LABOUR MARKET CHANGES IN INDIA AFTER THE 1991 INDUSTRIAL POLICY: EMPLOYMENT PATTERN AND WAGE INEQUALITY

Abstract

Following the industrial policy changes in 1991, India experienced a major shift in its economic framework, significantly affecting how the labour market is organized and operates. The removal of the industrial licensing system, encouragement of private sector involvement, and easing of foreign direct investment regulations transformed production methods and business conduct, which in turn redefined employment relationships in the industrial field. Although these changes led to increased production and growth within the industry, their effects on job quality and wage distribution have varied. This article explores the 1991 industrial policy as a key factor influencing the evolving labour market, particularly focusing on employment trends and wage disparities among industrial workers. The research utilizes a methodology based on secondary data, including Periodic Labour Force Survey (PLFS) information, National Sample Survey Office (NSSO) publications, and analyses released by the World Bank and the International Labour Organization. The results show that the growth of employment in the industrial sector after the reforms has been marked by a decreasing percentage of regular wage jobs and an increasing prevalence of contract and informal employment. This change has diminished job security and access to social safety nets while exacerbating wage differences across various employment types. Additional data indicates significant wage disparities between regular and contract workers, along with income differences related to skills and gender. Notably, the existing wage inequality seems more linked to the volatility of employment relationships rather than solely to variations in labour output or human capital. The study contends that the 1991 industrial policy should not be interpreted merely as a growth-focused reform, but rather recognized as a structural factor contributing to labour market segmentation and wage disparity. The discussion highlights the necessity for future industrial and labour policies to prioritize job quality, formalization, and equitable wages to promote inclusive and sustainable industrial growth.