contract workers average Ave
per day (Rs.) wage per day (Rs.) Wage Differential Ratio rage
State/UTs Rati
2000- 2005- 2010- 2012- 2000- 2005- 2010- 2012 2000 2005- 2010 2012-
Name o
01 06 11 13 01 06 11 -13 -01 06 -11 13
Jammu &
Kashmir 135 142 224 297 89 105 183 240 0.66 0.74 0.82 0.81 0.76
Himachal
Pradesh 120 154 260 330 77 110 234 280 0.64 0.71 0.90 0.85 0.78
Punjab 125 166 245 314 94 112 174 258 0.75 0.67 0.71 0.82 0.74
Uttarkhand 317 303 329 411 92 115 214 271 0.29 0.38 0.65 0.66 0.50
Haryana 186 223 353 435 97 135 252 294 0.52 0.60 0.71 0.67 0.63
Delhi 138 171 295 434 124 140 271 342 0.90 0.82 0.92 0.79 0.86
Rajasthan 137 169 273 388 111 120 211 299 0.81 0.71 0.77 0.77 0.77
Uttar
Pradesh 151 183 294 355 94 118 191 242 0.62 0.64 0.65 0.68 0.65
North 164 189 284 371 97 119 216 278 0.59 0.63 0.76 0.75 0.68
Bihar 174 202 477 306 58 83 138 206 0.33 0.41 0.29 0.67 0.43
Assam 93 124 250 264 79 89 144 244 0.85 0.72 0.57 0.92 0.77
West Bengal 189 221 310 381 121 123 210 289 0.64 0.56 0.68 0.76 0.66
Jharkhand 296 360 517 801 293 118 229 245 0.99 0.33 0.44 0.31 0.52
Odisha 214 305 435 579 74 89 231 293 0.34 0.29 0.53 0.51 0.42
East 193 242 398 466 125 100 190 255 0.65 0.41 0.48 0.55 0.52
Chattisgarh 228 229 370 678 138 138 196 280 0.61 0.60 0.53 0.41 0.54
Madhya
Pradesh 167 209 322 413 122 103 208 268 0.73 0.49 0.65 0.65 0.63
Central 197 219 346 545 130 120 202 274 0.66 0.55 0.58 0.50 0.57
Gujarat 158 205 304 376 102 136 232 299 0.64 0.66 0.76 0.79 0.72
Maharashtra 229 288 446 547 108 144 264 350 0.47 0.50 0.59 0.64 0.55
West 193 246 375 462 105 140 248 325 0.54 0.57 0.66 0.70 0.62
Andhra
Pradesh 137 182 310 423 49 77 165 193 0.35 0.42 0.53 0.46 0.44
Karnataka 153 185 333 454 103 140 258 390 0.67 0.75 0.78 0.86 0.77
Kerala 143 164 250 330 128 127 190 265 0.90 0.77 0.76 0.80 0.81
Tamil Nadu 119 143 248 327 88 131 268 316 0.74 0.91 1.08 0.97 0.92
South 138 169 285 383 92 119 220 291 0.67 0.70 0.77 0.76 0.73
Other States 127 169 305 361 89 122 210 292 0.70 0.72 0.69 0.81 0.73
All India 164 198 313 404 90 116 221 286 0.55 0.59 0.70 0.71 0.64