In the same years India's state turned a car venture that had built almost nothing into a car people queued for, and legislated a lower line above which an employer needed its permission to let workers go.
14 min read · Priyanshu Sekhar Patra
1983
Wednesday, 14 December 1983. Sanjay Gandhi would have turned thirty-seven today.
His mother, Prime Minister Indira Gandhi, is handing a car key to Harpal Singh, an Indian Airlines employee who won the right to the first car in a lucky draw. He has paid Rs 47,500 for it. The car is a white Maruti 800, registration DIA 6479. Its engine is a Suzuki three-cylinder of 796 cc, and in these early months the plant at Gurgaon, in Haryana, assembles parts imported from Japan.
The government of India owns most of the company that built it, and Suzuki of Japan holds 26 percent. The agreement with Suzuki was signed fourteen months ago, and the factory, its suppliers and its dealer network have been set up in fourteen months. The company plans to make 20,000 cars in its first year and 40,000 in its second. Its rivals on the road are the Ambassador and the Padmini, built to designs of the 1950s.
Suzuki had warned that Maruti would make no profit in its first year, and that nobody books a car they have never seen. The bookings ran far past the plan: about 120,000 in the first year, six times what the plant was to make. Buyers were willing to pay twice the official price to jump the queue. Others waited almost three years for delivery. Within two years the 800 had doubled the number of cars sold in India, and demand still ran ahead. R. C. Bhargava, one of its first directors, recalls that Maruti could not raise its capacity until 1992–93 because expansion needed foreign exchange; even in 1991 the government would allow it only with a foreign loan, and a Japanese bank financed that part. Its workers learned the trade partly in Japan, and Bhargava credited their efficiency in part to that training and to Suzuki’s support.
The same asset had been in the state’s gift twice. The first time it went to the Prime Minister’s son and produced almost nothing. The second time it went to public-sector managers with a Japanese partner, and it made the car the country queued for. In 1982, the year of the Suzuki agreement, the same state legislated a lower line in its labour law, above which an employer needed the government’s permission to let workers go.
Root · 1983 ↓ 1970
1970
A Lok Sabha reply of 10 November 1970 records two letters of intent to make cars: one for 25,000 a year, and one for 50,000 a year to Sanjay Gandhi, the Prime Minister’s younger son. He was twenty-three. He had no experience of building cars and no working prototype.
In 1971 Maruti Motors Limited was incorporated, with Sanjay Gandhi as managing director. He had served a three-year apprenticeship in automotive engineering with Rolls-Royce at Crewe, in England. He sought a collaboration with Volkswagen. The first prototype, finished in 1972, failed a test of road-worthiness. By one account the company had made 21 cars by 31 March 1976. By another it went bust before it made any.
After the Janata government took office in 1977, Maruti Limited was liquidated. A commission the new government appointed, under Justice Alak Chandra Gupta, reported very critically on the company’s affairs.
1980New Delhi · A fork the book draws and does not fill.
On the morning of 23 June 1980, Sanjay Gandhi lost control of his aeroplane during an aerobatic manoeuvre and crashed in New Delhi’s Diplomatic Enclave. He and his only passenger, Captain Subhash Saxena, were killed. Gandhi was thirty-three. Five months earlier his mother had returned to power at a general election.
Here the line forks, and the book leaves the other branch empty. Bhargava has said that if Sanjay Gandhi had not died in that accident “there would have been no joint venture of this kind”. The record holds the decision that followed.
After the crash, at Indira Gandhi’s behest, the Union government salvaged the company. In February 1981 it became Maruti Udyog Limited, a government company led by public-sector officials who had never made a car. Its chairman was V. Krishnamurthy. Bhargava was its director of sales and marketing, and later its managing director for twelve years. The government’s first plan had no small car in it. The managers settled on one after a visit to the Tokyo Motor Show.
1981Bombay
On 20 October 1981 the Bombay Mill Owners’ Association signed a bonus agreement with the Rashtriya Mill Mazdoor Sangh. That union was affiliated to the Congress party, and under the Bombay Industrial Relations Act it was the only union recognised in the city’s textile industry. The bonus would depend on what each mill could pay: nine private mills would pay 17.33 percent, and most of the others between 8.33 and 12.5. Most workers would not accept it, and the next day fifteen mills sat down. On 22 October workers from the Standard Mill marched to the house of Dr Datta Samant and asked him to lead them. He agreed that morning. Samant was a physician and an independent organiser, beholden, analysts said, to no party. His campaigns over the previous decade had won wage settlements unusually high by Indian standards, and had also been linked to violence.
On 30 October he founded a new union, the Maharashtra Girni Kamgar Union, and on 18 January 1982 an indefinite strike began. On 7 February Maharashtra’s chief minister declared it illegal, because Samant’s union was not the recognised one, and said he would talk only to the union that was.
By June nearly 250,000 workers had been out for five months, the longest stoppage in the history of the city’s mills, and the mills stood “eerily silent”. Their pay had been $75 to $115 a month. They wanted rises averaging $55 and the removal of the recognised union. There was no strike pay. Most had gone back to their villages to live on family land and odd jobs. Three people had been killed and about a thousand injured. Both the owners and the recognised union called the strike illegal, and no negotiations were under way. By then the mills had lost an estimated half a billion dollars of production, and the workers nearly $80 million in wages. The central government had broad powers to break strikes and had not used them.
Through 1982 neither Bombay nor Delhi could end it. In July the Union labour minister set up a tripartite committee and announced an interim rise of Rs 30 a month. Samant said his other demands were negotiable, but that the recognised union and the Act behind it had to go. In November the Registrar of unions ruled that the recognised union could not be derecognised, although it had too few members. By mid-January 1983 most mills were running again, at about 40 percent of normal output, and by July the strike’s failure seemed certain. Accounts differ on when it ended: an American newspaper reported it over in August 1982, while a labour archive’s chronology follows it into the middle of 1983. It failed without removing the recognised union. The concessions on record included a house-rent allowance in March 1983.
The state’s standing answer to a failing mill was to keep it open. In the decades before the strike, sick mills had been nationalised to preserve jobs. The National Textile Corporation, set up in 1974 to revive them, had recorded nothing but losses, $120 million in the latest year, and state governments had lately taken over twenty-two more mills.
1982
While the mills stood idle, Maruti looked for a partner. Fiat, Peugeot, Volkswagen, Renault and Nissan reportedly declined, and Daihatsu was the front-runner. Suzuki was not on the first shortlist. It came in after one of its senior directors, on a domestic flight in India, read an article in India Today about an imminent tie-up between Daihatsu and Maruti.
By Bhargava’s account, Suzuki had already spent two years negotiating with General Motors, and its talks with Maruti began in April 1982. Bhargava and a fellow director, D. S. Gupta, negotiated for Maruti, with the chairman in the background and no lawyer at their side. They made frequent trips to Tokyo, where Suzuki’s lawyer was based. Osamu Suzuki, the company’s head, stayed out of the talks and asked to be told only if there was a problem. The deadline was 2 October 1982. Bhargava pressed to close by August, so that he could get the government’s clearances in time, and the licence agreements alone took more than two months.
Suzuki, he says, wanted 25 percent of the company and capped the total cost of the project at $200 million; the government directed that the foreign partner hold 40 percent, and refused to sign for 25. Forty percent was the ceiling set by the foreign-exchange law of 1973, the law the prologue followed to IBM’s exit. Bhargava explained to Suzuki the rights Indian company law gave a shareholder at 26 percent, and the compromise was 26 percent at the start, rising to 40 percent over five years. Suzuki paid about $20.8 million for its first 26 percent, and the agreement was signed on 2 October.
Rodrik and Subramanian, whose dating of India’s take-off to about 1980 appears in A Stetson, sort reforms into two kinds. A pro-market turn removes barriers and favours entrants and consumers; a pro-business turn raises the profits of established firms and favours incumbents and producers. India’s change in the early 1980s, they argue, was the second kind. Others had cited Suzuki’s entry into the car market as the most telling case of liberalisation in that decade. They count it as pro-business: one foreign firm let in, under local-content rules, boosted existing businesses “without threatening them with real competition”. Maruti was also an entrant, and its waiting list was a list of consumers. But the entrant was the state, and the motoring editor Hormazd Sorabjee writes that easy approvals and several tax concessions favoured its cars in the early years.
In the same year Parliament lowered the permission line from 300 workers to 100, in the Industrial Disputes (Amendment) Act of 1982. It also substituted a new closure clause, section 25-O, for the one the Supreme Court had struck down. The lower line took effect on 21 August 1984.
Root · 1982 ↓ 1976
1976
The trunk law was older than the Republic. The Industrial Disputes Act became law on 11 March 1947 and came into force on 1 April. The permission line was grafted onto it during the Emergency of 1975–77, told in A Stetson. Chapter V-B took effect on 5 March 1976, and it applied only to establishments with at least 300 workers. The bill’s statement of objects and reasons pointed to lay-offs, retrenchments and closures on a large scale by large companies, which it said had demoralised workers. Its stated aims were to spare employees avoidable hardship and to keep up the tempo of production.
The rule’s first great test came from a garment factory. Excel Wear, a Bombay partnership that made clothes for export, employed about 400 workers. It said that its workers had turned militant from August 1976 and that carrying on had become almost impossible; the union disputed its account. On 2 May 1977 it asked the Maharashtra government’s approval to close. On 1 August the government refused, finding the reasons for closure prejudicial to the public interest, and ordered it not to close.
Excel Wear went to the Supreme Court, with other employers in the same position. On 29 September 1978 a bench of five judges struck the closure clause down as a violation of the right to carry on a business. The law required no reasons for a refusal, and no higher authority could review one. Compelling an employer not to close, the Court held, was a highly unreasonable way to pursue the law’s aims, and confining the rule to larger units had not made it reasonable. Justice N. L. Untwalia wrote for the Court:
Whimsically and capriciously the authority can refuse permission to close down.
The judges did not decide whether Excel Wear’s account of its workers was true.
The line at 100, and the new closure clause, came four years after the Court had spoken, from a Parliament elected in January 1980 and sitting in the ordinary way.
The arithmetic the line set before an owner was short. With 99 workers an owner needed no one’s permission to let a worker go. With 100 he needed the government’s permission to lay off, to retrench or to close, and the government could say no. The lesson fitted in three words: stay at 99. Whether owners in fact stopped there is a question the evidence has not settled.
60 workers — you can still hire and let go freely.
PERMISSION NEEDED TO LAY OFF OR CLOSE
Hire worker number 100 to see what happens.
100300
The 99 rule
Hire the hundredth worker and you can never let anyone go without permission
From 1976, a factory with 300 or more workers needed government permission to lay off or close; an amendment passed in 1982, in force from 1984, lowered the line to 100. Drag the slider.
Chain I181947 → 2025Planted: the line returns in A Headcount19472026
Set the two decisions of 1982 side by side. One helped a single large firm, owned by the state, to grow. The other set the terms on which any private firm might become large. The figure draws each on its own scale, cars a year against workers on a payroll: Maruti’s planned output, and the permission line, which stood at 300 from 1976, at 100 from 1984 and, in national law, at 300 again from 2025. Rajasthan had restored 300 within its own borders in 2014.
15 Mar 1976 · Chapter V-B: an establishment of 300 or more workers needs the state's permission to lay off, retrench or close
223 Jun 1980 · A plane crash: a fork the book draws and does not fill
314 Dec 1983 · The first Maruti 800 is handed over. About 20,000 cars were planned for the first year; about 120,000 were booked, six for every car
421 Aug 1984 · The 1982 amendment takes effect: the line drops to 100, eight months after the first key
512 Nov 2014 · Rajasthan alone raises its line to 300
621 Nov 2025 · The Industrial Relations Code puts the national line back at 300
A car key · 1970–2026
A key in December 1983, and a line at 100 from August 1984
Since 1976 an establishment of 300 or more workers has needed the state's permission to lay off, retrench or close. Parliament's 1982 amendment lowered that to 100 from 21 August 1984, eight months after Maruti's first key. Rajasthan raised its own line back to 300 in 2014, and the Industrial Relations Code did the same for the whole country on 21 November 2025. Maruti planned about 20,000 cars for its first year and took bookings for about 120,000: six for every car.
Sanjay Gandhi dies in an air crash near Safdarjung Airport, Delhi. The book draws it as a fork and does not fill it.
14 Dec 1983
Maruti
300
Indira Gandhi hands the first Maruti 800's key to Harpal Singh. 20,000 cars planned, about 120,000 booked.
21 Aug 1984
India
100
Industrial Disputes (Amendment) Act, 1982 (Act 46 of 1982), section 12, substitutes one hundred for three hundred in section 25-K
12 Nov 2014
Rajasthan
300 in Rajasthan, 100 elsewhere
Industrial Disputes (Rajasthan Amendment) Act, 2014 (Rajasthan Act 21 of 2014), in force at once
21 Nov 2025
India
300
Industrial Relations Code, 2020, made effective with the three other Labour Codes; States may enhance the limit
Forward · 1983 ↑ 2012
2002
The state’s exit began twenty years after the agreement. On 14 May 2002 the government approved the sale of its stake in phases. Maruti would issue Rs 400 crore of new shares to its owners, the government would renounce its share of them to Suzuki, and Suzuki would take majority control and pay the government a control premium of Rs 1,000 crore. The government’s remaining shares would then be sold to the public. It had sold the last of them by 2006 or 2007; the sources differ.
In February 2007 the company opened a second plant, at Manesar, also in Haryana. In 2010 Harpal Singh died. The first Maruti stood outside his house in Green Park, in Delhi, in rain and sun, until the company restored it piece by piece and put it on show at its headquarters.
2012Manesar
Maruti had faced three strikes in 2011. On 18 July 2012 part of the Manesar plant, which made about a third of the company’s capacity, was set on fire. Its general manager for human resources, Awanish Kumar Dev, aged fifty, died; the post-mortem found fractures in his legs and death by suffocation. By 20 July thirty-three supervisors and managers were still in hospital, two Japanese officials were in intensive care, and police had arrested ninety-nine people. The company said workers had blocked the exits and thrown the first punch. Workers’ accounts, collected in a later book, blame some 100 to 150 “bouncers” who came in during the second shift wearing workers’ uniforms, and the book says management had stalled talks on the union’s charter of demands. On 21 July the company declared a lockout. Osamu Suzuki said that those who took part in the violence, 546 people, had been identified and dismissed; the book’s authors write that about 2,500 were dismissed, 546 of them permanent workers and the rest contract workers. On 10 March 2017 a court in Gurugram convicted 31 of the 148 workers the police had arrested and acquitted 117. On 18 March it sentenced 13 of them to life for murder, and the defence said it would appeal.
The state had sold its last shares five or six years before the fire, and this book draws no line from that sale to it. It records the fire because the labour question outlived the question of who may build cars.
The letter of intent of 1970 named a person. The agreement of 1982 named a partner and a schedule for the partner’s stake, and the state’s own exit began twenty years later. The permission line had no schedule at all. It stood at 100 in national law for more than four decades.
So India came out of these years with a car people queued for and a line at 100 workers. The next folder on the desk asks the question that line raises and cannot settle alone: why are there so few factory jobs?