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Ethical Issues in Economic Development in India

Group 10
Ankit Garg, Anil Singh, Rahul Patil, Hiten Bachani, Parichit Dev, Pankaj Rachelwar

Contents
Introduction .................................................................................................................................................. 3 Few Facts and Figures ................................................................................................................................... 4 Basic Issues.................................................................................................................................................... 5 Labour Exploitation ....................................................................................................................................... 9 Labour Condition in Gem Stone Industry ................................................................................................. 9 Another Example of labour exploitation in the name of Employment .................................................. 10 Child Labour ................................................................................................................................................ 11 Causes of Child Labour ............................................................................................................................ 11 Bonded child labour ................................................................................................................................ 12 Consequences of child labour ................................................................................................................. 13 Suggestions to fight Labour exploitation .................................................................................................... 13 Corruption ..................................................................................................................................................... 5 Environmental Exploitation .......................................................................................................................... 7

Introduction
Historically, Indian society has placed great emphasis on loyalty to the collective, be it ones caste, village or family. This drives a culture of favors, friendship and clanship that clashes with the Western concepts of conflict of interest and pure meritocracy Indias lax ethical standards, coupled with a rigid bureaucracy and weak enforcement mechanisms, have certainly hurt the country in many ways Indicative of the ubiquity of the problem, it is estimated that US$1.5 trillion in black money an amount far exceeding Indias GDP is hidden in foreign banks. As Ratan Tata, chairman of the Tata Group, observed, If you choose not to participate in [corruption], you leave behind a fair amount of business Less has been said about the ability of companies in India to thrive by bending rules, greasing palms and broadening ethical boundaries The problem is circular; if unchecked, unethical behavior undermines the rule of law, thereby further weakening legal and administrative institutions Swami Vivekananda once said that men and women are like the two wings of a bird: just as a bird cannot fly on one wing, no society can progress at the cost of neglecting its women. In the post-reform (since 1991) period, India has done well in some indicators such as balance of payments, resilience to external shocks, service sector growth, significant accumulation of foreign exchange, Information technology (IT) etc

GDP growth was around 8 to 9% per annum in the period 2004-05 to 2007-08 Investment and savings rates were quite high 32 to 36% However, exclusion continued in terms of low agriculture growth, low human development, ruralurban divides, gender and social inequalities, regional disparities, labour exploitation & environmental exploitation etc

Few Facts and Figures

Basic Issues

Corruption

Environmental Exploitation

Labor Exploitation/Child Labor

Nepotism/ Regionalism

Gender Inequality

Rigid Bureaucracy/ Weak enforcement

Corruption
One of the major problems that India has been facing is corruption and it has hampered the growth story of the country to a great extent. The ethical issues involved here that come in way of economic development can be categorized as follows: Scams: Recently there have been scores of scams that have been unearthed and it gives an idea about the scale at which the hard earned money of the taxpayers is being misused. Some of the scams to be unearthed are the CWG scam, 2G scam, Adarsh Society scam, CoalGate and many others. The implication that these types of incidents have are twofold: 1) A huge sum of money which could have been used for the economic benefit of the society is being misused by some bunch of politicians and thus it hinders the pace at which the country should have prospered

2) It hinders the morale of the people who have been paying their taxes regularly by considering it as their duty towards the nation. Now, since this money has been founding way into the pockets of corrupt politicians; why should one pay their taxes? Use of substandard Materials: There have been several incidents wherein the construction companies have indulged in the use of substandard construction materials leading to collapse of the structure and causing loss of life and property to many. These types of incidents normally occur once in a while and there has been no stopping it too because of the lax standards followed by the government.

Lobbying: There cannot be economic development until it is inclusive. Statistics suggest that the gap between the rich and the poor has been growing like anything. One of the main reasons behind this is policy paralysis. Though there are many policies to support the small scale entrepreneurs but they prove ineffective in the light of the arrival of the lobbying efforts by some of the MNCs. One of the recent examples is the Walmart Lobbying Report which states the efforts made by the company to set their foot on Indian soil. Policy makers need to understand the idea of inclusive growth by keeping aside their short term personal interests otherwise the idea of an inclusive growth will find itself merely on paper

Sale of Degrees: For any successful nation, there lies a strong foundation of education of its citizens which allows the country to thrive successfully among the other nations. It is an irony that despite of the regulatory authorities there are many institutions which are selling MBBS/Engineering degrees in the open. This has only degraded the type of development that has been happening in our country. Due to this practice, there has been incidences of medical and engineering errors costing lives to many. To mention some of the institutions which resort to such practices: SAIMS Medical College Indore, here one can get a MBBS degree by paying a donation of 40-50 lakhs (No importance on past academic performance of entrance test).

Environmental Exploitation
Man has always interacted with natural environment in order to live (subsistence) and leads to extraction, processing and consumption of natural resources to prosper (economic development). In discharging these services of subsistence and economic development to mankind natural and environment have played three important roles 1) Supply of directly consumable life support goods and services and authentic amenities 2) Natural resources as inputs into production and 3) Waste disposal and automatic recovery. Though nature has never negated any one to avail the above services, however some limitations are associated with it. Whether it is the consumption of directly life support goods and services or natural resources as inputs, there is some optimum level of consumption. When the use of the first two services exceeds to the optimum level, nature and environment failed in providing the third services i.e. waste disposal and automatic recovery services. This not only degrades the national and environmental quality but also reduced the available quantity of natural resources and ultimately, hampered the very process of economic development. Therefore, when we talk about sustainable development we mean to say that the level of utilization of environment and natural resources should be up to that optimum level which may not create any trouble of nature and environment in discharging the services of waste disposal and automatic recovery of natural resources and environment. Now we have realized that our economic activities and zest for quick development are threatening the very survival of mankind over the earth. Our survival depends on the realization that we have to live in harmony with the various elements of environment which are interconnected. The problem of environmental exploitation can be explained in two parts Pollution: Mens actions has led to pollution of air and water on a large scale. This is mainly due to the ope n burning of CFC compounds (Air Pollution) which degrades the quality of air. The ethical issue involved here are

1) Man does not own the air and hence he has no right to pollute it as it is also the property of the other living organisms which coexist on planet Earth. 2) The consequences of Air pollution is climatic changes which affects the rainfall pattern drastically which in turn adversely affects the farmers which form a considerable amount of population in the agri based Indian economy. Thus there cannot be economic development when one strata of society prospers on account of other 3) We do have some moral obligations towards our future generations. With the pace that we have been destroying the natural sources, the future generations are going to face a real hard time when they will have to starve for some the basic requirements like water & air to lead a healthy life 4) Discharge of effluents in the water bodies by some industries has polluted the water, which has seriously affected the sea life. The ethical issue involved here is that we do not have the first right over the resources and thus we do not have any authority to indulge in activities that threaten the very existence of other species. 5) Plastic One of the most wonderful inventions of humans which we boast of; has definitely made our life easy but on the other hand is also a primary reason for degradation of soil and water bodies. But the irony is despite of knowing this fact, its usage has not lessened just because its cheap and it makes life of humans easy! (One has to really think about other species, if they want to survive for times to come because the world cannot sustain imbalance for a long time) Destruction of Natural Habitats: Mens action has led to destruction of natural habitats (forests/oceans) of wild species which causes them to interfere with human life for e.g. the repeated instances of leopard spotting in the human society. This has only led to the loss of life for the latter because history has been the witness that there is nothing more wild than the humans. The ethical issue involved here is that all living creatures have an equal right to live and man should not exercise his right forcefully to get control over all resources.

Labour Exploitation
Extreme exploitation, including the absence of a living wage or long hours; Poor working conditions, such as health and safety hazards; Arbitrary discipline, such as verbal or physical abuse, or Fear and intimidation when they speak out, organize, or attempt to form a union."

Labour Condition in Gem Stone Industry


In February, NLC published a report titled, "Hearts of Darkness," saying "Workers in India, including children, will die young grinding gemstones for Valentine's Day," explaining that: -- since record-keeping began in 1988, over 2,000 men, women and children died from silicosis (by breathing silica dust), from polishing gemstones for export to the West; yet operations began in the early 1960s when rural villages first got electricity, making motor driven grinding possible, so in all likelihood, the death count is multiples higher; earlier, silicosis victims were diagnosed to have TB, not thought connected to agate grinding; even today, radiology equipment needed to diagnose and monitor workers with silicosis is lacking; -- All workers inhale it on the job and experience other occupational hazards, including toxic chemicals exposure, ergonomic dangers, and high noise levels; -- Workers are paid very less "to do one of the most dangerous jobs in the world," exposing themselves to deadly silica dust; -- They begin as young as 12 or 13 (some younger); -- 30 - 38% of them die from silicosis; -- Up to 13% of non-working family members and neighbours, living near grinding units, also die from exposure to airborne silica dust; -- "scores of others are reduced to skin and bones, unable to walk and struggling to breathe;"

-- workers become "bonded labour" by borrowing money from "traders" who supply raw stones, and arrange for manufacture and export; wives are asked to continue their husbands' work if they die; then their children if they're incapacitated; With proper safeguards (including wet grinding and exhaust ventilation), silicosis is up to "100 percent preventable;" without it, grinding gemstones is a death or disability sentence; and the Indian government has done nothing to enforce its labour laws, in deference to its monied interests.

Another Example of labour exploitation in the name of Employment


A 2013 survey done by SAVE, an Indian non-governmental organisation, reveals that the total workforce of the 1,574 spinning mills in Tamil Nadu consists of about 224,000 women workers. An estimated 80 per cent of them are under 18, and 14-20 per cent is under 14. They are often subject to forced overtime, underpayment and hazardous and unhealthy working conditions. Almost 160,000 of the women workers stay in hostels. Their freedom of movement is restricted. Often they only leave the hostel once a month for shopping and rarely visit their families. Trade unions are completely absent. Sumangali Scheme Its an highly exploitative scheme under which around half of the total women workers toil. young unmarried women, In Sumangali Scheme, work in textile mills to save money for their dowry. In reality, schemes like Sumangali are a form of bonded labour, since wages are withheld and only paid after workers complete a three to five year contract period. Keeping the Employee Provident Fund (EPF) in employers' accounts Another exploitative practice is keeping the Employee Provident Fund (EPF) in employers' accounts. EPF is by law a social security fund. Employers are supposed to transfer 12 per cent of the employee's salary to this fund and add the same amount as employers contribution. This money has to be transferred to the concerned government office. Instead of transferring the money, there are employers in the textile and garment sector who keep the money in their own account and only transfer it when a worker finishes her 3-5 year contract. A worker who leaves before finishing the contract period loses the PF money she is legally entitled to. 21 garment companies Of the 21 garment companies approached, only eight have responded. These were HEMA (Dutch), Impala Loft (Germany), O'Neill Europe, Migros (Switzerland) PVH/Tommy Hilfiger Europe, Scotch and Soda (Dutch), Van den Broek (Dutch) and Zeeman (Dutch). Companies that were contacted but have not reacted at all are Abercombie& Fitch (USA), Carodel (Belgium), Crew Clothing (UK), IKEA NL, LPP

(Poland), Kiddo Fashion (Dutch), Teidem (Dutch), Sorbo Fashion (Dutch), TDP Textiles (UK), Tumble 'N Dry (Dutch) and Walmart (USA). Six companies acknowledge that violations of labour rights take place in Tamil Nadu, but only PVH/Tommy Hilfiger and Migros admit that bonded labour in the form of the Sumangali Scheme in their production chain

Child Labour
India's Census 2001 office defines child labouras participation of a child less than 17 years of age in any economically productive activity With or without compensation, wages or profit Participation could be physical or mental or both This includes part-time help or unpaid work on farm, family enterprise or economic activity such as cultivation, milk production etc. The census found an increase in the number of child labourers from 11.28 million in 1991 to 12.59 million in 2001. M.V. Foundation in Andhra Pradesh found nearly 400,000 children, mostly girls between seven and 14 years of age, toiling for 14-16 hours a day in cottonseed production across the country of which 90% are employed in Andhra Pradesh.ChildLabour in India 40% of the labour in a precious stone cutting sector is children. NGOs have discovered the use of child labourers in mining industry in Bellary District in Karnataka in spite of a harsh ban on the same. In urban areas there is a high employment of children in the zari and embroidery industry.

Causes of Child Labour


Poverty and lack of social security The increasing gap between the rich and the poor Privatization of basic services and Overpopulation Lack of quality universal education The neo-liberal economic policies are causes major sections of the population out of employment and without basic needs. Entry of multi-national corporations into industry without proper mechanisms to hold them accountable for use of child labour. High economic growth due to cheap labour with vast reserve of child labour

A growing phenomenon is using children as domestic workers in urban areas. The conditions in which children work is completely unregulated and they are often made to work without food, and very low wages, resembling situations of slavery. There are cases of physical, sexual and emotional abuse of child domestic workers. The argument for domestic work is often that families have placed their children in these homes for care and employment. There has been a recent notification by the Ministry of

Labourmaking child domestic work as well as employment of children in dhabas, tea stalls and restaurants "hazardous" occupations.

Bonded child labour


Bonded child labour is a hidden phenomenon as a majority of them are found in the informal sector. Bonded labour means the employment of a person against a loan or debt or social obligation by the family of the child or the family as a whole. It is a form of slavery. Children who are bonded with their family or inherit a debt from their parents are often found in agricultural sector or assisting their families in brick kilns, and stone quarries.Bonded labourers in India are mostly migrant workers, which opens them up to more exploitation.

Sivakasi Fireworks Case 450 fireworks factories, employing almost 40,000 workers directly and about 1 lakh indirectly such as paper tube making, wire cutting, box making in the country side working 12 hours a day younger children aged 4 10 earn an average of Rs. 2 per day. The older ones get maximum of Rs. 6 -7 per day Working conditions Children are taken like animals filling almost 150-200 children in a bus. They have to leave their house as early as 3a.m. and come back at 9p.m. Exposure to explosives is dangerous to their health Monitored by a warden restricting them freedom of movement

Consequences of child labour


1. 2. 3. 4. 5. 6. Child labour deprives a child of a proper childhood. He suffers physical and mental torture. He becomes mentally and emotionally mature too fast which is a dangerous sign. Child labour creates and perpetuates poverty. It condemns the child to a life of unskilled, badly paid work. Ultimately this leads to child labour with each generation of poor children undercutting wages.

Suggestions to fight Labour exploitation

Audit methodology' should be improved to detect bonded labour, discrimination and sexual harassment through offsite workers interviews with workers and their unions, to take additional interventions. Training for workers and management and a credible grievance mechanism are necessary. Companies need to make public their suppliers, also further down the chain. This also applies to audit findings, plans for improvement and results achieved. CSR initiatives of companies and other stakeholder should take the lead in facilitating further supply chain transparency in the garment sector. Meaningful engagement of local civil society organizations in the monitoring of labour conditions and the action plans is crucial for. Meaningful engagement of local civil society organizations in the monitoring of labour conditions and the action plans is crucial for improving the situation.

Nepotism
People choose to hire family members or friends due to personal attachment or they can trust them. Sometimes family members are out of job and in that case nepotism will arise if people chose that person for a job. The basic concern about nepotism in business is that it contradicts typical customs in employment to hire and promote the most qualified candidate for a job. While a son, daughter or nephew may be the most capable employee, nepotism sometimes leads to relatives getting jobs when other candidates have stronger education and work experience. Even when a relative is most qualified, hiring him may give the impression of nepotism. In large companies, nepotism isn't inherently wrong, although some people believe it is unethical in all cases. A 2009 Family Business Institute article noted that companies may benefit from nepotism if it consistently enforces fair policies. In a small organization, employees are often hired from internal referrals rather than formal job postings. Some companies encourage referrals of family members and friends to open positions. The ethics in this type of culture relate to the company's consistency in accepting family referrals and giving candidates fair access to jobs.

Practical Matters
Along with the ethical nature of nepotism, you need to consider the practical business matters. While family businesses often establish legacies from multiple generations of family involvement, not all companies benefit from nepotistic behaviors. In some cases, well-meaning owners or operators hire under-qualified, unmotivated family members that aren't worth what they are paid. Even worse, they undermine the workplace culture and increase the burden on other staff. Balancing the desire to help family and managing a successful business is the key. Nepotism also exacerbates problems. A culture of loyalty and secrecy flourishes within families. Nepotism in government naturally leads to nepotism in contracting, which means a failure to competitively bid, or bid-rigging. This can cost taxpayers millions of dollars a year. Nepotistic practices limit business growth, as it gets favor over more meritocratic forms of governance.

Gender Inequality
The discrimination against women clearly still abounds. According to Roopa Kudva who is current CEO of CRISIL, women participation in top management is almost neglible. Their presence is very low. Less than 1% of CEOs and MDs in India are women. . A cause of concern for India is the low representation of women in senior management positions of less than 10%, which is very low as compared to the world average of 20%. This also strikes a contrast to the very high women representation in senior management positions in south East Asian countries ranging from 30% to 45%. Women leadership is important and gender diversity brings in long term results. According to more than 140 studies, having women in leadership positions gives better financial with 47% higher ROI and 56% higher EBIT. Reasons for existence of gender inequality Women have to manage the workplace as well as the home. This creates a work-life imbalance and more women tend to opt out of the workplace to give time to the family. Career interruptions in the form of family problems, pregnancy also lead to women taking a break from their work. This interruption seldom leads to women being able to resurrect their career on joining back. Lack of family friendly support services such as child care, in the companies add to the woes of the women. Women generally do not perceive themselves as leaders. They do not see their talents and strengths in the same light as men. Hence they do not ask for a seat at table. Men in management recruit people like themselves which create clones in management. Diversity in gender, background is necessary for bringing in different sets of ideas and views to create foolproof innovations. Women generally shy away from projecting themselves in order to get additional roles and responsibilities when compared to their male counterparts. Companies with gender equality perform better A considerable body of research suggests a link between gender equality and better organizational performance. While there are a range of reasons to explain this link, one factor is that diversity brings together varied perspectives, produces a more holistic analysis of the issues an organization faces and spurs greater effort, leading to improved decision-making. Replacing a departing employee can cost 75%

or more of their annual wage. As both women and men are more likely to remain with an organization they view as fair, employee turnover for an organization offering gender equality can be reduced, thereby decreasing the high expense of recruitment. Gender equality attracts top talent A workplace that is equally appealing for women and men will provide businesses access to the entire talent pool. As women are increasingly more highly educated than men, a workplace that is not attractive to women risks losing the best talent to competitors. Gender equality can reduce expenses Replacing a departing employee can cost 75% or more of their annual wage. As both women and men are more likely to remain with an organization they view as fair, employee turnover for an organization offering gender equality can be reduced, thereby decreasing the high expense of recruitment. What can be done to remove the gender inequality? The corporate mindset is slowly but surely changing and accepting women in leadership roles. It has to become more supportive towards women in the work place. Women starting off their career or very early in their career should take inspiration from women who have succeeded Gender neutrality should exist in organizations. A woman should be promoted/not promoted merely based on her performance and not gender. Provide full and genuine access to all occupations and industries, including to leadership roles for women and men One of the important thing that woman should do during her career asking for a seat at the table

Rigid Bureaucracy/Weak enforcement


The economic problem arises with bureaucracies due to rigid administrative rules. It acts as a wedge between action and responsibility.Bureaucrats hands are tied due to external pressures created by the politicians and they are not allowed to think out of box. There are certain guidelines and according to that bureaucrats are expected to work. There are numerous examples in which bureaucrats are required to defend and promote politically determined policies and those policies are not viable in nature.

This is a constant dilemma that bureaucrats increasingly face: whether to say and do things that they know to be unethical and survive another day unscathed or to take a stand and face reprisals for doing so. In the short run, the former seems the smartest course. But there is a price. In the long run, it contributes to the normalization of unethical behavior and to the process termed as the bad driving out the good, in which ethical employees gradually leave and are replaced by more compliant and less competent staff. That makes life even more unpleasant for the average employee and, more importantly, increases the chances of catastrophic failures and red tapes. In India, even simply putting concerns in writing can be viewed as a threat and punished, presumably because it could eventually surface via an access to information request. Recent example is government and Vodafone which is locked in a $2-billion tax dispute. Vodafone did not need to pay $ 2.6 billionsin taxes because the transaction took place between two overseas firms and there was no provision in Indian law to tax such deals. Vodafone's tax controversy relates to Indian government's budget proposal to retrospectively tax overseas transactions involving local assets which is widely seen as targeting UK-headquartered Vodafone $11 billion purchase of Hutchison Essar. The Supreme Court had ruled in Vodafone's favor in 2012, saying it was not liable to pay any tax over the acquisition of assets in India from Hong Kong-based Hutchison. The government, later in 2012, changed the rules to enable it to make retrospective tax claims on concluded deals. Vodafones case has tarnished Indias reputation as an international investment destination and come to symbolize wider worries among international business about moves by Indias aggressive tax department retrospectively to reopen old investigations.

References
http://rense.com/general91/hor.htm http://www.theguardian.com/news/datablog/2011/mar/08/international-womens-day-pay-gap http://www.vitalvoices.org/node/2159 http://www.ft.com/cms/s/0/b90b93d4-9968-11e3-91cd-00144feab7de.html#axzz2z15pDKCj http://timesofindia.indiatimes.com/business/india-business/Rs-20000cr-tax-dispute-Govt-Vodafonetalks-fail-tax-department-to-collect-dues/articleshow/30231428.cms