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Almost a Miracle: Encouraging Inclusive Growth in India

The free public elementary school is closer to ten-year-old Rita’s home than the factory where she works ten-hour days instead of getting an education. Rita lives in Bawana, a slum on the northern edge of New Delhi that is home to more than one hundred thousand impoverished residents. In an effort to showcase a prosperous country to a global audience during the 2010 Commonwealth Games, the Indian government displaced thousands of poor people from their makeshift homes in the capital city’s center to Bawana. In exchange, they were all promised access to good paying manufacturing jobs in the nearby factories through which they could lift themselves out of poverty and create a better life for their children.

Reality, however, differs considerably from the image of India that its government tries to portray to the world: Bawana’s thirteen city blocks are a maze of unpaved muddy lanes lined with open sewers, overflowing public toilets, and rotting garbage. Bawana is also a place where criminals traffic vulnerable children like Rita.

According to mothers in a women’s group organized by STOP Trafficking and Oppression of Children and Women, a Delhi-based NGO that fights this pervasive crime, nearby factory operators engage local dalaals or brokers to provide child laborers to fulfill work orders in factories that produce jeans, soaps, sandals, and plastic-ware headed for domestic and export markets. These dalaals, who are actually traffickers and not always in disguise, go into Bawana and dupe, drug, steal, and buy children to provide labor to the factories. The children work long hours and the traffickers take one-third of their wages, leaving them with less than an average of $40 in monthly income to give to their families. Mothers have complained and filed many cases with the authorities, but to no avail: the local police are also on the dalaals’ payroll, denying the children and their families access to justice.

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In March 2012, another local NGO, Bachpan Bachao Andolan (Save the Childhood Movement), rescued nineteen such children from factories near Bawana, some as young as six years old. These children were trafficked and forced to work in hazardous conditions to assemble components for electronic equipment.

Life in Bawana contradicts India’s self-portrayal as an “economic miracle.” While observers of globalization typically express concern about poorer nations left behind by successful rising powers like India, concern is also due for those left behind in India. India is squandering potential for greater growth by its lack of access to justice and opportunity for all its citizens. Indeed, after two decades of sustained economic growth, India’s “miracle” has exempted many of its young: forty-seven percent of all children under five are underweight and sixty-one million are stunted in growth, the highest percentage in the world. Despite a decade of near-double-digit GDP growth, one out of every three malnourished children in the world is found in India.

In his landmark 2004 book on human trafficking, Disposable People, scholar Kevin Bales estimated that two-thirds of the world’s victims of forced labor are in South Asia. In the midst of a rising middle class with access to a globally connected affluence undreamt of two decades ago, India also has forty million bonded workers today—those unable to leave forced and exploitative working circumstances—and between twenty and sixty million child laborers who work instead of going to school and are thus denied the benefits of the overall economic progress of the country. National law prohibits children under the age of fourteen from working, yet many are still found laboring in factories and farms and as servants in the homes of India’s middle class. On December 24, 2012, under the headline “Traffickers Sell Northeast Women like Cattle,” the Times of India stated: “In fact, so blasé and open is the trade that there is a price fixed for each category [of woman and girl]—Rupees 1 Lakh ($1,800) for marriage, Rupees 1.5 lakhs ($2,700) for prostitution, and Rupees 5,000–6,000 ($90–$110) for bonded labor.”

Although there are laws on India’s books that criminalize human trafficking, and bonded and forced labor, their enforcement is not a political priority, which means that democracy in India exists much more fully on paper than in practice. In the relatively rare instances when human traffickers and the factory owners who violate labor laws are charged, they are rarely convicted, and such cases languish in an overburdened judicial system. According to the Times of India, in New Delhi alone, more than sixty-one thousand general criminal cases are awaiting trial in the city’s courts, a third of them pending for more than five years. There is no more stark illustration of the aphorism that justice delayed is justice denied.

 

These are not only rankling injustices, but should present a problem for statecraft as well. Because of its size and economic potential, no other country in the region is of greater strategic importance to the success of the US “Asia pivot” than India. Helping Indians deal with the issue of coercive labor that diminishes their prosperity and threatens their stability ought, therefore, to be a more central element of US policy than it presently is. Assisting India in becoming a more inclusive market democracy will bolster it as a strong model and ally and as the counterweight to the rise of an autocratic China. The United States would do even more for India’s and its own geopolitical interests by helping end human trafficking and bonded labor than securing India the permanent UN Security Council seat it understandably covets.

More inclusive growth in India is not just an interest for the Indian and US governments. Ethical reasons aside, American businesses also have a stake in avoiding media firestorms over cases of coercive labor in their supply chains, such as that suffered by The Gap in 2007 when it was discovered that abusive child labor was helping embroider the blouses the clothing company sold in the West. In addition to averting unexpected eruptions of bad press that is repulsive to customers, shareholders, and employees, companies doing business in India have much to gain from a more predictable and stable investment environment and dynamic consumer market to sell goods and services. Furthermore, the all too common political disruptions in India caused by labor and community unrest are a key risk that many businesses devote substantial resources to monitor and plan for. Implementing concrete measures that prioritize supply chains and labor sourcing free of truly extreme exploitation minimizes such risks while also increasing opportunity for workers.

Importantly, building job opportunities for parents reduces the need for their children to work, and enables them to focus on their education. When asked, the mothers who participate in STOP’s women’s empowerment group in Bawana all said that if they themselves earned a monthly wage of 8,000 Indian Rupees, or $150, there would be less financial pressure on their children to work. That is, a monthly wage of $150 is enough for Rita’s mother to ensure that her daughter could be included in India’s economic miracle.

 

Economic reforms passed by the Indian government in December 2012 provide a renewed opportunity for multinational businesses to pursue this enlightened self-interest. More than twenty years earlier, in 1991, the Indian government began a process of liberalizing its economy to increase private investment, cut red tape, and stimulate economic activity. These reforms generated growth in overall commercial activity and subsequently in an unprecedented accumulation of wealth and equity by a rising middle class, whose spending on goods and services further fueled economic expansion. In the two decades leading up to 2010, India’s GDP grew at an average of 6.6 percent and facilitated increased government investment in education and programs aimed at increasing opportunity for the very poor and traditionally marginalized social groups.

Persistent corruption, however, has hampered many of these efforts to systematically alleviate poverty and reduce the vulnerability of the poor and the young to exploitation. India’s economic growth has now slowed down over the past two years. In response, in December 2012, the central government passed additional reforms designed to attract increased foreign capital. As remaining vestiges of protectionist state fiscal policies are being dismantled, foreign operators can now own a majority stake in companies in the multi-brand retail market. These policies aim to entice retail giants like Wal-Mart and Carrefour to invest in the country and re-energize a stalling economy by appealing to Indian consumers. Currently estimated at one hundred and sixty million, India’s middle class is predicted by the National Council for Applied Economic Research to reach a staggering two hundred and sixty-seven million people by 2016, a very profitable brand-chasing demographic that Western retailers aim to lure.

But in eyeing these prospects, Western retailers would make a mistake if they did not take concrete steps to ensure that their operations will decrease exploitation and increase opportunity within their supply chains, which generate and sustain hundreds of thousands of jobs throughout the country. Admittedly, ensuring accountable sourcing is not easy: the average Fortune 1000 company has twenty thousand suppliers and it is difficult to ferret out abusive working conditions in the farthest tiers of a supply chain that may span the globe. Research conducted by ChainLink indicates that two-thirds of companies surveyed spent $50,000 to $250,000 per year on assessing supply-chain risk. Many corporations rely upon codes of conduct and agreements with their suppliers rather than stronger measures to ensure compliance with local and international law. However, as is evidenced by a recent preventable fire that killed one hundred and twelve workers in a factory in Bangladesh that produced clothes for popular Western brands, few verify the actual working and safety conditions. There are challenges in obtaining this type of data, including the security and reliability of those collecting the information. Many Indian enterprises that provide and control labor operate outside the law, abetted by official corruption, and thus cannot be trusted to police themselves.

If there is any real hope of fighting human trafficking in India, US companies will need Washington to apply greater diplomatic pressure, as mandated by the US Victims of Trafficking and Violence Protection Act of 2000. And US companies may find their Indian counterparts increasingly complying with another recently passed measure by the Indian government: the new Companies Bill requires firms to spend two percent of their average net profits on corporate social responsibility. This law reinforces the will of Indian enterprises to favor inclusive over coercive labor. Ultimately, even more than US diplomatic pressure on India, or India’s own state intervention, the most effective driver of change would be supply-chain auditing coming directly from US-headquartered businesses, as well as the encouragement of Indian enterprises. 

By investing in information about Indian suppliers’ human rights practices, companies headquartered in India and the Indian government itself can work with subcontractors to hold human traffickers accountable. If they can answer this challenge they will have helped enlarge and consolidate the Indian economic miracle. That is as much in Western-headquartered multinationals’ interest as it is for Indian companies. Moreover, by serving as a model among Asian and world powers, it is as much a strategic priority for Washington as for New Delhi.

Samir Goswami is the founder and board president of Economic Enterprises for Humanitarian Development. Mark P. Lagon is a professor in the practice of international affairs at Georgetown University, an adjunct senior fellow at the Council on Foreign Relations, and the former US ambassador-at-large to combat trafficking in persons.

 

Photo Credit: © Jorge Royan / http://www.royan.com.ar / CC-BY-SA-3.0

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