GT Voice: Widening wealth divide erodes India's manufacturing industry
Published: Dec 15, 2020 08:08 PM

Illustration: Xia Qing/GT

The violent attack at Wistron's iPhone plant in southern India resulted in losses of up to NT$200 million ($7.12 million), but major production facilities did not suffer serious damage, the Taiwan-based contract manufacturer said in a statement filed to the Taiwan Stock Exchange on Tuesday.

While the actual loss is limited relative to estimates from previous reports, the incident may raise eyebrows concerning the investment environment of India's manufacturing sector given iPhone facilities have often been used by the Indian government as a selling point to lure foreign investment away from China.

According to media accounts, employees' anger responding to payment issues was a major cause of the ransacking. Although the matter is still under investigation, the violent incident may serve as a window into the "low labor cost" that has long been touted as an important component of India's manufacturing competitiveness.

Business and academic circles hold high hopes for growth on the back of India's cheap labor, but now it seems far from certain that low labor cost will eventually translate into manufacturing advantage in India. Instead, the rising wealth inequality in India is pushing a huge pool of cheap labor to the verge of social conflict and violence, damaging the country's manufacturing sector and ruining its reputation.

Violent protests and strikes are common in India. Given the abject poverty faced by large proportions of the population, this is often the only way they can defend their rights and interests.  

In recent days, India has witnessed a spike in violent protests. Among these, hundreds of thousands of farmers have been gathering at the Indian capital for weeks to protest against reforms that the government believes will give farmers more choice, while farmers' fear may help big businesses there exploit more profits and make the poor more impoverished. Several large-scale strikes also occurred in southern India, including the one that involved over 3,000 workers at two Toyota Kirloskar Motor Private Limited-owned car assembly plants in November.

The coronavirus pandemic has hit the Indian economy and the country's poor population extremely harder, but the fundamental reason behind the social unrest is the growing wealth divide between the haves and the have-nots.

A study released at the beginning of this year by human rights group Oxfarm India revealed that India's richest one percent held more than four-times the wealth held by 70 percent of the country's poorest population. And the COVID-19 pandemic has only exacerbated the country's polarization. Tens of millions of jobs were lost, while at the same time Indian billionaires got richer during the pandemic.

The COVID-19 crisis has intensified the wealth divide, making social tensions more acute than ever. Under such circumstances, cheap labor won't be a relevant advantage for India's manufacturing sector. If the wealth gap continues to widen, it will be a matter of time to see similar strikes or violence like the one at Wistron's facility. At a time when India's economic and social stability is besieged, the idea of absorbing China's industrial transfer seems like nothing but a fantasy.

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