Competing for Labor and the Public Good: Provident Funds in India, 1910s to 1950s

Multinationals’ efforts to address social security concerns exhibit considerable diversity worldwide. While they are arguably motivated by “doing business in the public interest”, many of the concrete initiatives fall short of their lofty promises to combat inequalities. An examination of the historical development of such endeavours across various contexts sheds light on the mismatch between ambition and outcomes.

This paper focuses on the transformation of “provident funds” (PFs) in India from World War I to the 1950s, capturing the colonial interwar period and the transition to Indian Independence in 1947. Provident funds first emerged in the 1910s as a safeguard for retirement, disability, and death. Initially, a handful of large private enterprises and public institutions spearheaded these efforts, framed by novel legislation since the 1920s. While similar to social insurance schemes in requiring member contributions, PFs differed by allocating benefits only based on individual member payments, complemented by employer contributions, effectively serving as compulsory savings accounts.

This study draws upon an unexpected trove of documents compiled by a German manager at I.G.Farben in the 1930s, during the chemical company’s initial foray into establishing a PF in India. It scrutinizes the regulations and benefits of 15 different PFs in Indian, British, German, and U.S. firms, bolstered by correspondences pertaining to the establishment and operation of these funds.

The paper shows how PFs not only became integral to discussions about labor and the public interest, but also influenced companies' competitiveness within the Indian market. Employees frequently implored firms to institute PFs, and skilled workers departed for competitors offering superior benefits. By 1935, 74 commercial enterprises in Bombay, constituting half of the Chamber of Commerce’s membership, had instituted PFs, each with distinct understandings of their contribution to a common good, their benefits and outcomes. Following contentious debates, the Indian government, post-independence, favored a contributory PF over a pension scheme. Eventually, in the 1950s, PFs were recast as public savings programs, obscuring their earlier role in private industry.