WEEK 3 ASSIGNMENT

Business, Government and Society

JANUARY 8, 2018
IM BANGALORE
You have been asked to advise Z&N, a multinational readymade garment manufacturer, on where
to set up their first factory. They have three options: Karnataka, Maharashtra and Uttar Pradesh
(eastern region). You have to assess the societal context and a suggest one state where you think they
will best be able manage in the context in the current society there.

If there is one country that cannot crib about the unavailability of natural resources, it is India. Add to that
India’s demographic dividend and you have a country that is raring to go as far as the manufacturing sector
is concerned. However, in the Indian context, several other issues creep in and societal factors become a
huge determinant in deciding whether to set up shop. The readymade garment industry is no exception.

Women in Informal Employment: Globalizing and Organizing (WIEGO), a network in global research-
policy domain, reports that a majority of workers in the shop floors of garment manufacturing units are
women. Hence, Uttar Pradesh (East) does not seem an attractive proposition owing to its dismal women’s
participation rate in the labour force (approximately 24%, as per data from indiastat.com). There is still a
significant stigma attached to the concept of women working in manufacturing jobs. Hence, the authors
suggest Z&N to not keep it as an option.

Societal considerations aside, one major component of costs is the labour cost. The authors have compared
based on the minimum wages as mandated by different state governments. According to data from
paycheck.in, Maharashtra has the least mandated wages followed by Karnataka and Uttar Pradesh. Since
the industry is highly labour intensive, its quality and characteristics are important variables. Looking at
the employment data of the three states in question, the authors noted that Uttar Pradesh has the highest
level of unemployment and lowest literacy rates implying high availability of unskilled labour, and hence
is not a fit.

Labour unrest is also another important consideration. Since strikes by labour unions affect the productivity
of any factory, the authors compared the states based on the number of disputes, workers involved and
manhours lost. According to data from indiastat.com, Maharashtra is the most desirable state amongst the
three owing to the least number of labour disputes in the fast few years. Maharashtra also edges Karnataka
out in terms of government policies being conducive, with the Maharashtra government providing subsidies
to textile manufacturing units and offering substantial support for growing R&D centers. The political
structure of Maharashtra is also touted in industrial circles as being stable and with the conducive FDI rules
in place, Maharashtra is undoubtedly the most attractive proposition among the three states.

To further investigate the safety aspect in the societal context, the authors looked at the number of incidents
and deaths due to the destruction of property and infrastructure. As per indiastat.com, Maharashtra has the
highest incidence of such events in the past few years among the three states. However, the authors
conjecture that this statistic is not worth worrying about since it is highly probable that the state with the
highest industrial concentration would face more of such adverse instances.

Also, the language and cultures are quite different in the three states, and they become important
considerations in the selection of the state. Language becomes a barrier in Karnataka in that Hindi is not
commonly understood by the general populace, and hence migration of workers is hindered. Maharashtra
scores high in that regard.

Maharashtra is also the largest cotton producing state among the three, and thus has an advantage in the
procurement of raw material. Also, infrastructurally speaking, Maharashtra is superior compared to the
other two in terms of availability of supporting industries and transportation. It is also significant that
Maharashtra has recently amended a law and now allows women to work night shifts. Considering all the
above, the authors would advise Z&N to set up its first factory in Maharashtra, because of the conducive
societal aspects.