India is pressing rich countries in the Gulf to raise the wages of millions of Indians working there, in a drive that could secure it billions of dollars in fresh income but risks pricing some of its citizens out of the market.
Over five million Indian nationals are believed to be employed in the oil exporting states of the Gulf, the single largest group in a migrant worker population of more than 20 million.
Migrants do many of the dirty and dangerous jobs in the region, from construction to the oil industry, transport and services. They account for nearly half of the roughly 50 million population of the six-nation Gulf Cooperation Council.
So India’s campaign for much higher pay could have an impact on economies around the region, especially if it leads to a general increase in wages for workers from other big labour-supplying countries such as Pakistan and Bangladesh.
Over the past seven months, Indian diplomats in Bahrain, Kuwait, Qatar, Oman, Saudi Arabia and the United Arab Emirates have sharply increased the minimum salaries that they recommend for Indian workers at private and public firms in those states.
“We want the Indian workforce to be paid higher salaries. Inflation, the value of the Indian currency and a rise in the cost of living in the Gulf were the factors that led to the decision,” Y.S. Kataria, a spokesman for the Ministry of Overseas Indian Affairs (MOIA) in New Delhi, told Reuters.
The success of India’s strategy is not yet clear, however. Officials in at least some GCC nations have expressed displeasure, and the strategy could backfire if those countries end up hiring more workers from elsewhere in the world.
“Of course it will encourage companies to look at Bangladesh and Pakistan as more viable options to get migrant workers,” said Mohammed Jindran, managing director of UAE-based recruitment agency Overseas Labour Supply.
The Indian government cannot dictate the pay of its citizens in the Gulf – decisions to hire workers are made by labour recruiters in individual countries, which have not set minimum wages for migrants and usually prohibit union activity by them.
However, the recruiters must rely on the co-operation of local authorities to operate in India. An internal memorandum prepared by the MOIA, sent last month and seen by Reuters, says that if workers are offered wages below specified minimums, ministry officials “would deny emigration clearance”.
In Saudi Arabia, the Indian embassy lifted the recommended minimum salary posted on its website to SAR1,200 ($320) a month earlier this year from SAR670. In the UAE, the minimum wage for Indian blue-collar workers rose to Dhs1,500 ($409) in recent weeks from Dhs1,200 last year, Jindran said.
Even when Gulf recruiters agree to certain wage levels, the numbers do not necessarily stick. Some workers are promised one salary when they sign up in their home country, then forced to renegotiate lower wages when they arrive in the Gulf.
India’s role as a top labour supplier means its drive cannot be totally ignored by recruiters, and it could have a big impact in some countries and industries. But there may be a backlash.
Another MOIA official said India’s pay demands had met initial resistance in all six GCC countries, while two of the countries had threatened to reduce their Indian workforces and hire more, lower-paid workers from Bangladesh and Nepal instead.
Ahmed Al-Fahaid, Saudi deputy labour minister for international affairs, told Sky News Arabia last month:
“If this is a decision that is applied throughout India as a whole, meaning no one gets out of India for work unless with that limit, then this is a sovereign decision for the country and we will not interfere,” Fahaid said.
“But if it is a special decision to raise wages for whoever comes to work in the Kingdom, then we oppose it and do not accept it, as it would be an act of discrimination and we don’t accept that in international agreements.” He did not elaborate.
If India’s efforts to secure higher pay succeed, they could boost its economy, because migrants send much of their pay home. India received $69 billion as remittances in 2012; a 2010 central bank study found Gulf nations accounted for 31 per cent.
Higher wages could also impact many companies. Fawwaz al-Khodari, chief executive of Saudi builder Abdullah Abdul Mohsin al-Khodari, said profits in the sector might be squeezed by demands from governments of some labour-exporting countries.
“In cases where salaries have been SAR800 to SAR900, we are now hearing talk of SAR1,500 as a minimum salary, which is a huge increase… Clearly this would become a major issue in the contracting industry.”