Informal sector in India: Perspectives and policies 8190094858, 9788190094856

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UNIVERSITY OF MICHIGAN

INFORMAL SECTOR IN INDIA Perspectives and Policies

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INSTITUTE FOR HUMAN DEVELOPMENT The Institute for Human Development (IHD) is a nonprofit autonomous institution for study and action in the areas of labour, employment, poverty, education, health and other aspects of human development in developing countries, particularly India. The specific a.reas in which the lnstitute's current activities are concentrated include: impact of structural adjustment policies on poverty, employment and social development, and desired policy interventions; empowerment of rural labour; efficacy of poverty alleviation programmes and devising an appropriate anti-poverty policy; status and efficacy of primary education in rural areas and its access to the poor; and institutional framework and the poor. Its special focus is on gender disparity, backward regions and vulnerable groups.

INSTITUTE OF APPLIED MANPOWER RESEARCH The Institute of Applied Manpower Research (IAMR) was set up in 1962, inter alia, to conduct empirical research in manpower, provide advisory and consultancy services to government departments and industry; and stimulate • manpower research through seminars, conferences and training courses. Currently, the lnstitute's activities pertain to the following five themes, viz., employment and unemployment; science, technology and industry; manpower information system towards effectively reflecting user's perception and needs; and provide continuity to research activities of the Institute.

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INFORMAL SECTOR IN INDIA Perspectives and Policies

Edited by

Amitabh Kundu Alakh N. Sharma

INSTITUTE FOR HUMAN DEVELOPMENT & INSTITUTE OF APPLIED MANPOWER RESEARCH NEWDELHI

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Contents Preface 1.

2.

3.

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Introduction Amitabh Kundu and Alalch N. Sharma

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Part I : CONCEFl'UAL AND ME"I"HODOLOGICAL ISSUES Information Base for the Informal Sector S.S. Suryanarayanan

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Informal Sector in India: Its Coverage and Contributions A .C. Kulshreshtha and Guiab Singh

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Part U : TRENDS AND PA"1=1·ERNS AT MACRO LEVEL 4.

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Employment in the Informal Sector ArupMitra Growth Dynamics of Informal Manufacturing Sector in Urban India: An Analysis of Interdependencies Amitabh Kundu, N. uilitha and Sant uil Arora Wages and Employment in Unorganised Sector: Issues in Wage Policy Jeemol Unni lnformalisation of Employment and Poverty in Ahmedabad Darshini Mahadevia Scalar Linkages in Industries: Implications for Productivity and Employment AmitaShah

Part Ill : STRUCTURE AND DYNAMICS AT MICRO LEVEL 9. Workers and Earnings in Informal Manufacturin~ Evidence and Issues in Estimation Keshab Das 10. Manufacturing Activities in Urban Slums: A Case Study of Sandal Making in Hyderabad G. Swaroopa Rani and 5. Galab 11. Political Economy of Labour: A Case Study of Surgical Instruments Manufacturing Industry at Jalandhar, Punjab Manjit Singh

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12. Powerlooms in Silk Weaving: Case Studies from Kamataka

Supriya Roy Choudhary 13. Small Information Technology Services, Employment and Entrepreneu.rship Development: Some Explorations into Indian Experience Nagesh Kumar 14. Informal Tourism Sector: Insights from 'Iwo Cities Surjit Singh 15. Linkage between Informal and Formal Sectors: Some Findings from Micro-level Studies Harjit 5. Anand Part IV: WOMEN IN INFORMAL SECTOR 16. Urban Indian Women in Informal Employment: Macro Trends in the Nineties /ayati Ghosh 17. Globalisation, Liberalisation and Women Workers in the Informal Sector U. Kalpagam

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18. Impact of Emerging Labour Market on Women and Their H(\11se1\olds: A Tale of Three Slums in Mumbai

Sudha Deshpande 19. Unorganised Women in an Urban Setting: Opportunities and Challenges Martin Patrick

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Part V: SUPPORT SYSTEM 20. Technology and Training for Informal Sector: Need for New Initiatives

Rajendra P. Mamgain and J.C. Awasthi 21. Meeting the Credit Needs of the Micro Enterprise Sector: Issues in Focus Tara Nair 22. Moving Towards People-centred Economy Ela R. Bhatt Part VI : SOCIAL PROTECTION AND ORGANISATION 23. Social Security for Workers in Unorganised Sector T.S. Sankaran 24. Organising Informal Sector Workers Navin Chandra and Surendra Pratap Contributors List of Abbreviations Index

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I Preface The ongoing globalisation of the Indian economy in the nineties is widely believed to have corrected certain macro-econqmic distortions. It has nevertheless resulted in serious problems in the social field including slow growth of employment. The emergence of the informal sector has often been viewed as providing a solution to a few of these problems by ensuring sustainability of livelihood for a large section of the population, particularly the poor. Indeed, a significant part of the incremental employment generated in the nineties is in the informal sector, both within manufacturing and tertiary sectors. And yet, it remains one of the.less researched areas in the context of formulating a viable development policy. It was in this context that the Institute for Human Development (lliO) and ~ Institute of Applied Manpower Research (IAMR) organised a three-day seminar during December 1997 in Delhi to highlight these issues and identify ,,seful inputs for policy formulation. Financial support for the seminar was provided by the Department of Statistics of the Government of India, International Labour Organisation and Friedrich Ebert Stiftung. The seminar evoked an overwhelming response attracting many distinguished experts in the relevant field, which included as many as 70 researchers, policy makers, social activists and others who participated and intensively deliberated on the theme. Professor Yoginder K. Alagh, the then Union Minister for Planning and Programme Implementation, inaugurated the seminar and Professor Madhu Dandwate, the then Deputy Chairman of the Planning Commission, delivered the valedictory address. In all, 35 papers were presented in the seminar. The present volume contains 22 papers which includes 16 thoroughly revised papers presented at the seminar and six other papers which were either specially commissioned for this volume or published in the Indian Journal of Labour Economics during the past two years. Earlier, nine papers of the volume were also published in a special issue of the Indian Journal of Labour Economics in 1998. The present volume makes a comprehensive effort to analyse the present trend, understand the dynamics of development and assess its implications for the workforce and the people. It overviews the conceptual and methodological issues relating to the identification of the informal sector and informal workers and analyses the trends and structure of its growth in recent years using both

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secondary and primary data. It examines the issues pertaining to wages/ earnings, productivity, macro-micro linkages, etc. and attempts to determine its prospects of growth providing meaningful employment to a large section of the workforce in future years. Various aspects of discrimination in labour market and on the job have been covered although partially by bringing in the gender dimension. The efficiency and welfare implications of the increasing absorption of labour force in this sector have been examined by focussing on the support system and issues relating to social protection. The volume, in general, attempts to identify areas and avenues that can be pursued to find solutions to the problems confronting this sector, and thus help in developing a policy perspective for its healthy growth. The IliO and IAMR are thankful to the Friedrich Ebert Stiftung (FF.5) for meeting part of the publication cost of the volume. In bringing out the volume, we received valuable support from several people. Dr. T. S. Papola, President of the Indian Society of Labour Economics; Professor L.K. Deshpande, Visiting Professor at the IHD; Professor Ashoka Chandra, Special Secretary in the Ministry of Human Resource Development, Government of India and former Director of IAMR; and Or. H. Ramachandran, present Director of the IAMR, extended their full cooperation to this venture. The contributions made by A.J.C. Bose, Rajendra P. Mamgain, Anup K. Karan and Piush Antony were extremely helpful. Thanks are also due to the colleagues at the Institute for Human Oevelopment-Alok Anand, Kaushik Roy, Smita Sahai and Rajesh Shankar-for their help and cooperation in various ways. We are also thankful to Madhavi Chauhan, Oipika Sen, S.P. Sharma and Rajeev Sen for their assistance.

December 10, 2000

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1 Introduction ,·

Amitabh Kundu and Alakh N. Sharma

I. INFORMAL SECTOR: MACRO AND MICRO CONCERNS

Studies on the informal sector, using primary as well as secondary data, have come out with conclusions that are often self-evident and repetitive. The results are often quantitative without being analytical and have not been of much help in understanding the pattern or nature of interdependencies or the dynamics of this sector. This, nonetheless, is a less important problem in the fast growing literature on the subject. The more important issue is that the estimates on the size of the sector and its correlates vary widely and irreconcilably so much so that they lead to opposite conclusions and policy perspectives. This has often led researchers and planners to come out with prescriptions that are equivocal and even contradictory. The tentativeness of the conclusions in this area of academic and policy research is not difficult to explain. As the researchers and data producers have failed to standardise the definitions and framework for data collection, studies have been undertaken with widely different concepts and categories. It is, therefore, not surprising that several scholars who agree with each other and appear to belong to the same "school of thought" do not realise that empirically they are articulating quite different things. Similarly, policy makers often disagree vehemently with each other without making the effort to discover that the differences are due to those in their definitions, levels of aggregation or scope and coverage of the concepts. There have, however, been certain positive developments in this field in recent years, particularly since the late seventies. Increasingly, the researchers and policy makers have felt that, local specificities notwithstanding, the concepts pertaining to informal sector must be standardised so that communication becomes meaningful. There has also been an awareness that for any effective policy intervention or creation of a support system for the informal sector, it is necessary to build up a macro perspective at the national and state level. The scholars are now increasingly using secondary data in their analysis of the trend and pattern, and are trying to place the micro-level results within a macro perspective. This was quite impossible when researchers

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working on different cities and industries choee to develop their own concepts, definitions and tools of analysis. This change has come about beca\1ae of the pressures exerted by a number of activists, administrators and researchers and the lobbying done by them in national and international organisationa asaociated with the statistical system reaµlting in some standardisation of the database. Attenlpt at defining this aector in clear terms, using the data that are easily available and are comparable over time and space, is a positive healthy development. Increasing use of the information from secondary sourcea like Population Census, National Sample Survey (NSS), Employment Market Information (EMI) Programme, special surveys by Central Statistical Organisation (CSO), etc. makes a comparative analysis across regions/cities and industries possible. Unfortunately, however, certain avoidable anomalies in the scope and coverage of the data generating agencies at the national level have come in the way of making such comparative assessments. Indeed, there is a strong bias in favour of organised sector in the present statistical system, possibly due to its importance in terms of its share in national income. The surveys organised for gathering information on unotganised activities or the informal sector-the two terms being generally used interchangeably in the literature-have often lacked temporal comparability due to nonstandardisation of concepts, change in the format of tabulation, etc. Importantly, paucity of staff and other resources, available to the national organisations responsible for the data generation, have become major hindrances in any effort to remedy the situation. Despite serious problems with the existing data and their cross-sectional and temporal comparability, there has been no dearth of estimates put forward by national or international agencies. It has been argued that the unorganised sector employs more than 90 per cent of the total workforce in India and contributes over 50 per cent of GDP. A large number of generalisations have been made with regard to its interdependence with other sectors and other developmental indicators. Large sections of planners and policy makers, however, seem to converge on the view that the informal ~tor is transitory in nature and would gradually disappear with the development of the economy. This possibly would explain the neglect of this sector in current research and policy debate. The proposition has, however, been proved wrong empirically and the sector has continued to grow over the years, most certainly in terms of its share in employment. Indeed, the process of globalisation seems to have accelerated the trend towards informalisation and there is a realisation that this sector will be a major contributor to the growth of employment in the future. Keeping all these aspects in view, the present volume attempts to address the various dimensions of this sector in a somewhat holistic manner. The papers included in the volume may be placed under the following six themes: (i) conceptual and methodological issues; (ii) trends and patterns at macro level; (iii) structure and dynamics at micro level; (iv) absorption and status of women workers; (v) support system; and (vi) social protection and organisation of workers. Empirical analyses using secondary and field data in these six areas enable us to look at the dynamics of this sector or their absence in a fairly comprehensive manner.

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11 D. CONCEP'I uAL AND lttEIHODOLOGICAL ISSUU

Analysing the informal sector baaed on secondary data and th~ difficulties in making generalisati.on u a consequence, are well recognised in the literature. Attempts have been made in recent years to improve the quality and coverage of data collection by the national level data gathering agencies. Despite all t:heee attempts, there are problems in making temporal and cro11-1ectional comparisons of various parameters pertaining to this sector and arriving at definite policy recommendations. The paper by Suryanarayanan (Chapter 2) deals with the iaeues pertaining to measurement of informal sector and discuMes the possibility of making g:eatia use of the data available from secondary sources. The author believes that serious efforts are being made in the country to generate reliable infonnation since 1977, when the first 'Economic Census was conducted. It was envisaged that the Census would cover all enterprises and provide a sampling frame for the surveys for the organised sector conducted by the Annual Survey of Industries (ASI), as also for the different segments of unorganised sector conducted by NSSO and departments within CSO. These surveys together would, thus cover the entire industrial sector. The paper, however, points out that there exist serious data gaps in assessing trends and patterns of informal sector. The first problem is that the 'Economic Censuses provide infonnation only for a limited number of indicators on industries categories from Population Census or NSSO. Now, by defining the informal sector as a residual category, one can generate data for this sector simply by subtracting the figures for organised sector from the totals. But that is pos.,ible only for the limited indicators. Secondly, infonnation from the Censuses on enterprises or employment therein in three-digit NIC categories are available with a considerable time lag. Of course, the quick estimates are provided by EMI without much delay but the data are highly aggregative (sectorally). Thirdly, the coverage of organised sector by EMI is extremely limited even when compared to ASI (also there is a serious problem of non-response) and consequently, the former would grc>$1y underestimate the organised sector. Finally, NSS generally does not provide data at sub-state level and certainly not at district level, and as a result, most of the estimates derived through NSS data will be for the state or the country. Despite these limitations, the author argues that there is a scope for greater utilisation of the existing database and suggests a way by which the estimate for self-employment in the informal sector can be obtained by using NSS and ASI data He recommends strengthening of the data system, particularly the periodic surveys as also those released under EMI. One would immediately agree with the author that there is a strong case for organising the surveys with greater precision, larger coverage and·enhanced financial/ staff support. This is primarily because of the trend towards casualisation of labour and the growth of the informal activities in the Indian economy, which has been reinforced with the launching of the programmes of hberalisation and structural adjustment. Unfortunately, the reasons for "nonreliability of the data outside the infonnal manufacturing sector" have not been detailed. Also, one would like to know the reasons for non-use of the results of NSS surveys (for 1984-85 and 1989-90) in national income estimation, even for the manufacturing sector wherein lack of reliability was less problematic. Indeed, one needs to get an insight into the conceptual and computational

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problems in these surveys, that affect their quality. These observations, notwithstanding the generation of reliable data through NSS (also CSO) surveys, as suggested by the author, is extremely important as this would permit estimation of the informal sector and its characteristics not through the residual but a direct approach. The paper by Kulshreshtha and Singh (Chapter 3) analyses several methodological issues and recent developments in strengthening the existing data system pertaining to the informal sector. It begins by discussing the production boundaries in the System of National Accounts (SNA) 1993 prepared under the auspices of the International Working Group on National Accounts. It goes on to define the coverage of household sector as an institutional unit, engaged in both production as well as consumption activities. Though households, as per the definition, would generally coincide with families, they include members from outside as well, as long as they share the resources and consumption. As a production unit, a household is considered an unincorporated enterprise producing both for domestic consumption and market disposal. Thus defined, the household sector also includes the production units located outside the premises of the house, including those employing hired workers, capital assets, etc., as long as these do not constitute separate legal entities outside the household. SNA 1993 then defines the informal sector to comprise all households sector units that produce for the market. This comprises (a) informal own account enterprises, and (b) enterprises of informal employees that do not constitute a separate legal entity outside the household. It, thus, endorses what is popularly known as ILO's concept of informal sector. Restricting the coverage of informal sector to production for market would exclude own account production for final consumption (even when a part of the production is marketed), production of housing services by owner occupiers, besides of course, the domestic services produced by servants, hidden/illegal production, etc., from the purview of the informal sector. This could be a point of criticism of the definition as it limits the scope of the informal sector. The authors then discuss the information available from the official system in India which considers informal sector as a residual category viz., comprising units that are not registered/ covered under a certain Act or are not required to report to public authorities as per certain administrative stipulations. They provide an overview of the coverage of the informal activities belonging to different production sectors and their data sources for the purposes of national income accounting . These vary significantly so much so that in case of tertiary sector, all establishments other than the public undertakings are considered unorganised since no regular reporting of data takes place under any legal/ administrative stipulation. Further, the authors underline the difference in the scope and coverage of informal sector under SNA 1993 and the present official system. The paper concludes by presenting estimates of the size of informal sector in terms of employment as also contribution in value added, as obtaining from the official statistics. It may, however, be pointed out that the enterprises of informal employers (producing for market) that do not have more than say, 20 (without power) or 10 (with power) workers, are not registered under certain legal stipulations like

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the Industrial Disputes Act of 1948, etc., can be included in the household sector

(and hence within the informal sector) as per SNA 1993. This is how CSO also defines unorganised sector for national income accounting. That being the case, the differences between SNA 1993 and the official system in India do not appear to be in-econcilable. It should be possible for the CSO to generate data following SNA 1993 guidelines and yet make the series comparable with that generated for earlier years, by proposing a few corrections and adjustment factors.

DI. STRUCTURE AND DYNAMICS AT MACRO LEVEL The second section, which has five articles, analyses the aspects of productivity, employment, inter-sectoral linkages, etc. in an attempt to identify the factors responsible for growth and stagnation of different industries within the informal sector. The articles are based on secondary data at the macro level. Mitra (Chapter 4) attempts to determine the size of the informal sector using data from alternate secondary sources. The analysis brings out the differences in the estimates in the percentage share of workers in the informal sector at the state level, based on Economic Census and Directorate General of Employment and Training (DGET)/EMI data, using the residual sector approach. However, the rankings of the states by Mitra using the alternate sources show a close similarity, which should increase our confidence in the reliability of the estimates obtained from secondary data. He then proceeds to examine the interdependence between incidence of informal employment across the states and other indicators like levels of urbanisation, industrialisation and poverty. The author points out that the percentage of informal sector workers varies inversely with urbanisation as well as industrialisation. This would question the proposition that the unorganised sector is strongly linked to formal industries. It is in the backward states that a large majority of informal employment is concentrated. The positive relationship between informal sector and poverty, although not very strong, further confirms the thesis. Acceptance of these propositions would lead to drastic changes in the programmes for supporting the informal sector. It would necessitate a shift in the focus from the states with a high level of industrial development to the relatively backward states. Kundu,. Lalitha and Arora (Chapter 5) examine the trends and patterns of informal manufacturing sector using secondary data. However, making a departure from the established tradition, they do not look at informal sector as a residual category but estimate its magnitude directly by aggregating own account enterprises (OAE) and non-directory manufacturing enterprises (NOME). They extend the analysis upto 1998 by using the corresponding data from Economic Census. Their analysis, basically covering two time-periods viz., 1978-84 and 1984-89, and then extending it, in a limited manner to 1998, reveals that the growth has been uneven, both sectorally and temporally. While the first period marked a significant increase in the number of units and employment, the second and the third period showed a reversal of the trend. On the whole, one would argue that manufacturing sector, as also the informal sector within it, has shown a declining trend in urban areas. This, to an extent, is due to industries being pushed out to the villages in the periphery. One would infer that the problems of congestion, industrial pollution, etc., posing a Digitized by

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serious environmental threat to the city population, have resulted in industries being shifted to the hinterland, where people are relatively poor and are less capable of protecting themselves. The paper further shows that a large part of the informal sector is at a low level of productivity employing very little capital assets. Surprisingly, the growth rates in units or employment ir. the industries do not correspond to improvements in their performance indicators. This is because, for many in the informal sector, being in business is a matter of survival and not of profitability. A small part of the sector, however, is linked to the formal sector and responds to market stimuli. Here, the number of units, employment, etc., increase with productivity. The availability of credit is a crucial factor in the purchase of capital equipment or hiring it for use. Further, ownership of land increases the access to credit and registration with a public agency has also positive impact of economic performance of the industrial groups. Thus, these would be the critical factors for strengthening the informal sector. One major limitation of the study, however, is non-inclusion of directory enterprises (DE). It may be argued that their inclusion is likely to underline the importance of land, credit and registration with public agencies for the success of informal industries. The paper by Unni (Chapter 6) analyses the actual trends in wages and employment scenarios in the unorganised sector in India using (basically) macro- level data. With regard to the implementations of the Minimum Wages Act, the author finds that the criterion for inclusion, under the category of workers, has left a very few of unorganised sector workers outside the purview of the Act. In fact, the non-existence of norms for fixing the minimum wages has led to an unending debate. As early as in 1957, ILC had adopted a 'needbased' approach to minimum wages, based on five norms related to consumption expenditures on calories, clothing, housing, energy and other miscellaneous items. There have been a number of court decisions in favour of providing minimum wages that would guarantee minimum levels of food, clothing, and housing and social protection. However, recommendations of various committees and commissions from time to time have diluted these norms. A comparison of wages in the organised and unorganised sectors shows that while real wages in the organised sector have been maintained over time, owing to revisions in dearness allowances, etc., those of the unorganised sector have been declining sharply. Based on the time series data obtained from Agricultural Wages in India (AWi) for both the agricultural and unorganised sectors and Indian Labour Journal for cotton textile industry, the author argues that the statutory minimum wages are fixed at a very low level-close to the poverty line. This wo1,Jld be the case for the workers in the informal sector, particularly the women. The home-based workers, particularly those who get jobs through sub-contracting arrangements, are almost invariably paid piecerate wages. In the absence of direct supervision, this form of payment is expected to assure a high level of productivity of the worker. However, this has led to daily wages of these workers being extremely low ranging from a mere of Rs.6 per day in ring embroidery to Rs. 58.5 in pant stitching. A large number of home-workers receive wages close to or below the poverty line, to whom even the lowest norms of minimum wages do not apply. Further, a high wage alone cannot assure a reasonable level of living in the absence of adequate

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15 days of employment availability. The NCL norms are Rs. 125 per day per worker and 250 days of employment in a year which would yield a yearly income of Rs. 31,250. The author finds that in Ahmedabad city, only workers in the municipal corporation received wage rates and were employed for a period (number of days) which were above the norms. Even in a few industrial groups covered under the Minimum Wages Act, annual net incomes remained below the normative figure. In order to make Minimum Wages Act more meaningful in industries and government, the author stresses that wage must be fixed after taking the following factors into account (a) the number of pieces a worker can make in a standard eight-hours of work; (b) the rate of rejection; (c) the costs of inputs supplied by the home-workers; and (d) the cost of time spent in maintaining the machinery. Indeed, a meaningful wage policy has to provide for, besides fixing the minimum wage for workers, assured employment for a minimum number of days. It should also cover a wide variety of home-based and related workers not covered under the existing legal system. A tripartite mechanism needs to be evolved to determine the inclusion of various activities and type of workers under the Act. Further, the treatment to be given to seasonal workers and the manner in which a minimum number of days of work in a year is to be allowed to the worker in different trades need to be clearly spelt out. Mahadevia (Chapter 7) looks at the process and pattern of industrial growth in the metropolitan city of Ahmedabad, keeping the developments in the state economy in the background. She suggests that a part of the problem confronting the city - having inherited the textile sector from the colonial regime, which is fast becoming technologically obsolete - is historical. Largely, however, the problem is structural in nature and is linked with the present strategy of liberalisation. Based on a survey of literature and analysis of secondary data, the author argues that despite the state's economy experiencing a slower growth than the country in the eighties, the industrial sector in the state has done remarkably well. This is particularly so during the period after liberalisation. The city or the district of Ahmedabad, however, has not been fortunate in this regard- the number of units and employment in the organised manufacturing sector have shown a decline since the early eighties. Even in terms of performance indicators, Ahmedabad has fared poorly compared to the state although the rate of decline in industries during the post-liberalisation phase has gone down. There are distinct signs of casualisation of employment, growth of informal sector and marginal workers in the metropolis. One of the factors responsible for the problems faced by the city would be the high rate of immigration. The city of Ahmedabad a..c; also 1.Uban Gujarat are attracting a large number of migrants and there has been no deceleration in the eighties in contrast to most other states in the country. Unfortunately, the growing labour force is being encouraged to seek absorption in less polluting informal industries and tertiary activities or pushed to the periphery. The decline in the organised sector employment and growth of informal workforce can also be attributed to the strong vested interests in making the metropolis a residential city for the elite. A number of industries are, however, coming up in the city's periphery, and this is resulting in the degeneration of the hinterland. The programmes for urban industrial development, redensification, legislative Digitized by

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reforms like relaxing the restrictions on land use, high rise construction, etc., have become useful tools for bringing about changes in the city structure that are needed to make it a global city. As a consequence, only commercial and office complexes are being permitted in the central areas in the city that can afford the cost of land. Finally, establishing conclusively that there has been poverty-induced growth of employment through casualisation would require comprehensive data on wage rate and changing structure of workforce and the micro level evidences may not be enough for the purpose. Nonetheless, the indication that the metropolitan growth is promoting informalisation under the logic of globalisation is extremely important and needs to be examined for other metro cities as well. Shah's paper (Chapter 8) examines the profile of the industrial sector and analyses the possible linkages between activities at different scales of production on the basis of similarities in their growth pattern and commodity composition. The analysis reveals that the states having a high incidence of large factories also have a high incidence of unorganised enterprises, belonging to three scale based categories viz. OAME, NOME and DME. But this, the author admits, could partly be due to size (population) effect. Importantly, the growth rates of value added in organised and unorganised sectors are strongly correlated across the categories of industries. Furthermore, the employment shares of OAME and NOME, the two categories at the lower end, are known to have declined while those at higher level, viz. DME, small-scale industries (SSI) and factory sector, including the large factories, have gone up during 1984-89. She explains this in terms of an upward mobility of employment within the industrial sector, particularly within the unorganised sector. The growth of DME and SSI sector at the cost of the lower order categories is, thus, posited as a healthy trend as the value added and emoluments per employee increase consistently as we move up along the scale categories. Even within the SSI and ASI sector, the performance indicators considered in the study show an improvement as we move up the industrial categories, identified on the basis of investment, suggesting the desirability of an upward movement. The linkage of DME with the organised sector, much more than OAME, can also be inferred from the commodity composition. The former has a large number of industries engaged in production of modem items catering to the demand for upper income consumers. Labour productivity levels in organised industries (across categories at two-digit level) shows a high positive correlation with that of the DME but not with OAME. Also, industries having shares in terms of gross value added within DME are those that can be described as modern in terms of the nature of the commodity produced. These are likely to have greater linkages with the units in the large scale sector. Further, a strong positive correlation is observed among the indicators like capital per worker, labour productivity, emoluments, etc., in the case of DME. This is similar to what is observed for the organised industries. All these are interpreted to reflect the modernisation of DME. The employment growth in DME is, therefore, viewed as a positive phenomenon for the industrial sector. Furthermore, from the nature of the SSI clusters, the author infers that about 45 per cent among these have vertical linkages, particularly with large industries while the rest have horizontal linkages with small industries. Also, there has been a decline

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in the share of traditional industries and an increase in that of modem industries within 5.51 during the period 1979-89. All these trends reinforce the confidence of the author in the modem character of the DME and 5.51. There are, however, a few facts that need to be reconciled with the "scalar linkage" hypothesis. One must explain why the increase in value added per worker during 1984 89 in the dynamic component within the informal sector, the DME, is much less than OAE and NOME. The figure in real tenns has in fact declined as the increase in employment has not been backed up by that in gross value added. It must, however, be argued that the issue of interlinkages is difficult to establish empirically. The study gives interesting clues on the issue based on a analysis of secondary data as also that of other scholars and underlines the need to probe it further. IV. STRUCTURE AND DYNAMICS AT MICRO LEVEL

Macro economic analyses of the type discussed above have obvious limitations as they do not include characteristics and linkages of the informal sector on which secondary data are not available. There is an inertia within the official statistical system in responding to changing requirements with time. Understandably, that limits their relevance in policy making as many of the recent characteristics emerging through the dynamics of development cannot be analysed. Micro-level studies based on primary data have a distinct advantage as it can capture a large number of quantitative as well as qualitative characteristics of the sector. This section has seven such papers covering several sectors and regions. Four of the papers cover traditional manufacturing activities where production is often carried out for the survival of the workers. The others pertain to industries in the service sector that are modem, efficient and fast growing. These are software and tourism industries. The last one in this section provides a synoptic view of five industries/ occupations, which are mixed in character. Das (Chapter 9) attempts to estimate the contributions of informal manufacturing to value added and employment in a specific sub-sector, namely, ceramicware industry in Gujarat. The limitations of the official statistics on informal manufacturing are discussed with reference to insights gained from the case study. It is observed that in the case of this sub-sector, only a very small fraction-about 3 per cent-of the unregistered units are covered in the official system. This is also the case with the data on employment recording only about 2 per cent of the workers. The case study shows that there exists a high degree of informality in labour arrangements, both in unregistered as well as registered units. This is reflected in the large number of temporary/ casual and irregular workers in the industry. The piece wage system is widely prevalent in both types of units. Moreover, the actual status of the workers is often unclear and as a result many of them go unrecorded. Even when the records are maintained, these do not necessarily reflect the ground reality. Also, the proposition that a large number of small firms are dependent on their large counterparts is misleading as it hides the phenomenon of subcontracting of work to registered small firms, employing few or no regular workers. The study highlights the need to recognise the pervasiveness of informality in manufacturing activities, in both registered as well as unregistered sectors. Further, it underlines the Digitized by

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urgency to improve the methodology of data collection and increase the coverage by including issues like mode of payment, formal-informal interrelationship, technological change and terms of employment. The case study of sandal making activity in a slum of Hyderabad city by Rani and Galab (Chapter 10) focuses on the aspect of organisational structure. It shows how the system of contractual agreement adversely affects the quality of the product, rates of capital turnover, labour productivity, profitability and growth of enterprises. The units in the sample have been placed into two categories. The first comprises those that function independently and take their own decisions regarding investment, product mix, marketing, etc. The second category comprises those that produce for traders under certain contractual arrangement. The contract could be in terms of the trader buying against (a) cash loan given to the enterprises or (b) supply of raw materials. The difference in the system of contract would, thus, place the tied producers in two subcategories. The authors show that the units with a larger number of workers, and with larger fixed capital and young entrepreneurs opt for untied production. These units use raw materials of superior quality, go in for better product mix and as a consequence, earn higher rates of profit. Their costs of production per unit of the product are sometimes higher than those of tied entrepreneurs, but this can be explained in terms of the quality and type of the items produced. Also, the untied units report greater efficiency in resource use and higher capital intensity as well as labour productivity. Most importantly, these have higher proportions of value added accruing to entrepreneurs that should help in future growth of the activity. Similarly, among the tied producers, those that enter into cash contracts with the traders and have the freedom to select the raw material, generally go in for a better variety of products and use better quality of raw material than those entering into raw material contracts. As a result, the income levels of the former work out to be relatively high. Understandably, these report a higher turnover rate, greater efficiency in capital use and higher earnings. For many among the tied producers, including those under cash contracts, remaining in business is a matter of survival. The authors, thus, dispel the myth that marketing support coming from private traders and money lenders, provides a solution to the poverty cum low productivity syndrome of the own account entrepreneurs. In fact, the contractual tying up instead of helping the artisans in marketing, has a serious adverse impact on their productivity performance indicators and, most importantly, their future growth. Manjit Singh (Chapter 11) analyses the surgical instrument manufacturing industry in Jalandhar in Punjab (which supplies nearly 90 per cent of the surgical requirements of the country) and probes into the dynamics of growth of this industry as well as aspects of labour exploitation. Though the industry has a history of nearly 100 years, it has not moved out of its traditional modes of production. It has not transcended the age-old practice of home-based production which actually turns to be one, based on sweat-labour. The industry employs a large number of manual skilled labour who have not been able to organise themselves into trade unions. A large number of middle-men and traders in the industry take a big share in the profit margin. The structure of production is slightly different from the classical system-subletting of

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production to the smaller units does not involve any supply of raw material from the parent unit to the household units. The ultimate control, however, lies with the traders (suppliers) and merchant manufactures who have their say in both the raw material and the product markets. The household workers and small manufactures, thus, survive at the mercy of factory owners and wholesale traders. The profit margins are very low, partly because of the low level of technology yielding low productivity. The author thus pleads for intervention by the government to ensure that the small producers are able to compete in the market The growth of power looms in the textile industry of India has often been viewed as heralding the beginning of a new age of modernisation, displacing the traditional handlooms to a large extent. The former is characterised by remarkable heterogeneity in terms of the structure of capital, organisational form, scale of operation, etc. Based on the case studies in the state of IRMATION BASE FOR THB iNR>RMAL SliC10R

Volumt I: Dtsign, Concepts, Definitions 11nd Proctdurt, National Sample Survey Organisation, Department of Statistics, New Delhi, June. ---t(l995), Sll7"PtY of Directory Establishmtnts in the Thidt Stctor-52nd R.mmd (Naotmbtr 1995 to Dtctml,a 1996): lnstrudiom to Field Sbiff, National Sample Survey Organisation, Department of Statistics, New Delhi. -(1996), Key Raults on Employmtnt ttnd Unemploymtnt-Fifth Qllinqutmru,J SID'W.Y NSS 50th Round, Ouly 1993-June 1994), National Sample Survey Organisation, Department of Statistics, New Delhi: -(1997), Employmtnt llnd UHemployment in lndili, 1993-9f Fifth QMinquennu,J Surwy, NSS 50th Round Ouly 1993-June 1994), Report No. 409, National Sample Survey Organisation, Department of Statistics, New Delhi --(1997a), •Survey on Unorganised Manufacture (All-India)", NSSO 45th round Ouly 1989-June 1990), 5"'vtlcshllnll, June. . Papola, T.S. (1981), Ur'-in lnfe,r,wl Stctor in a Drortloping Ecmumry, Vibs Publishing House, New Delhi Registru General and Census Commissioner (1991), Census of lndili 1991-lnstructions to Enumtrrators ft,, Filling aq, the Housdtold Sdwule llnd lndnnd""1 Slip, Ministry of Home Affairs, Government of India, New Delhi SEWA (1997), R.tpo,t on tht Workshop on tht Contribution of the Urrorganised Stctor to tht lndum Economy, SEWA Academy, Ahmedabad. Suryanarayanan, S.S. (1998), Structure of lndum Lllbour: Dato Soun:a llnd Critiqlu on tht Enurnmmon Ttchniqua llnd Altmultiws, Paper prepared for the Centre for Education and Communication, New Delhi

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Informal Sector in India: Its Coverage and Contributions A.C. Kulshreshtha and Guiab Singh I. INTRODUCTION

The informal sector embraces a widely dispersed multitude of operating units with high rates of birth and death and considerable mobility; essentially differing from the formal sector in technology, economies of scale, use of labourintensive processes for producing goods and services, a virtual absence of wellmaintained accounts and dependence on government subsidy. It is informal in the sense that it is not regulated by government under any statute. The term 'informal sector' was used in an official document for the first time in the report of a comprehensive employment mission in Kenya undertaken by the International Labour Organisation (ILO) in 1972. Since then, a considerable amount of work on data collection and research has been undertaken to understand what the informal sector is, why it exists and how it operates. Even though the term 'informal sector' has been widely used, its precise meaning has remained somewhat elusive and the subject of controversy as it has been defined in different contexts with different meanings (Hussmanns, 1997; Sethuraman, 1981). It is a somewhat controversial subject because there are different viewpoints from which one can study the informal sector. In view of this, countries have the flexibility to make their own definitions appropriate to their needs and the system of data collection. Since 'informal' also implies the existence of sometrung 'formal', it is evident that the concept is related to what one considers as formal. As both the formal and informal sectors refer to economic activities-that is, the production and distribution of goods and services-the distinction between the two sectors must lie in the nature of economic units engaged in the activities and the manner and milieu in which they function. Much of the efforts to collect data on the informal sector in India have tended to identify the 'universe' based on certain enterprise characteristics. With a view to helping the member countries in reporting comparable statistics of employment in the informal sector, the 15th International Conference of Labour Statisticians (IClS) held in January 1993 in Geneva adopted a resolution on informal sector statistics which was subsequently endorsed by the United Nations Statistical Commission in

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February 1993. Most of the member-countries are likely to take some time to adopt and implement the resolution. To promote international standards for the compilation of national accounts as an analytical tool and the international reporting of the comparable national accounting data, the United Nations (UN) has been recommending guidelines in the form of System of National Accounts (SNA). The first version of the SNA was recommended in 1953, which was revised by the UN in 1968. The third version of the SNA (popularly known as 1993 SNA) has been prepared under the auspices of the Inter-Secretariat Working Group on National Accounts comprising Commission of the European Communiti... esEurostat-Intemational Monetary Fund (IMF), Organisation for Economic Cooperation and Development, United Nations and World Bank, and adopted by the UN Statistical Commission in 1993. It has been harmonised with other major statistical systems like the Balance of Payments Statistics and Government Finance Statistics of the IMF. The 1993 SNA contained a coherent, consistent and integrated set of macro-economic accounts based on a set of internationally agreed concepts, definitions, classifications and accounting rules. It provides a comprehensive accounting framework within which data can be compiled and presented in a format that is designed for purposes of economic analysis, decision-taking and policy-making. In India, the term 'informal' has neither been used in the official statistics nor in the National Accounts Statistics (NAS). The terms used in the Indian NAS are 'organised' and 'unorganised', though quite often researchers have used the term 'unorganised' and 'informal' interchangeably. In fact, the terms 'informal sector' and 'unorganised sector' are quite similar to each other though not identical. This paper presents, in section II, coverage and definition of the informal sector. Section ill describes the household sector and the informal sector as envisaged in the 1993 SNA. Sections IV and V, respectively, enumerate the coverage of the unorganised segment of the Indian economy in the official statistical system and its data sources. Section VI describes the methods of incorporating unorganised segment data into National Accounts Statistics. Section VII examines the contribution of the informal sector to the Indian economy in terms of value added and employment while section VIII presents the international developments in terms of standards for reporting of informal sector statistics. 11. INFORMAL SECTOR: DEFINITION AND COVERAGE

The informal sector as per the 1993 SNA refers to productive institutional units characterised by: (a) a low level of organisation; (b) little or no division between labour and capital, and (c) labour relations based on casual employment and/ or social relationships, as opposed to formal contracts. These units belong to the household sector (Annex I) and cannot be associated with other units. In such units, the owner is totally responsible for all financial and non-financial obligations undertaken for the productive activity in question. The 1993 SNA endorses the resolution of the 15th International Conference of Labour Statisticians, in so far as the informal sector concept is concerned. For statistical purposes, the informal sector is regarded as a group of production units that Digitized by

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form part of the household sector as household enterprises or, equivalently, unincorporated enterprises owned by the households. The important point to be noted about the informal sector, though not explicitly mentioned in the 1993 SNA, but stated clearly in the Resolution made on the 15th International Conference of Labour Statisticians in para 7, is that the household enterprises are units engaged in the production of goods or services which are not constituted as separate legal entities independently of the households or household members that own them and for which no C01',plete sets of accounts (including balance sheets of assets and liabilities) are available, which would permit a clear distinction of the production activities of the enterprises from the other activities of their owners and the identification of any flows of income and capital between the enterprises and the owners. In terms of the 1993 SNA, household enterprises (or, equivalently, unincorporated enterprises owned by households) are distinguished from corporations and quasi-corporations on the basis of legal organisations of the units and the type of accounts kept for them. Household enterprises are units engaged in the production of goods or services which are not constituted as separate legal entities, independently of households or household members who own them, and for which no complete sets of accounts (including balances sheets of assets and liabilities) are available which would permit a clear distinction of the production activities of the enterprises from the other activities of their owners and the identification of any flows of income and capital between the enterprises and the owners. Household enterprises include unincorporated enterprises owned and operated by individual household members or by two or more members of the same household as well as unincorporated partnerships formed by the members of different households. III. INFORMAL SECTOR IN HOUSEHOLD SECTOR

As per the 1993 SNA, the informal sector comprises: (i) 'informal own account enterprises, and (ii) enterprises of informal employers within the household sector. The informal sector is defined irrespective of the kind of workplace where the productive activities are carried out, the extent of fixed capital assets used, the duration of operation of the enterprise (perennial, seasonal or casual) and its operation as a main or subsidiary activity of the owner.

1. Informal Own Account Enterprises Informal own account enterprises are the household enterprises owned and operated by own account workers, either alone or in partnership with members of the same or other households, which may employ family workers and employees on an occasional basis, but not on a continuous basis. For operational purposes, informal own account enterprises may comprise, depending on national circumstances, either all own account enterprises or only those which are not registered under specific national legislation. Own account workers, contributing family workers, employees and the employment of employees on a continuous basis are defined in accordance with the most recently adopted version of the International Classification of Status in Employment (ICSE).

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2. Enterprises of Informal Employers Enterprises of informal employers are household enterprises owned and operated by employers, either alone or in partnership with members of the same or other households, which employ one or more employees on a continuous basis. For operational purposes, enterprises of informal employers may be defined, depending on national circumstances, in terms of one or more criteria like: (i) size of the unit below a specified level of employment; (ii) nonregistration of the enterprise or its employees; and (iii) the upper size limit in the definition of enterprises of informal employers which may vary between countries and branches of economic activity. It may be determined on the basis of minimum size requirements as embodied in relevant national legislation, where they exist, or in terms of empirically determined norms. The choice of the upper size limit should take account of the coverage of statistical inquiries of larger units in the co11esponding branches of economic activity, where they exist, in order to avoid an overlap. In the case of enterprises, which carry out their activities in more than one establishments, the size criterion should, in principle, refer to each of the establishment separately rather than to the enterprise as a whole. Accordingly, enterprises should be considered to satisfy !he size criterion if none of its establishments exceeds the specified upper size limit. For particular analytical purposes, more specific definitions of the informal sector may be developed at the national level by introducing further criteria on the basis of the data collected. Such definitions may vary according to the needs of different users of the statistics. With the backdrop of the 1993 SNA production boundary (Annex I), the informal sector may be identified by classifying the household production activities into the following five distinct categories (Becker, 1997): 1. Production of all goods or services that are supplied to units other than their producers: 1.1 Informal sector market production. 1.2 Other market production (units which do not meet the criteria of the informal sector: registration criterion and/ or employment size criterion). 2. Own account production of all goods that are retained by their producers for own final consumption such as: 2.1 Subsistence farmers and others engaged in the production of agricultural goods for own final consumption. 2.2 Production of other goods for own consumption. 23 Construction of own dwellings. 3. Domestic and personal services produced by employing paid domestic staff. 4. Own account production of housing services by owner occupiers. 5. Hidden economy. As a subset of the household sector, the informal sector is just the above household category 1.1., which has two segments as noted. For practical reasons, however, one may consider a narrower scope and compile in the informal sector only non-agricultural activities. On the other hand, for a broader Digitized by

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scope, one may consider inclusion of the domestic and personal services, illegal services and may be part of the hidden economy in the informal sector. IV. UNORGANISED SEGMENT AND INDIAN omCIAL STATISTICAL SYSTEM In the Indian NAS, the unorganised segment of the economy refers to all operating units whose activities are not regulated under any statutory Act or legal provision and/or those which do not maintain any regular accounts. Non-availability of regular accounts has been the main criteria for classilying these units as unorganised units. This definition helps demarcate the organised from the unorganised units. The organised segment of the economy in the NAS broadly includes all operating units of major minerals, for manufacturing activities; the units registered under the Factories Act, 1948, for nonmanufacturing activities; the private corporate sector and public sector units comprising administrative departments, departmental commercial undertakings and non-depart111ental commercial undertakings. Exact coverage of the organised segment in the Indian NAS is given in Annex II. This segment is called 'organised', as statistics for it are available regularly from budget documents, annual reports in the case of the public sector, and through results of the Annual Survey of Industries (ASI) in the case of registered manufacturing undertakings. All remaining operating units under various economic activities are in the unorganised segment. Though the major component of the unorganised segment is the household own account enterprises, there are a sizeable number of establishments (for the distribution of enterprises: own account and establishments, see Annex ill) as well in the unorganised segment since all the manufacturing establishments which are not covered by the ASI and all the non-public sector and un-incorporated enterprises/ establishments in various economic activities are very much there in the unorganised sector. The unorganised segment is labour-intensive and, in the Indian context, it can be typically viewed as a proxy for the household sector combined with non-profit institutions serving households (NPISHs). In the Indian economy, more than 60 per cent of the national income is generated in the unorganised (informal) segment. The informal sector concept as enunciated by the ILO and the unorganised segment mentioned above, are conceptually quite different in that, whereas the ILO concept focuses on a particular group of production units for economic/ social/political reasons, the unorganised segment depends on the country's practices to generate information for the different economic activities in an organised manner. In the Indian context, as indicated above, the unorganised segment of the economy is one which is not organised and would include own account production of goods and services of owner-occupied dwellings, domestic services, some quasi-corporations, etc. Therefore, strictly speaking, to get information on the informal sector, one is expected to compile the contributions of above mentioned activities from the unorganised segment. Normally, the unorganised segment would be larger than the informal sector but it could be the other way round as well if the country's practices for generating information in an organised way on a regular basis become comprehensive. Digitized by

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V. DATA SOURCES FOR UNORGANISl!D SEGMENT

The household sector including private unincorporated enterprises is viewed as the unorganised segment of the economy. For agriculture, the principle sources of information used for the purpose of building national income estimates are: (i) land-use statistics; (ii) area and outtum of principal crops, and (iii) cost of cultivation studies. Statistics on land-utilisation flow in as byproducts of normal depa, t,nental activity of the state revenue depcarbnents who collect them for various administrative needs for land-revenue collection. Periodic estimates of the area and outtum of principal crops, generally known as forecast crops, are prepared by the state agencies and are consolidated by the Directorate of Economics & Statistics, Ministry of Agriculture. Final estimates of production are based on complete coverage of area and yield through crop-cutting experiments conducted by the respective state governments. The results of cost of cultivation studies conducted on various crops in different states provide information on the inputs of agriculture such as seeds, consumption of diesel oil, electricity consumed, feed to animals, repair and maintenance of farm machinery, etc. Input data relating to electricity, fertiliser and insecticides are not utilised from cost of cultivation studies, as better and more reliable data are available from the Central Electricity Authority, Fertiliser Association of India and Pesticide Association of India. There are several other agencies, which provide data for agriculture. These are the Tea Board, Coffee Board, Rubber Board, Arecanut Board, Cashewnut Development Board, Directorate of Sugar and Vanaspati, etc. Output of livestoclc production is prepared on the basis of the results of integrated sample surveys and studies made on the advice of the Technical Committee of Direction for the Improvement of Animal Husbandry and Dairying Statistics. Indian Livestock Census, conducted quinquennially, is the main source of data on livestock numbers. Other sources for data are the state animal husbandry departments, Directorate of Marketing and Inspection, National Sample Survey Organisdtion (NSSO), Central Silk Board, Khadi and Village Industries Commission, etc. The non-agricultural part of the unorganised segment is covered in the Indian economy through various surveys conducted under the regular programmes of NSSO and follow-up surveys of the Economic Census organised/ coordinated by the Central Statistical Organisation (CSO). India has conducted four Economic Censuses in 1977, 1980, 1990 and 1998. The Economic Census provides basic information on the location, activity, employment, etc. of all the enterprises. The items of information collected under the Economic Census include the location, nature of activity, number of persons usually working, type of ownership, social group and gender of the owner, having fixed or no premises, power/ fuel used, and whether registered or licensed under any Act. The Economic Cen.cnises conducted have provided the required frame for the conduct of the follow-up surveys on various activities: manufacturing, trade, transport, hotels and restaurants and other services for covering the unorganised segments of the non-agricultural economy. One problem experienced in conducting the Economic Censuses has been that they become outdated quite fast as the own account enterprises and small and tiny establishments are very dynamic because of their high birth and death rates. A gap of 10 years is too long a period in view Digitized by

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of the dynamic nature of the small establishments and own account entrepreneurs' behaviour. It is important to update the frame based on the Economic Census periodically, at least quinquennially. India has finally succeeded in establishing quinquennial Economic CensusesFollow-up surveys have been conducted using the frame provided by the Economic Censuses. These surveys have helped in filling the data-gaps that existed prior to 1977 when Economic Census/follow-up surveys were not in existence. India has a quinquennial programme of follow-up surveys of Economic Censuses. A particular economic activity in the unorganised segment of the economy gets a chance to be covered once in five years. Amongst the non-agricultural economic activities, the two major activities are manufacturing and trading (unregistered). Therefore, in the follow-up surveys, these two major activities in terms of number of establishments/own account enterprises (for actual numbers as per 1990 Economic Census, see statements in Annex ill) are covered as a twin programme with a larger sample. Under the first programme, a survey of non-directory establishments (NOE, i.e., those employing one to five workers) and own account enterprises (OAE) is carried out by NSSO covering a sample of some 150,000 operating units while, under the second programme, the CSO covers about 40,000 directory establishments (DE, i.e., employing more than five workers and not in the registered/ non-public sector). For other economic activities, enterprise surveys are conducted covering all DE, NOE and OAE involving about 40,000 enterprises/ establishments in totality. Thus, in a five-year programme, in one year, trade activity (twin programmes, one covering DE and the other NOE and OAE); and in another year, manufacturing activity (twin programmes, one covering DE and the other NOE and OAE) is covered. In the remaining years, other economic activities, i.e., hotels and restaurants, transport, storage and other services, are covered under the enterprise surveys (of all DE, NOE and OAE). The follow-up surveys have provided detailed information on the value of output, intermediate consumption, value added and additions to capital stock required for national accounts purposes. A list of follow-up enterprise surveys conducted so far is given in Annex N. Experience has shown that the sample surveys provide reliable information on ratios and not on the individual characteristics. Thus, ratios, such as value added per worker of the activity, are taken from the survey results and multiplied by the corresponding estimated workforce to arrive at the estimate of value added for each activity. It may, however, be indicated that certain problems have been faced in the use of follow-up surveys, particularly in the surveys on non-directory trading establishments and own account trading enterprises that have not provided reliable estimates. The problem with these surveys has been that small establishments and own account entrepreneurs do not keep an account of the business, and information is collected by personal interviews. Fear of attracting taxation and/ or other reasons result in non-usable consequences such as negative value added. VI. PRACTICES OF INCORPORATING UN ORGANISED SEGMENT DATA INTO INDIAN NATIONAL ACCOUNTS STATISTICS

In the Indian NAS, the total economy is covered as the sum total of the nrv;,nised and unorganised segments of each of the industries (economic

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activities). Practices in use to compile domestic product from the unorganised segments of various economic activities are described below:

1. Agriculture and Allied Activities The agriculture and allied activities sector covers the production of all agricultural crops, raising of livestock and poultry, livestock products and operation of irrigation systems. Except for the operation of government irrigation systems and plantation crops of tea, coffee, etc., most of the agriculture activity in the household sector. The value added in this sector is estimated through the production approach, i.e., value of output less intermediate consumption comprising seed, manure, fertilisers, pesticides, repair and maintenance of assets, irrigation charges, electricity, diesel oil, etc. Value of output is estimated as the products of outtum of the crops and corresponding average prices. The outtum of crops is estimated as the product of the area under the crops and corresponding yield rates. The inputs in agriculture are estimated on the basis of the results of cost of cultivation studies, which are undertaken for each of the crops in different states. The value of output of livestock products comprising milk, eggs, poultry, meat and other items are estimated on the basis of various studies/surveys conducted. The operation of the government irrigation system is considered as allied activity, but this is an activity of the organised sector. As agricultural activity is undertaken mostly by the household sector own account enterprises, allocation of primary income is in the form of mixed income. Mixed income is derived from the value added by subtracting the components of compensation of employees, estimated on the basis of the information available from the cost of cultivation studies. Plantation crops like tea and coffee are mostly managed by the corporate sector and data becomes available from the Tea Board and Coffee Board. To a large extent, agricultural activity is undertaken by own account workers with the help of unpaid family workers and paid workers on a temporary basis. Agricultural production activities are also carried out by both market and nonmarket producers. Market producers have the prime intention of selling their produce in the market. Of course, they do keep a part of their produce for their own consumption. The non-market producers produce primarily for their own final consumption. The agricultural and allied activities in India are by and large unorganised and have the characteristics of the informal sector. The ILO resolution excludes the household enterprises engaged in agricultural activities from the scope of the informal sector and suggests keeping it separate for practical reasons like data collection. It may also be worthwhile to mention that the backyard kitchen gardens in urban areas where fruits and vegetables are produced primarily for self-consumption, are within the production boundary as per the 1993 SNA. These activities are, of course, covered in the IndianNAS.

2. Forestry The activities of forestry cover major products comprising industrial wood and fuelwood and minor products comprising a large number of heterogeneous items such as bamboo, fodder, lac, sandalwood, honey, resin, gum, tendu Digitized by

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leaves, etc. The major products are covered by the government sector as the forests are mostly under the control of the government. The Ministry of Environment and Forests is responsible for the collection of statistics from the respective state forest departments. Fuelwood and minor forest products are, however, mostly collected by the households as free collections or by payment of a licence fee for the collection. These activities, therefore, are in the unorganised sector since the households, as own account enterprises, perform these. Also, there is a lot of unauthorised lifting of both major and minor products of forest, which becomes an illegal activity. These activities are, therefore, not properly accounted for in the national accounts. In the NAS, fuelwood production is covered through the consumption approach. The information from the consumer expenditure surveys conducted by the NSSO is used as a proxy for the production of fuelwood.

3. Fishing The activities covered in the fishing sector are commercial fishing in ocean, coastal, offshore and inland waters; subsistence fishing; and gathering of sea weeds, sea shells, pearls, etc. The value added is estimated by the production approach. The value of output is estimated separately for marine fish and inland fish and inputs, in the form of repairs and maintenance of boats, nets and other operational costs, are based on some specific studies made. The value added of unorganised sector of this activity is obtained as a residual, i.e., taking the value added estimate from the production approach and netting it for the components of the public sector and corporate sector estimated separately from the budget documents, annual reports and the sample studies on private companies.

4. Mining and Quarrying The estimates of this activity are compiled separately for major and minor minerals. Information on the major minerals is covered by the annual surveys of mining covering all major minerals by the Indian Bureau of Mines. Petroleum and natural gas is covered by the Oil and Natural Gas Corporation. The unorganised segment of this activity covers the minor minerals and quarrying. Data on minor minerals at present are collected by the state geological departments. The information on minor minerals and quarrying is not adequately covered. India has now only included this activity in the follow-up surveys of the Economic Census and results of the surveys are awaited.

5. Manufacturing For the purpose of estimation of domestic product, all manufacturing activities are classified into two broad sectors: organised and unorganised. In the Indian NAS, the organised sector is taken as the registered sector covering the factories employing 10 or more workers and using power or those employing 20 or more workers but not using power. All such factories are registered under the Indian Factories Act, 1948, and data from these factories are collected through the annual survey of industries. The unorganised sector, which is termed as 'unregistered', is covered using the results of the follow-up surveys of the Economic Census. The unregistered manufacturing sector is covered by two

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surveys, namely; Directory Manufacturing Establishments (DME) survey covering establishments not registered under the Factories Act and employing more than five workers. The other survey covers the remaining units engaged in the unregistered manufacturing activity, i.e., Non-directory Manufacturing &tablishments (NDME}-those units employing one to five workers and OwnAccount Manufacturing Enterprises (OAME), which may employ only unpaid family labour. These twin follow-up surveys are conducted ·simultaneously, quinquennially and the results of these surveys provide information on the value added per worker which is multiplied by the working force to get the value added of the unregistered sector in the base year. The estimates of other years are obtained by moving the base year figure with appropriate physical indicators and price indices. The unregistered manufacturing sector in the Indian NAS, as mentioned above, represents the unorganised component of the manufacturing activity in the economy. In the 1993-94 series of the NAS an attempt has been made to capture this segment in a more comprehensive manner, in that the value added from these units in small scale industries has been estimated separa~ely, details of which are discussed in section Vll of this paper. The entire contribution of unregistered manufacturing cannot deem to have originated in the informal sector component of the household sector (including un-incorporated enterprises). To obtain the contribution of the informal sector, appropriate netting of the corporate sector included in the unregistered manufacturing sector component, has to be made even though it may not be significant.

6. Construction In most countries, the value added through construction is measured by a very indirect approach. The value of output of construction is estimated through the commodity flow approach, i.e., taking into account the net availability of the basic materials which go in for the construction activity. Based on the estimated value of these basic materials, the output of construction is estimated by including the value added component which is taken as a proportion of the value of basic materials. The proportions are arrived at on the basis of research/ type studies relating to various kinds of construction activities. Construction activity also comprises components which are labour-intensive, viz., improvement of land, plantation, construction of traditional houses by the householders themselves making use of the free natural material (bamboo, leaves, etc.). The value of construction by type of institution is taken as the expenditures made by the type of institutions in the acquisition of the construction assets .. For the government and corporate sector it is the expenditure made by them on construction activity. The household sector construction component (i.e., the unorganised sector) is arrived at as a residual, i.e., from the total value of construction obtained as indicated above, netting for the components of the public and corporate sectors. It is very difficult to collect reliable information on construction activity through sample surveys as construction takes place at sites and one does not have even a sampling frame of construction sites to facilitate the selection of a sample. Also, there are other conceptual problems such as even when government or a company spends money on the construction activity,

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construction work is done by a contractor, who either subcontracts or employs casual labour. Thus, the estimates relating to the construction activity of the public.or corporate sector does not necessarily indicate that this activity has originated in the organised sector. 7. Electricity, Gas and Water Supply The activity of electricity, gas and water supply is mostly in the realm of the government. Only a small component of the informal sector exists in the case of water supply-the activities of carrying water by water-fetchers whose sources of water are wells, and manual water pumps, and those whose services are sold to clients for a fee. These activities, as per 1993 SNA, are included in the sphere of production. Another activity that falls in the unorganised segment is gobar (cowdung) gas. This activity is mostly carried out by households for their own consumption but the possibility of selling part of it cannot be ruled out. The contribution of gobar gas is estimated on the basis of information on the number of gobar gas plants received from the Khadi & Village Industries Commission.

8. Trade, Hotels and Restaurants The services of trade, hotels and restaurants are covered separately for the organised and unorganised segments. Estimates for the unorganised sector are arrived at as a product of the working force with the value added per worker. The working force of the unorganised segments is obtained as a residual from the estimated total workforce by removing the workforce of the organised segment. The per-worker value added is taken from the results of sample . surveys conducted for the purpose. First, benchmark estimates are prepared separately for rural and urban areas as a product of the number of workers and per worker gross value added (GVA). In the new series (base 1993-94), the private (non-public) trading, hotels and restaurants activities for the purpose of determininig GVA, is considered separately for: (i) the private organised part, and (ii) the private unorganised part instead of the private sector trade, hotel and restaurants as a whole as was the case in the earlier series of NAS. Estimates for the private organised part, comprising private corporate and cooperative sectors engaged in the activity, have been prepared for the base year 1993-94 using results of the RBI study on company finance and information available from NABARD, respectively. The estimates for the unorganised segment have been obtained as the product of the workforce and value added per worker. The estimates of workforce for this segment have been obtained from the total workforce for the activity by subtracting the workforce of the public sector and the private organised segment as available from OGE & T. The workforce of the residual areas has been taken as such. The estimates of GVA per worker for urban and rural areas have been obtained from the results of the follow-up surveys of the Economic Census. The benchmark estimates of GVA are carried forward to other years through an index of gross trading income prepared specifically for the purpose by taking into account the marketable surplus of agricultural commodities, domestic output of industrial goods and imports, and the corresponding trade margins.

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Own account trading enterprises are very large in number making a significant impact but there is a problem in estimating their contribution to national income on the basis of the results of follow-up surveys wherein data is collected through personal enquiry by asking questions on commodities purchased and sold. There seems to be a tendency on the part of the respondents not to provide information truthfully for a variety of reasons-may be, the fear of attracting taxation, Jack of comprehension, not attaching importance to the survey, etc. In India, the four rounds of follow-up surveys conducted so far on trading activity have not yielded reliable (at times, unusable) results indicating even negative value additions. Alternative methods of capturing this activity and methodological studies to solve the problems are needed. The last survey on trade conducted in 1997 included a question asking the trader what margin he gets normally on the commodities he trades in, rather than seeking details of the purchases and sales of the various commodities the trader handled. Results, which are available for non-directory trading enterprises and own account trading establishments, are, however, not • very encouraging.

9. Transport, Storage and Communication For transport and storage services, the practices followed are the same as that of the trade, hotels and restaurants. Much of the communication activity is with the public sector as services like posts, telegraphs and telephones are managed by them. Recently, some communication activities like cellular phones, faxes, transmission of information through satellite, e-mail, etc. have come into the picture in a big way. Such activities at present are not covered adequately for want of development of standard methodologies to evaluate these activities.

10. Banking and Insurance Most of the activities of banking and insurance are in the organised (public) sector, yet there are informal financial transactions through household operations such as pawnshops, informal chit-funds, etc. These services are only approximately accounted for in the national accounts. There is a need to include these activities through enterprise surveys.

11. Real Estate and Ownership of Dwellings Ownership of dwellings is a service which is produced and consumed by the households and, therefore, will not be considered as falling in the informal sector in the strict sense. However, in the Indian NAS, the contribution of this activity is taken under the unorganised segment. Real estate activity in the unorganised sector is covered by the enterprise surveys, the follow-up survey of the Economic Census.

12. Other Services Other services include educational services, research and scientific services, medical and health services, sanitary services, religious and other community services, legal services, recreation and entertainment services, personal services such as domestic laundry, dry cleaning, barbers, beauty shops, etc. and services

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not elsewhere classified. The practice followed for covering the services in the unorganised sector is the same as those mentioned above, i.e., the working force of a particular activity multiplied by the value added per worker. The value added per worker is estimated from the enterprise survey results. VII. CONTRIBUTION OF UNORGANISED INFORMAL SECTOR

The unorganised informal sector has assumed increasing importance in the Indian economy. The contribution of the informal sector to the economy can be examined through several macro-economic aggregates like the employment, domestic product, etc. National accounts statistics in India as on date are compiled following the guidelines set out in the SNA. Details of data sources used and the methodology adopted are given in the Central Statistical Organisation (CSO) publication, National Accounts Statistics: Source & Methods, 1989, and the brochure on New Series of National Accounts Statistics (Base Year 1993-94), 1999. In 1999, India revised its national accounts series from its earlier base, 1980-81, to 1993-94 and also simultaneously implemented, to the extent data were available, the recommendations of the 1993 SNA.

1. Estimating Employment in Indian Informal Sector The informal sector is basically labour-intensive and provides employment to a large section of society. Various approaches could be adopted to estimate the size of the employment in the informal sector. One could identify the informal sector enterprises through the mechanism of Economic Census and ascertain the employment therein. Alternatively, one could estimate the total employment through either the Population Census results or large scale household surveys on employment and unemployment and then subtract from it the employment in the formal or organised sector. Yet another approach could be to determine the employment in the informal sector directly through sample surveys of the households, that is, first identify the workers in the household through a sample and then determine if they are themselves the own account enterprises or work in an enterprise that is informal and, thereafter, by reaching the informal enterprise, estimate the size of the informal sector. This approach is uncommon-perhaps a totally new one-but is being tried on an experimental basis in India. There are serious problems on account of the quality aspect of the data. The quality of data on the informal sector, which is available through different Censuses and surveys, is a problem area. To illustrate in the Indian context, information on employment is available from Population Censuses, Economic Censuses, and enterprise surveys that are conducted as follow-up surveys of the Economic Census and large scale household survey on employment and unemployment. The estimates of workforce from these sources, however, greatly vary and the users are at a loss to identify the reality of the situation from these alternative sets of estimates. The size of employment in the informal sector can be measured directly or indirectly. There are difficulties in both the approaches, firstly, because a clearcut operational definition of the informal sector is not at hand and, secondly, various existing data sources give different estimates of the workforce for various economic activities. We shall attempt to determine the size of employment in the informal sector by the second approach, i.e., first, we obtain

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the total workforce estimates and then subtract from it the estimated workforce in the organised (formal) sector comprising the public sector (general government, depdrt11,ental and non-departmental commercial enterprises), private corporate sector and cooperative societies. Table 2 presents estimates of workforce, by economic activities, in the unregistered segment of the Indian economy in 1993-94 (the current base year of the NAS). The limitation of the Economic Census is that it does not cover agricultural activities in crop production and also domestic services. The limitation of the follow-up surveys of the Economic Censuses has been that they have been conducted for individual economic activities in different years and also all activities have not been covered. Also, it has been experienced that th~ sample survey-based results are good for estimating ratios rather than population tntals. This explains why in the past sample survey-based results estimating the working force were not considered. It is important to note that Population Census-based estimates of working force do not capture the activities, particularly those of women, adequately. In fact, the worker-population ratios from various NSS employment surveys are higher than those based on the Population Cens11ses (Visaria, 1998). Table 1 shows the estimates of total workforce for the year 1991 based on: (i) the NSS principal and subsidiary workers estimated using the worker population ratios of the 43rd and 50th rounds and the estimated population total based on the Population Census, 1991, and (ii) the estimated main and marginal workers based on the Population Census, 1991.

Tablet Estimates of Total Workforce of Indian Economy for the Year 1990-91 Ns.5 principal & subsidiary workers• Male

Rural

173,149,626 (2.29%)

Urban

Total Note:

60,457,262 (8.91%)

Female

Total

Population Census main & marginal workers Male

99,927,249 273,076,875 169,275,125 (9.36%) (24.23%) 15,116,528 (63.06%)

75,573,789 (16.66%)

55,510,863

233,606,887 115,043,777 348,650,664 224,78.5,988 (3.92%) (28.24%) (10.86%)

Female

Total

80,437,891 249,713,016

9,270,712

64,781,575

89,708,603 314,494,591

The percentage figures shown in parentheses denote how much higher the Ns.5 figures are over those of the Population Census; • 43rd and 50th rounds of Ns.5 estimated using.

The above comparison shows that the total workforce estimated from the NSS survey is higher by 10.86 per cent whereas the estimated female workforce is higher by 28.24 per cent. In brief, Table 1 clearly reveals that there has been an undercounting of the workforce in the Population Census in all the categories (rural/urban/male/female), and particularly in the case of females in both rural and urban areas. Having determined that there has been underenumeration of the workforce in the Population Census, in the new series of National Accounts Statistics with the base years 1993-94, it is for the first time that estimates of workforce Digitized by

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have been prepared in a synthetic way by using: (i) worker-population ratios and workforce participation rates observed in the Ns.5 survey of employment and unemployment (50th round), and (ii) population projections and patterns of workforce in different economic activities as obtained from the results of fullcount tabulation of the Population Census, 1991, from the office of the Registrar General of India. The estimates of the workforce for the new series have been arrived at using the methodology indicated below:

(i) Methodology for Estimating Workforce To begin with, the worker-population ratios, as obtained from the results of the 50th round Ns.5 along with population projection figures, have been used to estimate the workforce for 1993-94 with rural/urban and male/female breakups at the all-India and state levels. Having obtained these marginal totals the workers are then apportioned to the different economic activities at the onedigit of National Industrial Classification (NIC) level using the Ns.5 work participation rates for both the all-India and state levels. Once the number of workers for rural/urban and male/female break-ups at the one-digit level of NIC are fixed, the workers are further apportioned to the two- and three-digit levels of NIC in the proportions required in the full-count tabulations of the working force as provided by the office of the Registrar General of India. It may be mentioned that in the Population Census, apart from main and marginal workers (equivalent to principal and subsidiary in the NSSO survey on employment and unemployment), an estimate of the third category of workers, namely, 'main worker with other workers' (MWOW) is also available. The estimate for this category of workers is not directly available in the NSSO surveys. Unfortunately, the estimates of MWOW are not available at that detailed level as main and marginal workers, in that, these are available only at the total level with rural/ urban and male/female break-up. As these workers are engaged in multiple economic activities, it is imperative to include them in the national accounts in order to capture the value added on account of activities performed by them. For the purposes of the national accounts, therefore, the total workforce comprises principal workers, subsidiary workers and MWOW workers. In order to obtain the total workforce, MWOW workers have been adjusted assuming that the ratio of MWOW workers (as available from the Population Census, 1991) to main and marginal workers in 1991 would be the same in 1993-94 as well. For head count purposes, however, only principal and subsidiary workers need to be considered (Table 2). The Directorate General of Employment & Training (OGE & T), Ministry of Labour, brings out the estimates of employment in the organised segment of the Indian economy based on the information collected through the network of employment exchanges in the country under the Employment Market Information (EMI) programme. The employers of the organised segment furnish the requisite information through the employment returns prescribed under the Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959, and rules framed thereunder, to the OGE & T. The EMI programme relates to the organised sectorr which covers all establishments in the public sector, irrespective of their size and non-agricultural establishments in the private sector, employing 10 or more persons. Accordingly, information in respect of Digitized by

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Table2 Estimates of Workforce 1993-M (u on 1st October) Economic activity

Workers main with other work

Principal and subsidiary

segment 1. Agriculture, forestry and fishing

22,978 198

2. Mining & quarrying 3. Manufacturing ( NIC 2 + 3 +97) 2,408 4. Electricity, gas and water supply 75 5. Construction 817 6. Trade, hotels and restaurants 1,549 1,373 6.1 trade ( NIC (60 to 68 + 890) 6.2 hotel & restaurant (NIC-690+691) 176 7. lransport, storage and comm. 553 7.1 railways ( NIC-700) 85 7.2 transport by other means 395 7.3 storage (NIC 740, 741 & 749) 6 7.4 communication (NIC-75) 67 8. Financing, insurance and real estate 122 8.1 banking and insurance (NIC-80, 81, 84 &: 85) 92 8.2 real estate 4 8.3 business services 13 8.4 legal services•• 13 9. Comm., social and personal services (NIC9-97) 1,842 9.1 public admn. &c defence ( NIC-90) 576 9.2 other services 1,266 9.2.leducation ( Unrecognised) 486 9.2.2 research le scientific"• 5 491 Sub-total (Education, research & scientific) 9.2.3 medical &: health 128 9.2.4 religious & other community 92 9.2.5 domestic services 48 9.2.6 laundry, dyeing and dry deaning 80 9.2.7 barber and beauty shops 72 179 9.2.8 tailoring services 9.2.9 other personal services••• 48 9.2.10 sanitary services 15 9.2.11 services n.e.c. 83 9.2.12 intentational &: extra territorial bodies 3 9.2.13 recreational and cultural services ( NIC-95) 27 10. NEC 5

All sectors

30,547

Work.force Workforce in the in the organised unorganised segn,ent segmen~

237,278 2,738 42,410 1,456 12,216 29,220 26,059 3,161 10,957 1,794 7,855 140 1,168 3,453

1,413 1,097 5,082 989 1,197 470 315 155 3,101 1,316 922 119 744 1,625

235,865 1,641 37,328 467 11,019 28,750 25,744 3,006 7,856 478 6,933 21 424 1,828

2498 116 463 376

1,505 5 101 13

993

34,253 10,768 23,485

11,007 4,482

23,246

6,525 4,061 277 4,338

16,960

8,()()3

274 8,277 2,625 1,507 1,485 1,206 959 3,171 1,208

111 362 363

6,286

3,942 3,939 1,450 779

1,175

2,005

728 0 2 0 1 5 142 6

1204 959 3,170 1,203 227 1,999

60

0

60

613 68

126 0

487 68

374,049

25,980

348,069

369

1485

Notes : •Derived from substracting workforce in organised segment from that total principal and subsidiary workers; ..The workforce in legal services as available from the Bar Council :,f India was higher than the estimated workforce of this activity. As such for legal services, the w orkforce as available from the Bar Council has t-een used and excess workforce has been adjusted in other personal services; •"In case of organised part of research and scientific services, the DGE&T workforce data has been used and excess workforce has bee. adjusted in educational services.

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all public sector establishments and non-agricultural establishments in the private sector employing 25 or more persons is collected statutorily under the provisions of the Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959, and information from smaller, non-agricultural establishments in the private sector employing 10-24 persons is collected on a voluntary basis. It can thus be seen that the estimates of employment in the organised segment of the economy as available from the DGE&T publication entitled, Employment Review, has its limitations in that the estimates of employment in the private organised segments are reported on a voluntary basis from the establishments employing 10-24 persons. However, in the absence of any other source of estimates of workforce in the organised segment (except for manufacturing for which the workforce in the organised segment are available from the ASI), this information on employment in the organised segment has been used to derive the estimates of workforce in the unorganised segment by subtracting it from the total workforce estimates obtained above. Thus, we get the estimates of workforce in the unorganised/informal sector (fable 2) for 1993-94. Out of the estimated total workforce of 348 million in the unorganised sector in 1993-94, the major chunk is in the agricultural sector accounting for 236 million. Thus, size of the informal sector (excluding agriculture) in the Indian economy is of the order of 112 million: the largest employer of the informal sector being the manufacturing activity (37 million) followed by trading activity (29 million), community services (23 million), construction activity (11 million) and transport activity (eight million). The estimated number of workers in the OAEs in all the activities based on follow-up surveys are much higher when compared to the one based on Economic Censuses (Statement 1-Annex V). If the non-sampling errors are large in the Censuses, the survey-based estimates should be more appropriate to capture the ground realities. Further, to get the right answer ,ve should have post-enumeration checks in position in the Economic Census, which has not been done in the past. Fortunately, the Economic Census, 1998, incorporated the post-enumeration check system in the work programme. Statement 4 through Statement 8 (Annex V) shows the estimated number of OAEs, NDEs and DEs and the corresponding number of workers engaged therein as per follow-up surveys relating to the unorganised segment of manufacturing, trade, transport, hotels and restaurants and other services. (ii)

Contribution to Net Domestic Product

The contribution of the informal sector to the net domestic product has been presented separately for the unregistered manufacturing and service activities. (a) Unregistered manufacturing activities Before we discuss the contribution of the unregisterP.d manufacturing activities to the domestic product, a brief description of the methodology, used in the new (base 1993-94) series, for estimation of gross value added (GVA) relating to unregistered manufacturing would be in order. In the new series, estimates of GVA from these units in the small scale industries (SSI) and others have been compiled separately. For estimating the GVA from the

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unregistered units belonging to SSI group (unregistered SSis), the GVA and employment relating to small scale units covered under the annual survey of industries (ASI) have been subtracted from those obtained from the results of Second All-India Census on Small Scale Industrial Units, 1987-88, published by Development Commissioner, SSI. Estimates of GVA per worker relating to unregistered SSis, thus obtained for 1987-88, has been adjusted to 1993-94 prices using the wholesale price index (WPI) and the workforce has been extrapolated to 1993-94 using the inter-survey growth rate observed during 1987-88 (43rd round) and 1993-94 (50th round) of the NSSO Employment and Unemployment Survey. Based on estimates of workforce and value added per worker, the GVA from unregistered SSis has been estimated following the income approach. The estimates of workforce for 1993-94 pertaining to 'other unregistered' manufacturing units, i.e., units other than those belonging to unregistered SSls mentioned above, have been obtained by subtracting units belonging to ASis and unregistered SSis from the total manufacturing workforce. This workforce has then been distributed among own account manufacturing establishments (OAME), non-directory manufacturing enterprises (NOME) and directory manufacturing enterprises (DME) by location (rural/urban) based on the co11esponding ratios obtained from results of the NSSO Survey on Unorganised Manufacturing Sector in India, 1994-95 (51st round). Respective estimates of value added per worker as obtained from the results of 51st round have been used duly adjusted for the price (using the consumer price index number for agricultural labourers for the rural and consumer price index number for utban non-manual employees for the urban). Estimates of workforce and value added per worker, by industry, relating to unregistered manufacturing are presented in tables 3 and 4. In the new series, an attempt has been made to capture the unregistered manufacturing activities in a more comprehensive manner by incorporating the information relating to small-scale units. The timeliness of data relating to the SSI segment needs to be improved as the present data is more than a decade old. The demography of this sector is highly dynamic and the trends manifested in the estimates relating to 1987-88 can obviously not be representative of 1993-94. As seen in Table 4, estimates of value added are quite low for several groups.

b. Services In the Indian NAS, the estimates of the GDP of most of the services in the unorganised segment of the economy is prepared following the income approach, in that the estimate of the workforce of respective activities is multiplied with the corresponding value added per worker obtained from the follow-up surveys of the Economic Census. These surveys have certain limitations in that, despite having them in position for the last two decades, reliable information on value added per worker has not been obtained. The basic problem is that the OAE and NOE do not maintain accounts, and information on the establishments are obtained by asking questions on their expenditures, receipts, etc. The general tendency on the part of respondents is to provide wrong !nformation due to a variety of reasons-fear of attracting

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1able3 Estimates of Workforce ('000) in Unregistered Manufacturing, 1993-94

NIC 1987 20-21 22 23 24

25 26 27 28

Group

Rural 1452 Food products Bev., tobacco, etc 3232 Cotton 2223 Silk, wool 178 178 Jute 852 Cotton cloth Wood, furniture, etc. 3120 Paper printing etc 105

29 Leather& fur products 30

31 32 33 34

NOME

OAE

333 Basic chemicals etc 115 Rubber, plastic, petroleum &t coal 34 products Non-metallic 1183 products Basic metals 64 &t alloys 473 Metal products

DME

Urban 555 1160 1108 109 119 273

Rural 221

Urban 339

148

72 440

680

166

149

72

166 199

24

Rural 262 204

Unregis-

Urban tered $1

119 125

195 51 1016 119 39 426

362 55 19 9 2 149

419 181

71 5

238 174

172 150

9 68

163 123

61

11

121 69

236

22

19

60

32

123

142

254

75

106

409

147·

335

58

16

44

60

152

143

99

311

31 55

335

280

24 17

11 29

%

66

11 29

97 158

210 103

25

19

49

23

100

75

901

64

299

209

585

49

81

34

146

3

69

36

660

85

444

3

116

109

219 51 47 105

69 63 142

465 89

35 Machinery

non-electrical 112 36 Electrical machinery 11 37 Transport equipment 38 38 Other

manufacturing 1785 39 Repair of capital goods 184 97 Repair services other than 39 638

taxation, lack of apprehension, giving little importance to the survey, etc. This is evident from the estimates of value added per worker for the year, 1~94, as obtained from the results of follow-up surveys (fable 5). These have been derived from the results of the 1991-92 enterprise survey duly adjusted for the price-rise using appropriate price indices. The estimates of value added per worker for a majority of the services are unreasonably low. Clearly, these are grossly understated and do not reflect the ground reality. Even professionals like medical doctors will not be able to survive in reality, their earnings were what survey results show. Strangely enough, for some of the services (medical and health, laundry, dyeing and dry cleaning, barber and beauty shops and services n.e.c.), value added per worker, as per these surveys, is higher in rural areas than those in urban areas. This does not appear to be realistic by any norm.

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1able4 Estimates of Value Added Per Worker in Unregistered Manufacturing, 1993-M

NIC

Group

NDME

OAE

1987

Runl

11461 11535 5819 10162

6162

20303

35945

23782

10336

24.520

61875

9464

11162 11451

18492

6520

23130

48523

12692

13310

13388

14678

18346

65234

2930

4705

11892

15168

11133

24904

73885

2689

11475

14280

25031

25717

44507

3651

6240

7874

11851

11769

11986

20001

&alloys 34 Metal products 35 Machinery

4178 5693

17215 12056

11659 12257

19381 18660

50828 12475

33181 23369

67497

non-electrical 36 Electrical

5649

15925

10592

22123

23283

30669

40673

8025

10132

12925

20822

18734

43617

70505

3360

10877

10466

29239

16293

26621

40740

manufacturing 1936 39 Repair of capital 7246 goods 91 Repair services other than 39 7864

14108

8923

16240

13042

25336

57736

14144

9221

14277

17061

43961

8514

13304

9037

13563

13191

16336

8514

5813 Bev., tobacco, etc. 3355 Cotton 3537 Silk. wool 4669 2169 Jute Cotton cloth 3026

Wood, furniture, etc. 4168 28 Paper printing etc. 3068 29 Leather& fur products 6901

30 Basic chemicals etc. 31 Rubber, plastic, petroleum &c coal products

32 Non-metallic products 33 Bask metals

machinery

5007

8872

6735 3858

7156 4871

6410

6561

8380

Un.rep

38982 38062 28612 119774 57437

Food products

Rural 11099 13263

DME

Urban 18754 18069 15957 16960 15980 1390.1

20-21 22 23 24 25 26 27

Urban 12425 6152

i!!·2

Runl 7835

Urban tered $1 23595

11071 18564 18139

8388

56692

37 'Iransport equipment 38 Other

Notwithstanding these limitations, information on the estimate of value added per worker as obtained from the results of these surveys, has been used for preparing the estimates of value added originating in the unorganised segments. The estimates of the share of different sectors in the total net domestic product (NOP) from the unorganised segment and that of the unorganised segment to total (organised plus unorganised) NOP for 1993-94 and 1997-98 have been presented in Table 6. It is evident from the table that though the contribution of the unorganised segment to the total NOP of India has declined during the period, it still accounts for quite a large share (over 60 per cent). It also reveals that there is considerable variation in the share of the unorganised segment in various economic activities. For example, the share of the

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68

SL no-

'llble5 Eatimatu of Value Added Per Worker for Activitiea ln Unorpniaed Segment of Services Sector, 1993-9, Value added per worker (Ra.) Services

Education (unrecogniaed) Raearch and lldentific services Medical and health (private) Religious and other community services 5. Domestic 6. Laundry, dying &: dry cleaning 7. Balber &: beauty shops. 8. 'Iailoring 1. 2. 3. 4.

9. Other penonal aervices 10. 11. 12. 13. 14. 15. 16. 17. 18. 19.

Sanitary services (private)

Services/ activities (n.e.c.) International and other extra-territorial bodies Legal services Real estate Business services Trade Hotels &: restaurants Transport by other means Storage

Rural

Urban

All

6,593 3,942 9,489 2,428 2,890 6,797 7,123 5,804 2,598 22,999 5,080

8,558 14,998 25,328 8,326 12,866 12,044 12,796 15,907 12,946 24,476 21,245

13,518 9,122 14,490

27,942 30,772 27,534

9,916

17,879

7,414 9,911 18,687 4,846 10,525 8,528 9,024 10,733 9,417 23,963 15,673 272,609 24,097 25,986 24,545 37,612 12,891 44,104 36,824

'

unorganised segment in agriculture is over 95 per cent, as against less than 4 per cent in the activity 'electricity, gas and water supply'. Trade, transport, construction and manufacturing also account for a high share of the unorganised segment in the NOP. As regards the structure of the informal economy, agriculture accounts for half of the unorganised segment income. Besides agriculture, 'trade, hotels and restaurants' and 'manufacturing' the other two major economic activities that contribute significantly to the unorganised income of the economy. The decline in the share of the unorganised se~ent in the NOP could possibly be attributed to the reduction in the market-response to these activities, resulting in a fall in the productivity of labour, their real wages, etc. The growth in the number of self-employed persons and casual workers, as observed from the data of National Sample Surveys, can be cited in support of this argument. Many research workers and activists working on the subject would, however, strongly discount this proposition and are inclined to hold the inadequacy of coverage and indifferent attitude of the official agencies, even in the data collection on the informal sector, responsible for this trend. It is indeed true that the present system of data collection does not give due importance to the informal sector, which is relegated to the residual category. However, given its importance in the economy, it is essential to strengthen surveys on the subject to provide more reliable information so as to enable a proper analysis of the dynamics of the informal sector, especially when public agencies are sought to be replaced by the market in several areas.

are

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UNIVERSITY OF MICHIGAN

OP INPoRMAI.Sac,OR

69

nble6 NDP In Oapn!•ecl/U~p»i•ed S.1ow"" Shue In NDF from UNMgar!••cl S111nwn~ and Shan of UnorpmHCI Stisuwat In NDP by Economic Activi~ 1993-9' and 1997•98 Net domeltic pmduct (Ra. aore) Shan in Shanof NDPfrom

1993-9'

199'1-98

unorganired Np\11\t

Bconomic ldtvity

Olp- Unorganlled niled

Orga· ni•ed

Unorganieed

1. Agricultwe, fore1by & 8ehing 8046 221183 13300 355820 1.1 agricultwe 6263 ~ 11190 325408 1.2 forestry atloging 1719 9381 2097 12532 1.3fiahing 4 7740 13 17880 2. Mining &quarrying 13861 1089 23085 1'89 3. Manufacturing 65774 37965 115693 66567 4. BJecbidty, pa & water supply 8169 632 15260 980 5. Construction 18929 19820 34914 40121 6. 1kade, hotels & reetaW'll\ta 10864 85763 31297 15426.l 6.1 trade 9373 81951 27561 147226 6.2hotels& • 1491 3812 3736 • 7017 restawants 7. Transport, storage & communication 21607 16114 38880 36162 7.1 railways 6792 0 10418 0 7.2 transport by other means 7118 15770 11723 35667 495 7.3storage 240 346 438 7.4 communication 7457 16301 8. Fmancing, insurance 39706 40835 80359 60569 & real estate 8.1 banking &t 37376 2734 72624 7168 insw-ance 8.2 real estate etc. 2330 38101 7735 53401 9. Community, social &t personal services 70499 16536 135188 29994 9.1 public admin. 38760 0 71960 0 &tdefence 9.2 other services 31739 16536 63228 29994

Allsecton

257"'55 440537 487976 7459'.5

unorprulld -sment

in NOP

19939'

199198

50.3

'1.1

96.5

'6.5

6-l.6

97.0

96., 96.7

2.1 1.8

1.7

2.4

84.1 99.9

85.7 99.9

0.2 8.6

0.2 8.9

7.3 36.5

6.1 36.5

0.1 4.5

0.1 5.4

7.2 51 .1

6.0 53.5

19.5 18.6

20.7 19.7

88.8 89.7

83.1 84.2

0.9

0.9

71 .9

65.3

3.7

4.8

42.7

48.2

3.6 0.1 0.1

4.8 0.1 0.1

68.9 58.9

75.3 53.1

9.3

8.1

50.7

43.0

0.6 8.6

1.0 7.2

6.8 94.2

9.0 87.3

3.8

4.0

19.0

18.2

3.8

3.9

34.3

32.2

100

100

63.1

60.5

1993- 19919' 98

VIII. DELHI GROUP ON INFORMAL SECTOR STATISTICS

With a view to giving a fillip to the development of international standards in several areas of official statistics, several international expert groups (popularly known as city groups) have been formed, namely, the Canberra Group on household income statistics, Ottawa Group on price statistics, Paris Group on labour and compensation, Voorburg Group on service statistics and Delhi

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lNPoRMAL SecroR IN INDIA

70

Group on informal sector statistics. The purpose of forming the Delhi Group is to exchange each other's experience in measuring the unorganised or informal sector of the economy and to prepare a status report and proposals for future work. The objective is to document the data collection practices in the informal sector that are followed by member countries and to develop suitable methodologies for survey, design and data collection in that sector, taking into account the 1993 SNA and the resolutions of the ILO. The third meeting of the Delhi Group was organised by the Department of Statistics & Programme Implementation, Ministry of Planning, Government of India, at New Delhi during 17-19 May 1999. After intensive deliberations, the Delhi Group came to the conclusion that, as the informal sector manifests itself in different ways in different countries, national definitions of the informal sector cannot be fully harmonised at present. The group opined that international agencies should also disseminate informal sector data according to the national definitions used. In order to enhance the international comparability of informal sector statistics, they should disseminate data for the subset of the informal sector, which can be defined uniformly. In order to define this subset, the Delhi Group adopted the following recommendations: 1. All countries use the criteria of legal organisation (unincorporated enterprises), of the type of accounts (no complete set of accounts) and of product destinations (at least some market output) for identifying the informal units. 2 Specification of the employment-size restriction of the enterprises in the national definition of the informal sector is left to the country's discretion. For international reporting, however, countries should provide figures separately for enterprises with less than five employees. In the case of multiple establishment enterprises, the size restriction should apply to the largest establishment. 3. Countries using the employment-size criteria provide disaggregated figures for enterprises which are not registered as well as for enterprises, which are registered. 4. Countries using the criterion of non-registration provide disaggregated figures for enterprises with less than five employees as well as for enterprises with five and more employees. 5. Countries, which include agricultural activities, should provide figures separately for agricultural and non-agricultural activities. 6. Countries should include persons engaged in professional or technical activities if they meet the criteria of the informal sector definition. 7. Countries should include paid domestic services uni~ these are provided by employees. 8. Countries should follow paragraph 18 of the resolution adopted by the 15th ICLS regarding the treatment of outworkers/homeworkers. Countries should provide figures separately for outworkers/homeworkers included in the informal sector. 9. Countries covering urban as well as rural areas should provide figures separately for both urban and rural areas. 10. Countries using household surveys or mixed surveys should make an

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moN OP INIOllMAL SecroR

11. 12.

13.

14.

15.

71

effort to cover not only persons whoee main job is in the informal sector, but also those whose main job is in another sector and who have a secondary activity in the informal sector. The group hopes that it will be possible to enlarge this subset. Results of the surveys on the informal sector conducted by different countries may be discussed as the main topic of the next meeting of the Delhi Group for recommending the survey methodologies for the collection of data on various aspects of the informal sector with a view, inter alui, to improving data quality including a reduction in non-sampling errors. At another meeting, the main topic may be the re.Jpecttve advantages and limitations of different survey methods and sample designs for the collection of data on the informal sector. Following the definition of the informal sector as proposed, an attempt should be made to estimate the size of the informal sector in terms of employment and its contribution to GDP on a regular basis. The Delhi Group should formulate recommendations regarding the identification of insecure forms of employment (including outwork/homework) inside and outside the informal sector, and submit them to the Paris Group for consideration.

mulu'IION OP INRmw. SaciQI

73

(a) evaaion of value added tax, income tax, etc; (b) evalion of IOCial securitiea contributione; (c) the non-obaervance of standards defined by law auch u minimum wages, working hours, equipment for safety on the job, etc., and (d) non

z

0

2

•

Total

Urban

Rural

Diffeience (%)

PC-91

EC-90

PC-91

OC-90

PC-91

3

4

5

6

7

2577 1055

531

4764 444

3359

29.S

1822

-31.04

13222

1080'7 244 271

782 767 16068 709

21816 'HI

29290

-34.3

1240

-212.3

6013

-1072

1913

14798

-24.6 -9.7

((6)-(7))/6-JOO

Agriculture, hunting, forestry and fishing

except crop production and plantation 4233 1 Mining and quarrying 274 2&c3 Manufacturing 11009 4 Electricity, gas &: water supply 153 5 Construction 242 60-64 Wholesale trade 417 65-68 Retail Trade 5736 69 Hotel&: restaurants 1148 6 Wholesale trade, retail trade and hotel &: restaurants 7301 70-73 Transport 363 74 Storage&: warehousing 161 75 Communication 211 7 Transport, storage &: warehousing and communications 735 Financial, insurance, real estate and 8 business services 475 9 Community, social and personal services 8809 X Others (unspecified activities) 65 Total 33296 (46.2)

531 2555

170

3458

6053

1118 7759

874.5

513 1535 13495

709

1621

1142

2769

1851

33.2

6292

10498

]TJW

17562

2530 39 384

973 392 405

11270 4795

7325

83 516

1336 553 616

900

1.3 448.3 Tl.9 -46.1

2953

1770

5394

2505

8347

-233.2

652 11558@ 508 41903 (43.1)

2041

2224

2876

12394

134030

2516 21203

-14.3 -17.7

54

706 54781 (56.7)

530

38780 (53.8)

1383

119

7JI116

122

24961 1214 96684

Note: • Excluding Assam; •• Excluding Jammu &: Kashmir; 0 Excluding domestic services; Figures in the pauenthe11es denote the nre of the corresponding total. Soura: 1. Central Statistcal Organisation (1995), Eammnic Census 1990: All India R.tpo,i, Department of Statistics, Government of Inda. 2. Office of the Registrar General of India (1922), Census of Indui 1991, Fino! Popull,tion Tolllls, Paper 2 of 1992.

-920.2

-34.1

2

r

Stalem"!Dt3

Number of Own Account Enterpriaes, Establishments ucl Employm.ent in Non-Agdcaltunl Bcaaomic Acti'Vities • Pa Economic Censw (in thomand)

0

....-·

IO

F.aJnomic Ces•-e 1990"• ,,

Eoonomic Census 1980-

N

(1)

c.. er

Own account enterprises

'
mAMJCS OP INPoRMAL MAN1.1PACTUJUNG SBCTOR

l()C)

clearances for expansion, import etc. Importantly, a majority of the units operate throughout the year but the number of seasonal operators is also not negligible. In view of all this, it would be important to include indicators pertaining to the nature of proprietorship, registration with any public agency, seasonality of operation etc. in an analysis of the development dynamics of this sector. High growth of employment in an informal industry is likely to be associated with a corresponding growth in the number of units. The increase in employment would lead to an increase in average employment per unit only when units are growing at a slower rate than employment. This may not be the case in many industries beca1,se of the very logic of emergence of this sector. Individuals failing to get employment in the labour market, often start a venture on their own, as a part of their survival strategy, leading to an increase in the number of units. As a consequence, an increase in total employment would not lead to an increase in employment per enterprise, particularly in the lowest rung of OAME. Given this scenario, it would make sense to include indicators pertaining to number of units, employment and employment per enterprise and their growth rates in the analysis. Employment in a new enterprise would comprise full-time, part-time and other workers. Interestingly, the full-time workers constitute more than 95 per cent (that include the family labour as well) of the total workforce in the informal manufacturing activities in urban areas. Nonetheless, certain units may employ people on part-time or short-term basis, depending on the demand situation. Indicators pertaining to different types of employment would, then, give an insight into the market conditions that the units are facing in different industries. Value added per worker or per enterprise reflects the state of health or economic viability of a unit or an industry. It depends on several factors, such as level of technology, availability of skilled labour and credit etc. Positive relationships between inputs and value added imply that the unit or enterprise is responding to economic stimuli. In any analysis of interdependency, inclusion of value added and input indicators would, therefore, make it possible to assess the extent to which economic factors determine the functioning and growth of an activity. Understandably, credit plays an important role in the functioning of the informal sector. Finances are required both for meeting day-to-day requirements arising from the operation of the unit (payment of wages, procuring raw materials, hiring of fixed assets or acquiring or leasing in machinery or land) as also for incurring capital expenditure. Consequently indicators have been identified pertaining to both working capital as also fixed assets. Outstanding loans have also been included to assess their impact on the performance of the units. In view of the fact that units owning land may have easier access to government facilities like getting registered or securing loans, indicators pertaining to land assets have been considered relevant in the analysis. Based on the above discussion, the following indicators have been selected to understand the functioning of the urban informal sector and assess its growth possibility in future years. This would also enable us to critically examine some of the myths and stipulations about the informal sector's capacity in providing

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OOlORMAL SecroR IN INDIA

110

long term solutions to the problems of unemployment and poverty in the developing countries, that are often taken as valid without empirical verification. These are: 1. Number of enterprises (NE) 2. Total employment (TE) 3. Persons employed full-time (Ff) 4. Persons employed part-time (PT) 5. Employment per enterprise (EME) 6. Working capital per enterprise (WCE) 7. Outstanding loan per enterprise (OLN) 8. Value added per worker (VAW) 9. Value added per enterprise (VAE) 10. Fixed assets owned per enterprise (FAO) 11. Percentage of units under perennial operation to total units (POE) 12. Fixed assets leased/hired or fixed assets not owned per enterprise (FNO) 13. Land-owned per enterprise (LO) 14. Land-leased/hired or not owned per enterprise (LNO) 15. Percentage of units under proprietary ownership to total units (POW) 16. Percentage of units not registered with any agency (NRG) 17. Growth in the number of units (GNE) 18. Growth in total employment (GTE ) It may be pointed out that the growth rates of units and employment of the informal enterprises (indicators nos 17 and 18) for the period, 1978-84, have been included in the set of indicators for 1984 85. Similarly, the growth rates for OAME, NOME and DME during the period, 1989-94, are a part of the indicators for 1994-95. V. ANALYSING GROWTH DYNAMICS OF INFORMAL SECTOR

An analysis of interdependencies among the selected indicators has been presented for the three types of enterprises in the following three sections. The basic purpose here is to identify the factors that explain the differences in the growth pattern of the different types of enterprises. The analysis has been attempted by constructing correlation matrices for the performance indicators for the three types of enterprises separately for the years: 1978-79, 1984 85, 198990 and 1994-95. Due to non-availability of data for some of the years, a few of the indicators mentioned above could not be considered in 1978-79 and 198485, Therefore, there are differences in the number of indicators considered in the correlation matrix for different years. Only those correlation coefficients that are statistically significant at 1 and 0.1 per cent level have been discussed here and are denoted by • and $, respectively.

1. Correlations among Indicators for OAME during 1984-94 Tables 12a, 12b, and 12c indicate that the number of enterprises (NE)-full-tirne (Ff), part-time (PT) and total employment (TE)-are positively correlated with

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GROWl'H DYNAMICS OP INPoRMAL MANlIPACTURJNG SecroR

111

one another and do not bear any significant association with other variables. Exceptions to this are their positive as.,ociation with the percentage of units under proprietary ownership (POW) and working capital per enterprise (WCE). These associations highlight the fact that in OAME, where the units are mostly under proprietary ownership, the "family labour'', besides working fulltime in the family enterprise also works on a part-time basis in other units. Also, OAME are highly dependent on the availability of working capital, which is a crucial factor in their growth. Employment per enterprise (EME), is not correlated positively with most of the performance indicators (12a, 12b and 12c). The insignificant association of EME with other indicators could be due to the fact that growth of units or their better performance does not necessarily result in an increase in the average employment and vice-versa. Possibly, a decline in the remuneration of the worker checks the growth of employment in an enterprise, despite other positive indicators (Table 12a). One would also infer that a large majority of the enterprises are the product of survival strategy of households that are operating, using family labour and assets. As a result, profitability or market conditions do not affect the size of enterprise or the EME (Table 12b). There is a positive association between indicators of value added and fixed assets (owned as well as not owned), outstanding loan (OLN) and working capital. One would note that the units that have large working capital would exhibit better economic performance viz., higher productivity, value added etc. However, the negative correlation between the indicators of proprietorship (POW) and unregistered units (NRG) with indicators of capital assets reveal that the capital base tends to be low in industries with larger incidence of proprietary and unregistered units (Tables 12b and 12c). The positive as.50ciation of outstanding loan (OLN) with working capital {WCE), owned fixed assets (FAO) and non-owned fixed assets (FNO) is understandable (Table 12b). This suggests that the fixed as well as. working capital needs of the OAME are financed through loans. The indicators of loan and capital have negative correlations with the percentage of unregistered units indicating that unorganised units have very little access to credit institutions and operate with a low capital base. The FAQ's positive association with WCE can be explained by the fact that when a unit decides to augment its fixed assets, it also makes a provision for extra working capital. The positive correlation of capital indicators with land ow~ed by enterprises indicates that ownership of land facilitates access to credit for purchasing the assets. Evidently, getting loans for building and other capital assets is relatively easy for the households that own land (Table 12b). Further, tables 12a, 12b and 12c suggest that working capital requirements are met through credit; availability of which is possibly dependent on the track record of value addition. It may be seen that the units that are unregistered and where the incidence of proprietorship is high are those that generally record low value added, and consequently have little access to working capital. The positive as.,ociation of capital assets that are not owned with value addition and with growth rates of units and employment indicate that dynamic units often hire assets from outside for augmenting their capacity (Tables 12b and 12c).

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INR:>RMALSECJORININoJA

112

Tableth Correlation Coefftdents of Selected lndicaton for Urban OAME, 198& 85 NE PT PT TE EME WCE OLN VAE VAW PAO POE GNE GTE

NE

PT

1.00 .96$

1.00

.86$ .96$

.88$ .99$

-.23 .63• .08 -.25 -.17 .30 .03 .08

-.08 .56• .06 -.28 -.25 .26 .01 .14 .20

.14

PT

TE EME WCE OLN VAE VAW FAO POE GNE GTE

1.00 .90$ -.04

.51 -.00 -.30 -.30 .26 -.11 .32 .39

1.00 • .(1J

.s.,. .05 -.29

-.26 .26 .00 .16 .23

1.00 -.29

-.18 -.16 -.54• -.18 -.09 -.10 .24

1.00 .56• .26 .27 .19 -.43 -.09 -.

z

2

I

GllOWlli DYNAMICS OP INA:>RMAL MANuJIACTIJRING SecroR

121

their fixed assets mainly through credit, which results in higher value addition per worker as well as per enterprise. Conversely, the amount of fixed assets owned by the unit along with the value added figures determine the availability of credit. Further, the negative correlation between percentage of unregistered units with asset-linked indicators suggest that legal registration of a DME unit helps it in getting access to credit, acquiring working capital and building up fixed asset base. It appears that the practice of hiring is not common for building up fixed assets in urban DMEs that are experiencing growth, as the correlations of hired fixed assets with all the indicators of fixed assets, except for hired land are statistically insignificant (Tables 14c and 14d). This proposition is further confirmed by the negative association between the growth rates of units and employment with fixed assets hired by the enterprise. In other words, the dynamic units generally do not hire capital assets to supplement their own, but instead purchase them. Possibly, the DME units that hire assets do not make much profit and go out of business over the years (Table 14c). This is in sharp contrast with the OAME, wherein the units thrive by hiring assets, as noted above. The performance and growth indicators under NOME, however, exhibit neither positive nor negative correlation with that of hired assets. 4. An Overview

The correlation exercises for the three segments of the informal manufacturing sector in urban areas, as attempted above, indicate that the growth in units and employment are guided mainly by the survival strategy and macro-economic circumstances that have become unfavourable over the years. Consequently, we find the employment indicators to be positively associated only among themselves. There has, however, been an ·increase in the average size of employment, both for OAME and NOME, despite a negative growth in the number of units in the late eighties. Unfortunately, the pattern of increase in employment does not correspond with improvements in performance or efficiency, implying thereby that the increases in employment do not reflect better performance and that this is a not necessarily a positive phenomenon. The sectoral analysis further reveals that this increase has been restricted to a few industrial groups. The analysis of interdependencies among performance indicators further reveals that credit is the most important factor in the effective functioning of the units. Outstanding loan per enterprise is related positively with working capital and other capital assets. These in tum have a positive impact on the value-added indictors. However, a large majority of the units do not have access to the credit facilities and, therefore, have few capital assets. The ownershipbased units that are not registered with any public agency constitute the majority; these have no access to loans and assets. They continue their operation, despite the low value added per enterprise or per worker, as a part of their survival strategy. Their other performance indicators are also highly unfavourable and are becoming more so over time. Having a piece of land, however, helps in getting credit and building the capital assets, but only a small number of OAME, NOME and DME units have been able to do so.

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UNIVERSITY OF MICHIGAN

INR>RMAL SECTOR IN INDIA

122 VI. POLICY IMPLICATIONS FOR FUTURE

The overview of the trend and performance of informal manufacturing sector in the context of changing macro economic scenario questions the perspective that this sector is the panacea for the problem of growing labour force in urban areas. During the period of structural adjustment. it is often stipulated that the informal sector would generate employment to compensate the reduction in organised employment. This needs to be seriously questioned, given the re

z

Name of scheduled employment/industry

Formal sector

All enterprises

Minimum wages 1-6-94/ 25-4-97

(Rs.) Informal sector

sector M

F

M

F

M

32.85-33.65 31.05-32.05

34.6 76.6

-

-

-

34.7 76.6

34.85-34.35 32.20-32.55 34.35-34.75/ 59.9-61.5 32.55 / 57.6-6/J.7 33.25-33.80/ 58.9-61.1 32.35 Rubber or rubber products industry 31.55 Roof-tiles manufacturing 32.60-33.60/ Industrial engineering (establishments 58.7-63.3 employing less than 50 worlcers) 34.35 Electronics industry 33.60-33.85/ Construction or maintenance of 60.5-69.5 road or in building operation 27.55-29.92 Shop and commercial establishments 29.29- 29.92 Petrol and diesel oil pumps 32.10-33.6 Hotel and restaurant 37.75/ 62.~ .3 Public motor transport 29.88 Local authority (Municipalities/ Corporations) 33.20-34.45 / Hospitals and nursing homes 59.6-65.9 dispensary, clinical laboratory Automobile repairing workshops and garages 31.15- 32.15

57.2 44.5 50.6

32.6

32.6

30.0

39.4

57.4 44.5 52.5

39.4

43.8

52.9 51.3

65.4

57.7

65.4

-

-

-

48.0 51.3

41.2 57.7 47.9

-

15.4

41.2 57.7

-

46.5

15.4 -

39.2 48.9

57.7 101.8

-

39.7

42.5

40.1

Rice, flour or dal mill Bakeries Cotton ginning & cotton pressing (heavy, light} Bobbin industry Textile processing industry Pulp and paper board manufacturing Printing press

Total Nott: Professional and managerial cadres are excluded. Source: Same as in Table 1.

61.2 40.1 115.4 59.7 81.9 112.0 49.4

-

10.0 86.8

123.1 16.1

37.6 55.4

55.3

-

-

112.0 98.6

-

-

-

-

50.8 123.1

-

.

F

; ~

-

-

-

-

37.3 59.1

48.9

39.8 115.4 59.7

10.0

80.0

~

-

-

-

34.9

16.1

33.3

-

38.0

-

69.8

84.9

46.8

36.9

2

c::

~"'

,... w ,...

INR>RMAI. Sa:10K IN INDIA

132

assuming two non-earning dependents per worker and 26 days of work per month (Bhagat, 1997). The poverty line wage in 1998 would be Rs. 521. In April, 1997 the wages were revised and ranged from Rs. 57 to 69 in various industry groups, that is, they have been revised to just above the poverty line. We first compare the money wages obtained in 1998 with the minimum wages in 1994 assuming that no revision of the wages has taken place till now. Then we compare them with the new revised rates. In all the selected industry groups the daily wage earnings obtained by men were higher than the statutory minimum wage prescribed in 1994. However, women workers in four of the industry groups received less than the minimum wage of 1994. In the seven industry groups where we obtained the new rates, the observed wages were above it in only one case of public motor transport. Since the focus of the survey was the informal sector, sample workers were asked questions regarding the registration of the unit in which the employee works. In cases where an employee is not able to provide information regarding the unit-as it often happens---an attempt was made to identify the nature of the unit by asking a certain number of supplementary questions. Units in the informal sector are those that are not included in the public or government sector, cooperative sector and are not registered with the Indian Factories Act. Also, the units that could not be identified are taken to be in the informal sector, and constituted only about 7 per cent of the total sample in the survey. In all about 64 per cent of the male and 40 per cent of the female employees were engaged in the informal sector in these 19 selected industry groups. Of the ten industry groups in which male workers were engaged in both sectors, the wages in the formal sector were higher in eight. In general, males in the informal sector also received wages above the minimum in 1994. This trend, however, changes if we consider the indexed minimum wage at the lower end of the range Rs. 45, or the poverty line wage in 1998 Rs. 52. The average male wage in the informal sector, Rs. 46.8, is just about equal to the indexed wage and below the poverty line wage. The average female wage, Rs. 36.9, is way below either of these wages. In the 19 industry groups male workers in only nine received wages abpve Rs. 52, and in 13 industry groups they received wages higher than Rs. 45. Among women and in the informal sector the situation was obviously much worse. The NCL minimum wage demand of Rs. 125 per day appeared a distant dream even in the formal sector. The only industry groups in which workers received wages above Rs. 100 are those employed in the Municipal Corporation and in a petrol pump. V. EMPLOYMENT AND INCOMES IN SELECl'EO INDUSTRY GROUPS

IN AHMEDABAD Clearly a high wage alone cannot assure a reasonable level of living. According to the NCL, the minimum wage of Rs.125 should be accompanied by at least 250 days of employment, which amounts to only about 21 days in a month. Average days of employment obtained in industry in Ahmedabad is presented in Table 4. Men in all enterprises, both formal and informal, obtained more than 250 days of work in all industry groups, except bobbin industry, roof-tile manufacturing, construction industry and in the petrol pump. Women in four Digitized by

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UNIVERSITY OF MICHIGAN

Table4 lnduatry-wiae Daya of Employment in a Y•ar, Ahm'!Clabad 0

-·

z

Rice, flour or dal mill

Bakeries Cotton ginning IE cotton pressing (heavy, light) Bobbin industry Textile processing industry Pulp and paper board manufacturing Printing press Rubber or rubber products industry Roof-tiles manufacturing Industrial engineering (establishments employing less than 50 workers) Electronics industry Consb'uction or maintenance of road or building operation Shop and commercial establishments (650-689) Petrol and diesel oil pumps Hotel and restaurant Public motor transport Local authority (municipalities/ corporation) Hospitals and nursing homes, dispensary, clinical laboratory Automobile repairing workshops and garages Total

Source: Field Survey.

Informal sector

M

F

M

p

M

F

339 360 296

236 -

-

-

'297 215

339 360 240

208

258

209

280

312

312

312

300 306

-

(1)

c..

Formal sector

215 262 306 306

-

236 -

-

318

-

104

52

104

316 321

-

318 312

-

210 291 208

161 327

227 341

-

-

300

360

318 52

-

-

-

-

-

-

275 322

-

209

161

290 208 301 185

327

304 313

260

313

260

-

360 -

324

326

360

314

326

292

-

360

-

280

240

292

244

272

-

-

-

334

-

I ~

~

287 239

~

INR>RMAL SBCI'Olt IN INDIA

134

out of nine groups obtained less than 250 days of work and those in the textile processing industry received on an average only 208 days of work. Full employment of 26 days a month or 312 days per year was secured in the rice/ flour mills, bakeries, rubber product, industrial engineering, electronics, municipal corporation and hospitals/nursing homes, etc. Workers in the infonnal sector obtained on an average slightly lower number of days of work. The daily wages received and the number of days of employment obtained in a year determine the annual income of the worker. The average income in the year in the selected industry groups is presented in Table 5. Taking the NCL norm of Rs. 125 per day and 250 days of employment, the annual income of the worker should be Rs. 31,250 and only workers in the municipal corporation received wages above this amount as per the survey of workers in Ahmedabad city. If we take the poverty line wage of Rs. 52.1 and full employment of 312 days in a year, we obtain an annual income of Rs. 16,255. Male workers in only five out of 19 industry groups and women working in the municipal corporation and pulp and paperboard manufacturing industry alone received wage earnings above this level. Among the informal sector male workers, only those employed in bakeries, industrial engineering units and in the petrol pump received wages above Rs. 16,255. The poverty line wage with only 250 days of employment implies an annual income of Rs. 13,025. Male employees in the rice and flour mills, bobbin, roof tiles and electronics industry, shops and commercial establishments, hotel and restaurants and automobile garages receive income even below this level. In the informal sector many more groups have employees earning average incomes below this bare minimum in the city.

Wages, Employment and Incomes in Construction lndusby The minimum wage rate in the construction industry for unskilled workers was fixed at Rs. 33.8 in Gujarat. However, the construction industry is also included in the Minimum Wages Schedule of Employment of the central government so that besides unskilled work, wages are also fixed for semi-skilled, skilled, and highly skilled workers. The wages are also specified according to city size with Ahmedabad being included with the four metropolitan cities. The wages ranged from Rs. 37.2 to 67.2 on December 31, 1994 (Table 6). Alongside we also present the wages for 1998, assuming that these were revised according to the Consumer Price Index for Industrial Workers. The wages ranged from Rs. 52 to 94. The new revised wages in April 1997 ranged from Rs. 60-69, which were actually below the wages using the CPI. It is not known how exactly skill level in the schedule of the central government is defined. For the construction industry in Ahmedabad we defined these levels according to the following occupation groups. Unskilled work:rs include loaders and unloaders. Semi-skilled workers include white washers, pipe layers and construction workers not elsewhere classified, and workers included bricklayers, masons, reinforced concrete workers, tile and roof layers, plasterers, supervisors and foremen, and carpenters, plumbers, blacksmiths and electricians working in the construction industry. It is difficult to distinguish between skilled and highly skilled workers in the industry and Digitized by

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Tables Industry-wise Average Income of Employees in a Yeas; Ahmeclabad 0

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The average days of work obtained and the average annual net income are presented in Table 8. Among homeworkers, in eight out of 17 products women obtained less than 250 days of work, which partly reflects the seasonal nature of the activities undertaken. This, together with the relative low wage rates, results in net annual incomes which are well below any acceptable norm. Among men homeworkers, dress and pant stitching appear remunerative yielding relatively high net incomes. The homeworkers often have to incur some costs in the manufacture of the product, which are deducted from their earnings for computing the average annual net income of these workers. There is also a cost of rejection of the finished product by the contractor (Jhabvala et al., undated). However, in tl:tis study we did not make any attempt to record •'us form of cost incurred. The net daily earnings (excluding a~:· C'Xpenses incurred) is computed and presented in Table 8. When compared with the gross daily earnings (Table 8) this is found to be lower in respect of a number of products, for example, in garments. In the case of products where the earnings of these workers remain the same the production process requires minimal expenditures to be incurred, e.g., beedi and agarbatti rolling. The daily net wages received by female garment makers is Rs. 31 .5, which is below the daily wage rate of Table& Daya of Employment, Annual and Daily Net Income (Ra.) and Worbn with Family Helpen among Homeworken in Unorganised Manufacturing, Ahmedabad

Name of the product

Daily net • earrungs

Average

Average days per year

aMualnet income

With helper (%)

Male

Female

Male

Female

Male

Female

Knicker stitching

360

236

4322

360

218 312

47577

12.0 132.0

13.9

Dress stitching Frock stitching Pant stitching Shirt stitching Petticoat stitching Salwar stitching Blouse stitching Mattress cover making Shirt cutting Garments manufacture (total) Kite making Sequins pasting Agarbatti rolling

3275 14043 6562

• •

34897 15351

•

5797

-

•

210

•

•

360

•

240

300

360

•

13135 19684

4247 4498 13?96

295 249

236 225

60

210 272 310 159 295 240

239 297 190

180

Betdi rolling

Hair-band making Ring embroidery Paper flower making

•

34202 12832 1799 3595

•

7434 5604

•

•

54.7 54.7

3885

115.9 51.5 5.0

5351 9424

20.0

3686 •

1842 2640

64.4

21.0 146.0 51.7 30.5

•

25.0 20.2 12.4 46.0 •

31 .5 24.9 18.5 19.7 30.4 23.2 6.1 11.0

Source: Field Survey.

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33.3 0 25.0 40.0

50.0 0 25.0 40.0 66.7 66.7 23.5 44.4 33.3 50.0

WAGl!S AND EMPt.oYMENr IN UNORGANJSBD 5Ec:roR

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Ra. 33.8 fixed in 1994 for the garment manufacturing establishments with more than three workers. Many of the homeworkers were helped by their family members. As shown in Table 8, about 25 per cent of garment making homeworkers engaged family labour, which if included, further reduces the net incomes received per worker. Under the Minimum Wages Act in Gujarat, minimum wages are defined for only two piece rate manufacturing activities undertaken by homeworkers. The numerous activities in which homeworkers are forced to eke out a living are not included in the Schedule of Employments under the Act though most of them will meet the inclusion criterion of at least 1,000 workers. It is thus clear that a large proportion of homeworkers receive wages close to or below the poverty line and even the lowest nonns of minimum wages do not apply to them. VIL ISSUES IN WAGE POLICY

The ILO's Minimum Wage-fixing Convention (No. 131), the Government of India's Report of the Committee on Fair Wages (GOI, 1949) and the 15th ILC have stated the elements to be considered in determining minimum wages. Various court decisions have also been in favour of a minimum wage that includes, besides minimum food requirements, clothing, housing and some social protection. Fixing minimum wages, as stated by the ILO, should be seen as a step towards formulating a policy designed to overcome poverty and provide social protection to workers. However, various committees and commissions have eroded these norms and lowered them over time. Even the minimum calorie norm has been reduced. Currently, the government is keen to implement a National Floor Level Minimum (Subsistence) Wage, Rs. 35 per day, for unorganised establishments. A comparison of wages in the organised and unorganised sectors showed that while real wages in the organised sector are maintained over time, those of the unorganised sector have been declining. This is attributed to the DA component attached to the organised sector wages. Relative wages, therefore, continuously move in favour of the organised sector. In principle the statutory minimum wage is also indexed, but the respective governments are very slow in introducing the new minimum wage schedules, with the result that the wages of the unorganised sector are eroded in the meantime. Presently, the statutory minimum money wage is fixed at a very low level, close to the poverty line wage. The average daily wages received by the workers, in many industry groups in Ahmedabad covered by the Act, are also close to this poverty line wage. This is particularly true of workers in the informal sector and women workers.

1. Restrictive Criterion The criterion of inclusion in the Schedule of Employments of the Minimum Wages Act in order to fix a minimum wage, is an unnecessarily restrictive criterion. The survey of Ahmedabad city showed that only 44 per cent of the employees are included under this Act. In fact, only 26 per cent of women are

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INFouw. 5ecroR IN iNDlA

engaged in the industries covered under the Act. Therefore, a large proportion of workers are left out of the purview of the Act. The proportion of workers in the informal sector as a whole not covered by the Act would be much greater. Only two activities undertaken by piece rated homeworkers, beedi rolling and garment manufacture, are included in the Schedule of Employment in Gujarat. The additional criterion for inclusion in the Schedule namely, that at least 1,000 workers being engaged in this activity, prove unduly restrictive for many homeworking trades. There is no systematic enumeration of unorganised labour in the country. In the catlf' of homeworkers the invisibility of their work makes enumeration difficult and their existence is, therefore, difficult to document and prove.

2. Minimum Norms of Employment It needs to be pointed out here that high wages alone are not enough to sustain livelihoods; minimum days of employment in the year are also required to achieve this objective. We observed that a minimum norm of 250 days is not met in a number of industry groups in Ahmedabad, which together with the low daily wages result in poverty level annual incomes. Even in the industry groups included under the Minimum Wages Act, annual net incomes remained below acceptable norms due to a combination of low daily wages and insufficient days of work. Thus, a meaningful wage policy would also require an assurance of minimum days of employment. In the informal sector the most pitiable conditions are faced by the piecerated homeworkers, about 85 per cent of whom are women. What is more, only two such trades are covered under the Act. In Ahmedabad city we estimated that 37 per cent of the homeworkers are included in these two trades. However, in the case of garment manufacturing the statutory minimum wage applies only to establishments with at least three workers, which implies that the homeworkers engaged in garment manufacturing are not officially covered by the Act.

3. Need for Meaningful Wage Policy Fixation of a minimum wage for piece-rate work is difficult in cases such as garments where the standard piece itself varies and so the worker is deprived of his rightful wages in various ways. Wage fixing has to take account of (a) the number of pieces a standard worker can make in a standard eight-hour day; (b) the rate of rejection; (c) the cost of inputs supplied by the homeworker, and (d) the cost of time spent in maintaining machinery. Notably, the ILO Convention on Homework has specified compensation for costs incurred and time spent in maintaining machinery, so to offset the loss sustained by the workers due to this activity. Presently the Labour Deparb1tent has the responsibility of deciding which trades to include in the Schedule of Emp_loyments of the Minimum Wages Act and whether it meets the various eligibility criteria including the minimum of 1,000 workers. The NCL has now demanded a tripartite mechanism, including trade union and local governments, to help implement the Act. Such a mechanism also needs to be evolved to determine the inclusion of various trades under the Act. Further, the treatment to be given to seasonal workers

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and whether a minimum number of days of work in a year is required for inclusion as a worker in a trade needs to be clearly spelt out. Overall, a meaningful wage policy has to include, besides a minimum wage fixed at a reasonable level, provision for assured employment for a minimum number of days. In the present day context of globalisation and informalisation of the workforce, a mere National Floor Level of Wages is not sufficient to protect all the workers. While the existing legal provision enables the government to protect organised sector wages with periodic revisions, the unorgani.sed workers remain largely neglected. Needless to say the least the government can do is to·give them laws with teeth, so that these workers and their organisations can effectively fight for their own rights. (TIit Glljtmlt hatihdt uf Dtr,elop1111nt Raarr:lt, Jigw, tffltl II Imm uf inoatigatontlt SEWA, Mlp«I in tM coU«tion IIIUI coding uf tM suroty "4111. Tht author toOUld like to tJumk all of thmt, the

umini,tnitiw staff, SEWA KAlJHfflll Mdstll and J. Y11gnik, GlDR for their dw,ful support. Roponsibility for any e,,ors in intt,pretlltion mnllins with the 11Uthor lllone.)

References Bhagat, Manju (199'1), "Poverty and Minimum Wages•, The lndum /Olmtlll ufuabour Eamomics, VoL 40, No. 4, October-December. COi (1949), Report uf tht Committtit cm Fair W11ga, Ministry of Labour. Government of India, Simla. 1W (1996), lnternlltio,u,J uabourConwntions 4nd · , Vola. 1, 2 and 3, 1919-1951, 1952-76, 1977-1995, Geneva. jhabvaJa, R. and R. Shaikh (undated), W11P"Fimtion for flo,1~ msai Pita-rrlte Workers: 'Ddrnu»l Shuly Bosed on II Su, oey uf Workm in Gufam,t, btdill, SEWA Academy, SBWA (mimeo). John, J. (199'1), "'Minimum Wages: On Vicious Consumption of Labour Power and Unrea!isnd Potentials•, Lllbour File, VoL 3, Nos. 3 and 4, March-April. lAbollr File (199'1), "Unorganised Labourers in the Country'", Lok Sabha, Unsta.rred Question No. 5038, Vol 3, Nos. 3 and 4, March-April Mathew B. and S. Babu (undated), Drrlft.Thesis on tM Ntal Based Minimum Woga, (mimeo). Subrahmanya, R.Iuld not be made became of the non-avatwbility of data couespooding to the new investment limit for the SSls, i.e., Ra. 60 1akha. Sourr%: Central Statistical Organisation (1993), Amnuu Surwy of lndll8tria: Sllffl1nll1Y Rmua for Ftldory Stdor-1989-90, Ministry of Planning and Programme Implementation, New Delhi.

Table3 Compoeltion of Output ln Small Scale and Village Induatri• Sector Product groups

1979-80 (% share)

A. Traditional sector Khadi Village indushies Handloom

Seriaaltwe Handicrafts Coir B. Powerloom sector C. Modern SSI sector (S100)• AD sectors

Note:

1989-90 (% share)

13.3 0.3 1.0 5.2 0.4 6.1 0.3

10.8 0.2 1.0 3.0 0.4 6.2 0.1

9.7

8.6

77.1

80.6 100.0

100.0

• 5S1s registered with Small Industries Development Organisation (SIDO).

Source: NCAER (1993), Table 3.7, pp. 65-66.

2. Pattern of Spatial Disbibution An integrated scalar structure might also imply uniformity in the spatial distribution between the large scale and small scale sectors and also among the different segments of the small scale sector as observed in Table 4. Since there is a gap in the data for the unorganised sector, it is not possible to make a proper comparison across the organised and unorganised sectors. Nevertheless, one finds a close similarity in the list of the top seven states in terms of the number of units between the segments within each of the two categories, though more in the case of the unorganised sector. Incidentally, the four states which appear in the list of all the four scale sectors are industrially more developed states, viz., Maharashtra, Gujarat, Andhra Pradesh and Punjab. (If data for the unorganised sector in Tamil Nadu were available, it might also have found a place in this list). Digitized by

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Moreover, there is evidence ( N ~ 1993) that the small scale sector has tended to concentrate in the vicinity of large industrial centres like Mumbai, Delhi, Ahmedabad, and also in the periphery of large scale undertakings, e.g. in Bangalore, Bhilai, Rourkela and Ranchi. The more noticeable fact is that, even when the process of dispersal takes place, it follows the path of expansion of the large scale agglomerates. The expansion of the Mumbai-Thane-Pune-Nasik or Delhi-NOIDA- Ghaziabad-Faridabad-Gurgaon or Bangalore-Tumkur-Hasan belts are examples of moving together, or the small scale sector following the path of the large scale sector.

1able4 Top Seven States According to Total Number of lndusbial EnterpriHe in Different Scale Seeton 51. no. Factories

SSls (5100)

DME+NDME•

OAE•

1. 2. 3. 4. 5.

Uttar Pradesh Madhya Pradesh TamilNadu West Bengal Punjab Andhra Pradesh Gujarat

Maharashtra West Bengal Uttar Pradesh Andhra Pradesh

West Bengal Uttar Pradesh Andhra Pradesh Maharashtra Madhya Pradesh IRMAL SBCIOR IN INDIA

regularised. However, of the total number of irregular workers as many as twothirds could be classified as belonging to the irregular I category. As in many cases the list of workers included members of the family, even these benefits were limited. The remaining workers (of irregular II category), never received benefits of any kind. The factory owners could attract skilled labour, preferably from Than, by extending long-term 'interest free' consumption loans upto Rs. 20,000 for the workers. Such an arrangement seemed to fulfil a part of their needs, as the availability of a lumpsum cash loan could be used for major household consumption purposes, including house construction, marriage and even repayment of older loans elsewhere. The loan could be repaid through regular deductions from the daily /monthly earnings. However, in some cases it was reported that not only an interest of two per cent per month was charged, but no worker could 'run away' without settling the loan. Incidentally, often factory owners compete with each other, by offering bigger loans, to attract better and more skilled workers, who continue to be vital inputs in an industry dependent largely on manual effort. An earlier report describes, "the practice followed by the employer as follows: He brings the workers along with their families from the scarcity-prone villages of Saurashtra, notably Surendranagar district, after 'freeing' them of the local debt by giving a certain advance. This advance is the beginning of a new vicious circle from which the workers never emerge. They can shift their loyalty only if the incumbent employer is ready to pay the past debt. This keeps the workers perpetually in debt" (Shah, 1996, p . 10). Additionally, the health hazards arising out of the particular nature of labour process and substances handled not only reduce their working life but also increase medical expenses (Saiyed et al., 1995; also number of reports in local papers in recent years). The status of workers, as in the case of the ceramicware sub-sector, raises interesting issues. Apart from the oft-discussed phenomenon of contract labour in the large manufacturing sector, the small-scale industrial units could also be largely dependent on temporary workers. Such a practice need not occur only under a situation of production sub-contracting. In a large number of subsectors, dominated by small enterprises, the entire production process is carried out within the unit itself. The conventional notion of small firms as being essentially dependent upon their large counterparts as their appendages can be quite misleading as it conceals the phenomenon of non-contracting registered small firms employing few or no regular workers. The employment registers in formal small units may present a scenario which is in complete contrast to the reality.

3. Mode of Payment and Earnings An aspect which has hardly received any attention in the available official statistics on employment and also in studies based on such data relates to the mode of payment. Information on this dimension becomes essential in not only arriving at a better estimate of income of workers, but also for recording the terms of employment under which they are working. Such an evidence would, inter alia, have significant policy implications, especially in case of the unorganised manufacturing sector. Digitized by

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Two fundamental forms of mode of payment have been identified, as the time-wages and piece-wages. The former could be paid on a daily, weekly or monthly basis, depending upon the value of labour that is spent and nature of work during a given time period. Notwithstanding the high incidence of irregular workers and also certain kind of work, especially in the kitchenware and sanitaryware units, e.g., breaking different mineral blocks into small pieces, mixing mortar, attending to machines, raw material stocks as also work in process, and odd jobs like sweeping, etc. the practice of daily-wage payment seems more prevalent in the relatively large registered units than in the unregistered units. Table 10 presents prevailing daily wage rates across sex and skill categories in registered and unregistered ceramicware industry, respectively. The minimum wage levels in the registered units is invariably below the prescribed rate under the Minimum Wages Act. Further, the wages paid in the unregistered units are often much lower compared to those in the registered units, across sexes. lable 10 Daily Wages and Earnings in Ceramicware Industry, Gujarat

Fen1ale

Male Registered Unregistered Workers Skilled 59 40 Minimum (1770) 70 Maximum (2100)

Unskilled Minimum Maximum

53 (1590) 62 (1860)

Registered Unregistered

52

(1200) 60 (1800)

(1587) 65 (1950)

50 (1500) 50 (1500)

40

50 (1500) 61 (1830)

50 (1500) 50 (1500)

(1200)

60 (1800)

Child

Registered Unregistered

-

-

60 (1800) 20 (600) 30 (900)

20 (60C)

Note: Figures in brackets mdicate monthly earnings (for 30 working days).

A prominent mode of payment of wages is the piece-rate system. A detailed discussion on the nature and implications of this system can be found in Marx (1983, pp. 516-523). It may be useful to delineate on the distinctive attributes of the piece-wage system. The nature and implications of piece wages can be comprehended from the following extract "The quality of the labour is here controlled by the work itself, which must be of average perfection if the pieceprice is to be paid in full. Piece-wages become, from this point of view, the most fruitful source of reduction of wages and capitalistic cheating... Since the quality and intensity of the work are here controlled by the form of wage itself, superintendence of labour becomes in great part superfluous" (Marx, 1983, p . 518). The piece-rate system, mirroring the confused status of the labour as both 'free' (in terms of choice of working hours and employer) and 'unfree' (as not being able to influence the rate of payment and losing on the collective bargaining front), is hardly reflected in the available database. Also the prevalence of such a mode of payment restricts meaningful analyses of the labour market situation, including those relating to discrimination based on gender, age and social security (Sparke, 1994). Digitized by

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The piece-rate system of wages was widely prevalent among the unregistered units (Table 11) with 88 per cent of the units reporting its adoption. Interestingly, almost half the sample registered units stated that they have followed the piece-rate system of payment. It may be noted that in the case of processes/activities which are characterised by indivisibility or lumpiness it becomes difficult to pay piece wages. Also, the nature and degree of mechanisation can largely determine the extent to which the piece-wage payment mode is feasible. In the ceramicware industry, given the level of technology in different manufacturing processes, a number of activities are still amenable to payment on piece basis. Tablett Prevalence of Piece-rate System of Wages in Ceramic Industry 1ype of wuts

No. of wuts

Registered Uruegistered

19 (47.5) 22 (88.0)•

Nott:

Figures in brackets are percentages to respective total of sampled wuts.

• Percentage based on a total of 25, instead of 35, as 10 wuts did not report hiring any worker.

The mode of payment and the rate at which payments are made eventually determine the level of earnings by the workers. Before we discuss at some length the specific process/ activity-wise wage payment status and level of daily income, a couple of points deserve mention. First, as the wage pa~d shall be based upon number of items made or number of times a certain activity has been performed, the natural inclination of the worker would be to stretch his/ her working time and effort so as to be able to make 'some more' items or pieces. As there is always a physical limit upto which one's body can work effectively, the number of extra pieces made might actually decline, following a typical rise in the early phases. Essentially, the level of average daily earnings over a period of time would remain low, if not decline substantially. Second, the only way the earnings could rise is by increasing the rate per piece. As mentioned earlier, the very functional dynamics of the piece wage system is such that, through reinforcing individuation, the scope for a demand for a hike in the rate (per piece) is virtually annulled. The basic purpose of emphasising the mode of payment aspect goes far beyond making a case for another variable. Such an information could be used purposefully in terms of addressing complex labour issues in the informal sector as also influencing policy intervention for the benefit of the sector. No less important is the fact that it could enable one to obtain a more precise and reliable estimate of the factor incomes. Based on the primary survey, an attempt has been made to compile information on the prevailing piece rates across product types and the average number of items that could be made by a worker under normal physical conditions (Table 12). That, in general, the average daily earnings are low (as compared to the daily minimum wages of Rs. 50 for females and Rs. 62 for males), across both registered and unregistered categories of units, is fairly obvious. The average daily earnings in certain items manufactured in the Digitized by

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193 registen!d units, namely, the bigger sized elecb-i(a} insulating equipments and the washbasin and toilet pans are relatively higher. Table12 Average Daily Eaminp of Worken, Ceramic Products Piece rate (Ra.)

Toya

Small: 0.25 Big: 1.00

Elt.chic equipment (iron) Big" 2.25 Plate: 0.60 Heater Finishing (F) 1 doz: 0.25 Cup and saucer

Cups and saucers· 1 piece: 0.05-0.06 Glazing(F) 1 piece: 0.05-0.04

lrolley fillings" 1 piece: 0.01-0.02 Sticker(F) 1 doz: 1.25 Line draw (F) 1 doz: 2.00 Packing(F) 1 doz: 0.25 Sanitaryware

Washbasin/ toilet" pan: 3.00-4.00 P-trap: 2.00-

No. per day

Daily eaminp per capita (R,.)

100-150 40-50

25-40

40-50

~

lOOdoz lSdoz

55-60 35-40

40-50

1000

1000

2500-3500

25-70

25-40doz

40-50

35-Wdoz

70-80

160doz

40-50

40

120-160

20-25

40-50

Note: • Concerns registered units; ••concerns both registered and unregistered units; 'F indicates that the activity almost entirely engages female workers.

It is important to note that, especially in the unregistered units, a number of activities are reserved almost exclusively to female workers. For instance, jobs such as fixing decorative stickers and drawing lines on the whi~ glazed cups and saucers, which are extremely strenuous and which demand utmost care and attention, are generally done by women. Similarly, jobs like packing the fragile cups and saucers with straw in the poorly lit and unclean surroundings involving both skill and tenacity by women could affect their health. An issue of more serious concern is that apart from such adverse working conditions, the average daily earnings of female workers fell far below the stipulated minimum wages. The utility of official statistics would be enhanced by including gender disaggregated information on mode of payment and daily earnings in the unorganised manufacturing sector.

V. HOW RELIABLE AND USEFUL ARE OffJCIAL ESTIMATES OF EMPLOYMENT?

Despite an increasing appreciation at the theoretical level of the nature, role and contribution of the informal sector in national economies, no commensurate improvement has occurred in the quality of the instruments and method of collection and reporting of official statistics. The data gathering and Digitized by

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reporting system as it exists now in India suffers from inadequacies arising mainly out of omission of production sectors (often justified as 'non-sampling error'); and non-recognition of the aspects in production organisation which constitute 'informality'. In the case of the ceramicware sub-sector, the extent of omission in. the unregistered sector has been found to be quite serious with only about 3 per cent of the total number of units being included in the official statistics. Likewise data available on employment is less than 2 per cent of our estimate. Moreover the actual status of employment in manufacturing units is often unclear and also goes unrecorded. Even if the records are maintained, these do not necessarily reflect the ground reality. This contributes to the generation of improper and unreliable data on the sector. Through this case study, we have demonstrated the typical problems associated with the reporting practices as also the inadequacies of the data collection machinery. Against the backdrop of these limitations, we have estimated the employment size of the ceramicware industry in Gujarat. The total employment in the unregistered units was estimated as 1292 (as per confirmed list) and 1802 (as per unconfirmed list). The NSSO 51st round (1994-95) survey of unorganised manufacturing units shows an abysmally small number of only 24 workers in the ceramicware industry for the state of Gujarat. As regards production organisation, the case study found that there exists a fairly high degree of informality in labour arrangements even within the registered sector. The first indication of this informality is the existence of large number of irregular (temporary/casual) workers in the registered sector. The second indication, which is hardly addressed in official statistics, is the widespread prevalence of piece-wage system in both registered and unregistered units. Further, the study demonstrated that the conventional notion of small firms as being essentially dependent upon or appendages to their large counterparts can be quite misleading as it can hide the phenomenon of non-contracting registered small firms employing few or no regular workers. VI. CONCLUDING OBSERVATIONS

In the light of the above, it is important to recognise that informality of labour arrangements is a deeply entrenched phenomenon in the production relations in both registered and unregistered sectors, which blurs even the otherwise clearly defined official boundaries between these two sectors. This recognition should be central to any effort that is directed at eventually doing away with the ills of informalisation. A related point is the need to enhance the quality and utility of data gathering instruments and methodology of data collection by incorporating aspects like terms of employment, mode of payment, formalinformal interrelationship, technological change, and, if feasible, the labour process, thus ensuring a realistic coverage of sectors and sub-sectors. It has been shown time and again that most of the registered sector units in India strengthen their competitiveness by flouting even the basic norms and laws. In other words, the existing mechanisms for formalisation of enterprise activity are not adequate for ensuring security of work and earnings of a large proportion of labour. It is clear that unless the enterprises are motivated to come forward and align themselves with the legal and regulatory systems, this Digitized by

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situation will continue. The rules and regulations need to be so rationalised that they become pervasive. Unfortunately, the ongoing debates on industry and economic reforms are dominated mainly by the interests and concerns of the entrepreneurs, and are practically silent on the right of workers to safety and security. (11us ~ dn,rvs

,q,on DIis, 1999. The author is ptlrliculArly gn,tefuJ to Ninnoli, Banerjee, Mlutlum, SWGminathan, &,nu, Sudarshan, Rmana ]luibuola, A.C. Kulshrtstha, Amitabh Kundu, l.Alit Dtshptmde, Alakh N. Slumna llnd Timi Nair far comments, clllrifiattions llnd su-pport at mrious slagts oftMmuly).

References

•

Banerjee, N. (1985), Women Workns in the Unorganistd Sector, Sangam, New Delhi. Breman, J. (1999), "The Study of Industrial Labour in Post-RMALSliCroR IN INolA

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the manufacture of surgical instruments, domestic workers from each ho,,se perform their own limited job-work on the raw material which has already passed through different hands. These domestic workers can think of hiring hands from the market only under unavoidable circumstances. They try to stay in the labour market by stretching their working hours even beyond their physical endurance. Their small hubnents are converted into sweat shops. Though, on the face of it, they appear to be self-employed domestic workers, in reality, their plight is more miserable than even the hired wage worker, who is not only free from the bindings of the owned means of production but also can sell his labour power wherever he likes. They do not revolt against their exploitation because, under the influence of domestic ideology, they are made to believe that, as independent producers, they themselves are responsible for their miseries. Ill. WAGES AND WORKING CONDITIONS

Wages in the unorganised industry in general, and surgical instruments manufacturing industry in particular, are extremely low. There are various reasons for the low wage rates: One, the very survival of the industry, in the given structural arrangement of production, depends upon the abundant supply of skilled but cheap labour power. Tradition dies hard and capital exploits this constraint of the labour. That is why, even among the bigger manufacturers, the tendency is to stay with the age-old manual hammer, despite the availability of capital-intensive modem technology. However, the stormy liberal whirlwind in the country is already breaking down the old defences for labour-intensive technology and forcing the current generation of workers not to let their children inherit their skill. This has already happened in Sialkot (Pakistan), the original abode of the industry, and the industry in Jalandhar has to follow suit. Two, the decentralised production not only scatters the workers over all the comers of the city; it also tends to rob them of their potential for collective resistance. The ownership of the paltry means of production and the conversion of their own houses to worksites, tend to blunt their class consciousness which always remains compounded with their dominant ideology. Therefore, neither the subjective factors nor the objective conditiC>ns of work are favourable for the emergence of collective resistance from the workers. That is why, it is the manufacturers who have formed their association and not the workers. The complete absence of trade unions in the industry has left the workers at the mercy of employers, who themselves are not free from the pressures of the capricious market. Three, 'underground' nature of the industry insulates it from the implementation of a large number of labour legislations meant for the protection of the workers. Our survey shows that the workers are total1y unaware of the existence of protective legislations. Factory inspectors and labour inspectors, instead of acting on behalf of the workers, often favour the employers who occasionally 'appease' them. Before availing protection from the law a worker has to be recognised as a worker in the eyes of law. In the surgical instruments manufacturing industry more than 90 per cent of the workers do not have the legal status of a worker.

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LABOUR IN SuRGJCAL MANuJIACTUJUNG INDusrRY As far as the mode of wage payment is concerned, more than 95 per cent

of the workers are piece-rated workers. On the basis of their social relation of production with capital, the workers can be divided into two categories: first, wage labourers and the second, those who engage their own paltry means of production along with their labour power. The domestic workers, who self-supervise their labour process, are paid by piece-rates. After the deduction of the cost towards depreciation of machinery and other consumable inputs, such as electricity and some chemicals, a domestic worker is left with the savings of around Rs. 2000 per month. In order to earn Rs. 2000 in a month the worker has to work for nearly 10 hours a day, and 30 days a month. If the calculations are made on the basis of statutory prescription of the number of hours per week and the corresponding amount of wages, the worker hardly earns even two-thirds of the minimum wage. A pure wage worker, whether he is paid on time-rate basis or piece-rate basis, is no better than the so called self-employed domestic worker. He earns between Rs. 800 to Rs. 1800 per month, depending upon the nature of job and the amount of skill involved. The pure wage worker, however, avails weekly holiday which is missed by the domestic worker. It only shows that a major chunk of the workforce in the industry does not earn even the statutory • • muumum wages. Since the industry involves manual skill which is acquired through onthe-job training, a new worker, who joins as apprentice, is not paid any wages. He is rather charged by the employer for imparting him skill which he pays in the form of contributing free labour power. In this way, like the guild masters of the medieval Europe, the employers usurp free labour of the worker, at least for a couple of years. Once the period of apprenticeship is over, he is paid at the rate of nearly half the amount of prevailing minimum wages to start with, which is revised upward over time. The working conditions in the industry are really appalling. In the chain of different steps involved in the detailed labour process, the very first step of forging a red hot piece of iron with hammer is full of risk. At the slightest negligence or lack of coordination between the hammerman and the forging worker who holds the iron piece on the anvil there can be a serious accident. There were workers whose fingers were crushed under the stroke of hammer, while others received burn injuries from the slip of red hot iron with which they worked. A worker who performs a filing job as a part of the next step, sits on the ground for the whole day. His knees are seriously affected due to the prolonged sedentary work. The most affected workers are those who do a polishing job. They do not protect their face against the dust flying all over from polishing the wheel and which when inhaled often causes T.B. and other respiratory diseases. The worst sufferers, are those outside departments of parent units. The dingy dark hutment, full of foul air, turns out to be a grave rather than a home to live in.

IV. FUTURE OF THE INDUSTRY Our interviews have revealed that unless some serious interventions are made at the level of the state government, it would not be possible for the industry to Digitized by

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compete in the market with the present level of available manual skill and the almost non-existent modem technology. There is a limit upto which workers can be squeez.ed and perhaps this has already been reached. The present skilled workers are withdrawing their own children from the industry and are trying their best to settle them in other economic avenues. This only shows that very soon the present supply of skilled workforce is going to get exhausted without refurbishing it from the ranks of the coming generation. At the present juncture, the best course would be for the state to intervene in training the new generation in the use of modem technology, rather than leaving everything to the private initiative and the market forces. The Technical University, Jalandhar should take a special interest and help the state to train manpower in some appropriate institution so that the existing practice of exploiting free labour power in the name of imparting skill to the new entrants is done away with. Left entirely to the market forces, as it is now, not only would the industry may collapse but it may also render mass of workers unemployed, struggling just for physical survival. The President of the Surgical Instruments Manufacturing Association has suggested for establishing of a common facility centre from where big or small manufacturing units could avail the facility of drop-forging. With the introduction of this single machine the face of whole industry can be changed. The drop-forging will increase both the quality and the quantity of the surgical instruments. He also suggested for opening up of a special branch in the Industrial Training Institutes or Polytechnic Institutes of the state to train young students in the skill of manufacturing surgical instruments. The Association was ready to give some training to the stud~nts along with a stipend. Left to the vagaries of the market, the industry may not survive for very long.

Notes 1.

In the absence of easy access to the literature from Sialkot (Pakistan) we had to rely upon the limited literature available in India. We acknowledge our gratitude to l.R. Madan who wrote a dissertation on swgical industry at Sialkot for his MA Economics just before the partition of the country and whose empirical infonnation we have used liberally in order to glear through the history of the industry. The subsequent historical account of the industry is based on the dissertation.

2.

The above mentioned dissertation of I.R. Madan.

3.

Ibid.

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12 Powerlooms in Silk Weaving: Case Studies from Kamataka Supriya Roy Chowdhury I. INTRODlJCI'ION

The expansion of powerloom production in India's textile industry has been widely commented upon. The share of the mill sector in total cloth production declined from 79 per cent in 1951 to 24 per cent in 1987. The share of powerlooms in total cloth production was 47.9 per cent in 1987. This trend has continued-during 1993-94 the powerloom sector produced 19,631 million square metres of cloth out of a total production of 27,900 million square metres by all the three sectors (mills, handlooms and powerlooms) put together. By 1998-99, the share of mills in total production of fabrics has fallen to 5.4 per cent, while that of powerlooms is 74.2 per cent (GOI, 1999). It is generally recognised that the expansion of the powerloom sector leads to a certain degree of displacement for mills and handlooms Oain, 1981; Hussein,1989). In cotton textiles, the mill sector has been mainly confined to the area of spinning, while a few of the larger and more successful mills have moved towards the export market and upmarket domestic consumers. In silk weaving, upper echelons of the domestic as well as export markets are supplied by handlooms, which produce silk textures and designs that are exclusive to handlooms. Powerlooms dominate the production of thinner and cheaper varieties of silk, as well as synthetics which serve the middle and lower end of the market in textiles. Powerloom production can be found in a wide variety of structures, from tiny household units of no more than a couple of looms to fairly large structures with over a hundred looms. As a whole, however, powerlooms continue to be defined as falling within the domain of the "small scale sector" in India's industrial policy. As a result, powerlooms remain outside the purview of the Factories Act, thus making minimum wages inapplicable to the sector. State policy has sought to encourage powerlooms, vis-a-vis mills, by differential excise duties, although more recently the two sectors have been brought at par with regard to excise. The remarkable proliferation of the small scale sector in India's textile industry is interesting, not only because it reflects the specific nature of the

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developmental process being witnessed in India, but also because it raises important issues for understanding the nature of state power vi&-a-vis different forms of capital. The structural changes accompanying economic/ industrial development are supposed to follow a typical, well known trajectory, drawn from the historical experience of the industrialised West: the decline of the primary (agriculture) sector in its relative contribution to national output, the growth of the secondary (industrial) sector, followed by the expansion of the tertiary (services) sector. Spatially, these processes were located in urban areas, and the growth of cities was an integral part of the country's economic growth. This process of growth is also supposed to lead to a shift from the rural infonnal sector to the organised modem sector of industry. The growth of powerlooms, which now drives India's second largest manufacturing industry, indicates a somewhat different trajectory. The typical powerloom operator located in rural or semi-rural areas, frequently a former handloom weaver, works on a loom or two at home with the help of family labour. The spatial context, as also the smallness of the unit, and the nature of labour used have led observers to define powerlooms as falling within the domain of the rural non-farm sector rather than the industrial sector (Vyaslu, 1992). Of course, a large number of powerlooms are also found in cities; here too, units are small while the large units are divided into smaller ones in order to avoid coming under the purview of the Factories Act and the minimum wage legislation. Wages and working conditions are abysmally poor, thus belying the notion that industrial development would lead to the expansion of the organised sector, relative to the infonnal sector.' Thus, the specific pattern of growth of powerlooms would seem to raise the question whether the overall pattern of change drawn from the Western experience of industrialisation is actually occurring in India. Secondly, the pattern of powerloom production is particularly interesting from the point of view of the heterogeneous nature of capital in India's manufacturing industry. Powerloom units range from the "tiny" sector-one or two looms operated by family labour within the living quarters of the owner-to units with large numbers of looms, fairly state-of-the-art technology, and wage labour. In the latter instances powerloom production would seem to embody the typical characteristics of large or medium scale capitalist production i.e., capital and labour structurally differentiated. Finally, powerloom production continues to play a central role for mercantile and usurious capitdl. A large number of small and very small owners are handicapped by their inadequate access to the market, as well as uncertain supply and fluctuating prices of raw materials. Given this situation, the industry is largely controlled by groups of merchants who trade in raw materials, lend money to small producers, and trade in the processing and selling of the finished product. It is this remarkable heterogeneity in the structure of capital, and in forms of organisation in powerloom production that lead to the questions pursued in this paper. First, what has been the role of state policy with regard to powerlooms? (government's policy in this sector can be seen in terms of three areas: credit, taxes and reservation; this paper will primarily look at govemmeni credit). Secondly, what are the specific dynamics of the relations of production that sus~ain the continuing role of mercantile and

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usurious capital in powerloom production? Finally, what att the political implications of the diversity of interests and capital associated with this sector? Has this enduring and expanding structure of production shaped a specific political identity or identities, interests, and organisations? What forms of political organisations have addressed themselves to the diverse issues around powerlooms? II. SILK WEAVING AND POWERLOOMS IN KARNATAKA

Within the limits of this paper, these questions will be addressed in the context of the role of silk weaving in two selected areas, in the state of KamatakaDodhbollapur and Anekal. Kamataka manufactures over 60 per cent of the total silk production in India and powerlooms play an important role in this production. In Kamataka, powerlooms have been growing with an additi9nal loomage of about 5 to 6 per cent annually. The total number of powerlooms at present is 57,027. With an average of 1.5 persons employed per loom, the total number of persons engaged in powerloom production is around SS,000 (Government of Kamataka, 1997). The major concentration of powerlooms is found in the following places: Dodhbollapur, Mangalore, Anekal, Belgaum, Mysore and Rabhavi. Even a superficial survey would reveal certain features in this sector that would call for the attention of both scholars and policy makers. First, a large number of weavers in this sector earn a monthly income that places them close to the poverty line. On the other hand, a small number of traders, mostly hailing from the state of Rajasthan, are engaged in what seems to be a highly profitable trade in the supply of raw silk and selling of finished silk products. These traders play the classic role of the "master weaver" or "middle-man"; though they do not play any part in the production process, or in fixed capital investment, they nevertheless control the entire production process by virtue of their monopoly control over the supply of raw material and their privileged access to marketing channels. Second, the government's role in this context can be seen in terms of two functions: one, in the supply and regulation of the raw silk market, and two, in the provision of credit to weavers' cooperatives. Governmental intervention, through the agency of the Karnataka Silk Manufacturing Board, in stabilising prices in the raw silk market has been minimal and ineffective. With regard to credit, powerloom weavers are entitled to government loans only as members of cooperative societies. Extremely poor records of loan recovery from the cooperatives has led to a situation where government credit for powerlooms has by and large dried up. In both these functions, the government appears to be playing an indifferent role. 2 Finally, while the level of economic discontent amongst weavers seems to be fairly high, the level of political mobilisation around the issues that most negatively affect them, i.e. the lack of non-availability of government credit, and the destructive role of middlemen, seems almost non-existent. Local leaders have perceived the solution to the weavers' problems to lie in the formation of production and marketing cooperatives. However, the failure of the cooperative movement stands out starkly in the recent histories of both locations. Large-scale misappropriation of resources and their mismanagement

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have turned most of the cooperatives into virtually defunct bodies, lacking credibility with the government and amongst members. Thus, this paper argues that the manipulation of market forces has led to the continuing stranglehold of mercantile and usurious capital on a majority of small powerloom weavers in Kamataka. This situation which can be seen as one of the extreme distress from the point of view of the individual weaver, and more broadly, an extraordinary anachronism in the context of India's 50 years of developmental planning, is possibly underlined by two central factors: the inability of the state to effectively intervene both in the organisation of raw silk production and its marketing, and the failure of the cooperative movement to provide the political and institutional framework within which alternatives to mercantile capital may have emerged. Ill. SILK WEAVING IN DODHBOLLAPUR AND ANEKAL

1. Weaving in Dodhbollapur Oodhbollapur is a very small town with a population of 50,000, located 40 kilometres to the north of Bangalore. Almost 90 per cent of the population is engaged in powerloom silk weaving. There has been no proper census of the number of looms; however, local observers placed the number of looms at somewhere between 20,000 to 25,000. The numerically dominant community of weavers in Dodhbollapur belongs to the Devanga caste, who have traditionally been handloom weavers and switched to powerlooms in the 1940s with the electrification of the area. There are no handlooms to be found in Dodhbollapur. A survey of 250 weavers' households in Dodhbollapur generated information on households on the basis of loom ownership (fable 1). It was thus found that households operating two to four and five to ten looms comprised 60 per cent and 25 per cent, respectively of the households surveyed. Households operating 12 to 40 looms comprised 6 per cent and those with more than 40 looms comprised 5 per cent of the sample. This paper focuses mainly on the first category (150 households or 60 per cent operating two to four looms) not only because of their preponderance in the sample, but also because these seemed to be representative of the largest number of weaver households in Dodhbollapur. Table 1 Ownership Pattern of Powerloom Households in Dodhbollapur Number of looms

Number of sample households 150

2-4 5-10 12-40 > 40

62

15 12

Total number of households

250

Source: Sample Survey of Weavers' Households in Dodhbollapur.

A remarkable feature of this category of household was that over 80 per cent of the weavers described their work as "job-work" or "conversion", both

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being terms which mean that the weaver receives the raw silk (yarn) from the trader and is paid a price on the finished product per metre. Conversion in this context thus meant converting the raw silk into woven material. Most weavers in Dodhbollapur produce what is known as grey silk (undyed) with only a plain zari border; the conversion charges, paid by the trader to the weaver for six mebes of this material work out, on an average, to be Rs. 6 per metre. For a weaver with an average daily production of 10 metres, the daily earning is Rs. 60, out of which he must pay for electricity, and labour where applicable. (Conversion charges and the price generally vary depending upon the weight of the material; for the present purposes, the calculations are being made on the basis of the lowest quality silk woven, in which six metres is equal to 40 gram). For the small number of workers in this category (20 per cent) who buy the raw material and sell the finished product (described as "independent", as distinct from "job work" or "conversion"), the selling price is on an average Rs. 50 per metre. The cost of the raw material for this variety of silk works out to something like Rs. 13 per metre (the cost of raw silk for this variety being Rs. 2 per gram). Accounting for electricity, rental, and labour charges, wherever applicable, this leaves the weaver with a margin of Rs. 11-12 per metre. With an average daily production of 10 metres, such a person would be earning a profit of around Rs. 120 per day. Thus, the average monthly income of "independent" producers is slightly more at Rs. 1866-than of those who are in the "conversion" activity-Rs. 1633. For a six-member household, individual earning per month per capita would be Rs. 311 and Rs. 272, respectively. This income structure places the two types of households within this category just above and below the poverty line, respectively. 3 It is important to note that those who described themselves as "independent" and those who are engaged in "job work", or "conversion" are both dealing with a group of traders who are known in local parlance as "master weavers". This group comprises exclusively a number of Marwari traders who have settled in Dodhbollapur over the past forty years and in addition to the silk trading, have extensive property interests in this area. They are first generation settlers from Rajasthan, hailing largely from a trading and mercantile community. A trader who pays a conversion charge of Rs. 36 for a six-~etre sari, sells the same in the retail market in Bangalore for Rs. 650. Allowing for raw material cost of around Rs. 70, conversion charges, processing charges and transportation costs, the profit margin for the trader is still substantially larger than what he pays to the producer. The basis of the trader's machinations vis-a-vis the weaver in Dodhbollapur is the simple mercantile philosophy of "buying cheap and selling dear". However, this basic and universally practiced market paradigm is governed, in this context, by an acutely unequal power structure. This power structure places the weaver/producer entirely at the mercy of the "master weaver". Most weavers in Dodhbollapur, whether engaged in "conversion" or "independent" production, produce against a specific order given by a trader. In addition to the fact that a weaver living at a subsistence wage has no access to the city market, the product made against a specific design order can be sold Digitized by

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only to the particular trader who has given the order. There is, however, a complete absence of any written contract. Typically, when the weaver approaches the trader with the finished product, the latter resorts to what is known in local parlance as "delaying tactics" by saying that he would not be able to sell the material after all, and refusing to buy it. Over several days, the weaver's distress escalates (in so far as his daily subsistence as well as his production activities are contingent on his daily earnings) and the conversion charges (or the price, as the case may be) for the material is further depressed. lraders belonging to the same community have an implicit understanding, so that an order placed by one cannot be sold to any other trader.• The weaver's bondage to the trader and the source of the latter's capital are also seen in other complex dimensions of this relationship. Weavers are paid by post-dated cheques. However, some members of the trading community are willing to readily encash a cheque, at a discount of 15 per cent. Given the weavers' acute cash crunch, a few traders have shaped a thriving business out of this practice. In two very recent shocking instances, a couple of unknown traders arrived in Dodhbollapur, offered prices higher than the usual rates, paid with post-dated cheques and disappeared with large quantities of material; it was only after their disappearance that it was discovered that the cheques could not be cashed in any bank. Weavers in the community have suffered losses of several thousand rupees on both these occasions.

2. Cooperative Movement in Dodhbollapur The cooperative movement in Dodhbollapur emerged with the express purpose of evolving an economic space for weavers beyond the control of traders. The specific goals of the movement were to find, by pooling resources, independent access to raw material, and alternative channels of marketing the weavers' produce. The movement began in the early 1970s with the formation of six weavers' cooperative societies. These primary societies formed the basis of a cooperative federation known as the Small Scale Weavers' Society. Within a few years the cooperative federation ran into losses amounting to Rs. 111 lakhs. As a step towards saving the situation, the primary societies were amalgamated and constituted into a single cooperative. The management of this new cooperative Dodhbollapur Taluk Weavers' Society-was handed over to the Registrar of Cooperatives, a Government of Kamataka concern. Thereafter, bureaucratic mismanagement replaced political mismanagement5 and the society incurred losses to the tune of Rs. 1.25 crores and was dismantled. The underlying cause of the failure of cooperatives seems to be the corruption in the handling of cooperative capital. Successive presidents of cooperatives took to the practice of recording purchases of raw material at prices higher than that actually paid, and recording sales at prices lower than that actually received. In the process, cooperative leaders and office bearers were able to earn a commission at both ends. Cooperative societies came to be completely dominated by local politicians, and then by governn,ent bureaucrats.6 There has, therefore, been a complete absence of an institutional framework whereby a collective set of interests could be promoted without the framework being tom apart by corrupt local leaders and bureaucrats seeking individual gains. Digitized by

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To a great extent, the failure of the cooperative movement in Dodhbollapur underlies the d.rying up of state credit for weavers in this area. Powerloom weavers in Dodhbollapur fall within the domain of the credit facilities offeled by the National Agricultural Bank for Rural Development (NABARD). NABARD, which was set up in 1981, has a specific set of policies aimed at facilitating credit flow to rural industries including handlooms and powerlooms. The rate of interest for NABARD loans is 11 per cent, which is substantially lower than the interest rates charged by commercial banks (18 per cent) for rural industrial activities. NABARD is a refinancing agency; its credit flows through the District Cooperative Credit Banks (DCCBs) to the Primary Weavers' Societies. The Bangalore (Rural) District Cooperative Credit Society (BOCCB), which loaned Rs. 1 crore to the Dodhbollapur Taluk Textile Society in 1986 was unable to recover this entire amount. Consequently, the BDCCB is no longer creditworthy for NABARD refina.ncing. The BDCCB channel for subsidised credit is thus closed to powerloom weavers in Dodhbollapur.

3. Weaving in Anekal Anekal taluk is situated about 60 km to the south of Bangalore. The taluk is a large centre of powerloom production with about 8000 powerlooms. Anekal town has about 2000 powerlooms producing art silk and about 1200 handlooms producing pure silk. A survey of 250 ho11seholds engaged in silk weaving on powerlooms generated the following categories, largely similar to the ownership pattern in Dodhbollapur (Table 2). Table2 Ownenhip Pattern in Powerloom Households in Anebl Number of looms

Number of sample households

2-4

5-10

175 40

12-40

25

>40

10

Total number of households

250

Source: As in Table 1.

Thus, of a total of 250 households surveyed, 70 per cent belonged to the smallest ownership category, i.e., two to four looms, 16 per cent owned 5-10 looms, and 10 per cent and 4 per cent, respectively were in the 12-40 and more than 40 looms category. Notably, the findings in Anekal regarding households in the first two categories were not dissimilar to those in Dodhbollapur. Close to 80 per cent of these households described their work as "job work" or "conversion"; and their income structure was found to be similar to what was found in Dodhbollapur. In Anekal, however, Marwari traders were rarely found, and the function of the "master weaver"-in terms of supply of raw materials and working capital and marketing of the finished product-are performed by local traders. The structure of dependence and domination underlying the relationship between small producers and master weavers are

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notably similar in both places. At Anekal, weavers in the two to four and 5-10 looms category operate with low levels of capital and virtually no information about or links with the market. As such, they are completely dependent upon the master weavers for raw materials, and for selling their products. The quality and quantity of cloth produced is always restricted to a specific order placed by a master weaver. Their scale of operations being thus limited, it is not costeffective for them to transport the material for selling it elsewhere. Thus, both production and marketing binds the weaver in a repetitive cycle to the "master weaver." The Anekal Taluk Powerloom Silk Production and Sales Society was formed in 1994. The objective of the cooperative was specifically to find marketing and raw material sources independently of .the master weavers. However, the Society was unable to get any assistance from the state government-which seemed to be its principal stumbling block. At present, the Cooperative Society exists with 473 members, but with practically no activities to justify its existence. IV. STATE CREDIT TO POWERLOOM SECTOR It is important to note that in general, the flow of government credit to powerloom weavers has been fairly low. In principle, NABARD has come out time and again with liberalised policy initiatives for boosting credit flow to handloom and powerloom weavers. NABARD has also increased its refinance support for handlooms and powerlooms from Rs.145 crores in 1982-83 to Rs. 610 crores in 1994-95. However, in its own perception, NABARD's credit flow to these sectors has not picked up as per the potential (Table 3). Table3 Gap between Target and Disbursement of Working Capital Loans to Powerlooms during 1994-96 (in Rs. lakhs)

Year 1994-95 1995-96

Target

Disbursement

425 280

75 95

Source: Flow of Refinance to Powerloom Sector, 1994-96, NABARD Report, 1996.

Thus, the intended flow of NABARD credit through the various DCCBs declined from 1994 to 1996 by 44 per cent. The actual disbursement was also low. The number of beneficiary units declined during these years by 66 per cent. Again, the number of units (within the domain of the Bangalore Rural DCCB) targeted for financial support during 1996 was 250, while the actual disbursement was made only to 72 units. This disparity between expenditure target and actual disbursement can be seen in the records of all 20 DCCBS through which NABARD credit is supposed to flow (Table 4). The performance of the district banks in the utilisation of the funds sanctioned to them is unsatisfactory because of the poor loan security position of the cooperatives (NABARD, 1996). Additionally, bank managers are inaccessible to cooperative societies; they lack the initiative to seek out and

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organise potential beneficiaries.7 Thus, state initiation and support in setting upof channels of capital resources for modernisation, better access to raw materials, and marketing, has been largely ineffective in the case of powerlooms. 1able4 Financing Handlooms and Powerlooms in lumataka, Quarten I and II, 1996-97 (Selected Districts) (no. of units) (I Qtr)

Districts Bangalore (R} Bangalore (U) Mysore Bidar Belgaum Bellary D.Kannada Dharwad

Target

(11 Qtr)

Disbursement

Target

Disbursement

111

5

17 14

5 10 57 30 117

1 21 1 5

139 37 10 72 130

38

7

66

3 49 15

124

33

Sourc:t!: Progrtss Report on Financing Handlomris and Powerlooms in Ksmuitaka, Q1U1rters I and II, 1996-97, NABARD Report, 1997.

V. STATE INTERVENTION IN SILKYARN MARKET While the supply and prices of raw silk are controlled by traders, the quality of the raw silk available remains erratic and unreliable. Thus, a fluctuating price system and an uncertain market, quantitatively and qualitatively, characterises the raw silk market. Consequently, there has been a shift in recent years to the use of imported (mainly) Chinese silk yam. There is no Open General License in the import of Chinese silk; exporters are allowed to import a limited quantity of raw silk. Given the scarcity of legally imported silk, a large amount of the imported silk available in the raw silk market is smuggled in. Karnataka is the largest producer of raw silk in the country, with a production of over 8000 tonnes of raw silk annually. The marketing of raw silk, however, has remained largely confined to the informal sector and has been the object of speculative and manipulative price fluctuations. The government-sponsored Silk Exchange, through the agency of the Kamataka Silk Marketing Board (KSMB), is supposed to act as the state's agency in stabilising prices and in supplying raw silk to weavers. However, the transaction of yam at the Silk Exchange is declining every year. Of the estimated silk produced in Kamataka, the percentage transacted at the Silk Exchange (i.e., where prices are fixed by the intervention of the state agency) has been steadily declining-from 36 per cent in 1990-91 to 30 per cent in 1991-92, and to only 22 per cent in 1995-96 (Table 5). Secondly, the percentage of raw silk transacted by the KSMB within the Silk Exchange is also minimal. Thus, during 1991-92, 1992-93, 1993-94 and 1994-95, the KSMB's purchase rate has been 22 per cent, 14 per cent, 11 per cent and 19 per cent, respectively (Table 6). The minimal intervention that is possible on the part of the KSMB is typified in the context of Dodhbollapur-the daily

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requirement of raw silk in Oodhbollapur is to the tune of 10 to 12 tonnes; the IJ mott of them are young and have been"ln bUlineN for quite IOIMtiJM, their eduaitlon level ii expected to be low. We find that a majority of tl\eN entrepreneun have a lChooling of 10 yean or lal, and only a minUICUle are graduate, and with higha- q111liftaition. lb. running of a Nltaurant/dhAIM ha, be1n • family tradition for mott of the owntn and thil ii 1uppo1 ted by the mdence av1ll1ble with u, whentn we fow,d only OM owner with a diploma In hotel nw,apment, and by the fact that 32 per cent of the entrepreneurs In thil ,ector had their fathen running the mtaurant There are another 51 per cent mtaurant/dhAIM owntn with their fathen In the ume b1111N11. The other occupatlonl in which the fathal wem repoitld to be engaged are agriculture and aervtce. nu., to an extmt, exhil,it1 mt11r generational occupational mobility among the rettaurant/dhAIM ownen.

(iU) Clientele and Income The lnfonna1 1ector re1taunnt1 pnerally pt their clientl directly u only one rntaurant adverli1e1 itlelf. TheN re,taurantl are frequented by local people, lower and economy-cl••• touriltl. In thil 1en1e, there are limited dtmct Unb with travel •send•, gutd•, etc. However, quite a few rataurantl pt clientl al10 through travel agentl and guidn (at.o toutl). In theN c11e1, C01DMf11ion is paid to indivict11al1 bringing cltentl and could take the form of fNe meals or a token amount in c:uh. The,e toutl have fixed the eating jointl to take touriltl. The autoricbhaw drivera and cycle-ricbhaw pullen are alao involved in this adivity beouse of the ignorance of the touriltl, e.pedally dolNltlc tourilta. The location of the rettaurant/dhAIM ii important here, in that if they are located in the vicinity of hotell, then Cllltomen are not taken for a ride by these elements. The groee monthly Income, u ,:eporled by rettaurant owners, would vary depending on due to location, IHIO'\ and type of food eerved (Singh, 2000). The groee income accruing in our case le R,. 0.516 million per month with an average income of Rs. 25,800 per month.

(iv) Type and Qw,lity of Food The type of food in which these enle,pri,el specialise to cater to the taste of the tourists is important. These restaurants provide a variety of foods-Indian, Rajasthani, Punjabi, South Indian, Chinese and continental foods. However, the

quality of food varies across enterprises. In most restaurants, the level of cleanliness is far from desirable. The customer is not aware of the cooking medium and its q11ality. The waiters are mostly unclean, the q1,ality of water is largely bad, the crockery is invariably not properly kept and so on. While enterprises do try to keep the SU1TOundings clean.every day the general standud of cleanliness is found wanting.

(v) Workforce, Wage Rates and Working Conditions It was observed that informal sector restaurants are mainly self-managed and family members are involved in managing the enterprise. The average Digitized by

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number of penona employed in the ledor WU found to be 5.6 penont per e,tabll,hment. Of the total workforce, the family memben eonttitute 19 per cent and they manage the enterprile. Of the hired workforce, 1 per cent are mangers and 80 per cent are non-manaprial worbn. The non-managerial help include, coob and waiten; invariably, there it one cook in the,e mtaurantl and, at tinw, the owner, too, perforn• thit talk. Bmploymant-tize depend, on the age of the enterpriN in our c11e. Nona of the re1taurant1 have female worbn. However, children employed in thaN ene.1prt,11 conttitute only 3 per cent of all worbn. They wuh the dilhet and clean the tab1-. The workforce doee not comprt,e ftnt-thne mlgl'lntl to the dty and have been involved in tome other activity. The workforce II aclulively male b1c,1s11 of working houn and pmralllng IOda1 condition,. Worbn are ea1ployed with little ICt'Nftlng but, in 101M COIII, having a contact become, important. Soma owhen do uk for referenca and pnviou, work experience with other 1111taurant1. The napply of labour it tlaltic ln thit ,egment of the touritm 11ctor, while the demand it Umlted, thu,, 1uppn11ing the wage,. Al the labour it mainly wkilled and very few worbn are •ldJJed, the wage rate remain, low. The unaktJled worker la paid a lower wage than the lldJled worker like the cook. The wage, are inflwmc.d by the market wage rate of cuual labour in the dty. Another reuon for low wage, la that theN worbn moedy eat and 1leep in the reetaurant premi1e1 and, u there are additional earning• from tipt by c:uatomen, employen pay lower wage,. The wage rate, therefore, varlet fmm a low of Ra. 500 to a high of Ra. 3,000 per ll1Dl\th in cath. All the family member, employed are not paid wage,. Children are paid much lower wage, of Ra. 500 per month deapite the fact that working houri are the ume u for adult workan. The total workforce la temporary and ca,ual In the,e ea,terprlle1 Theze it high turnover of worken; except for the cook, other worken are removed &on, the job on any small pretext However, there are certain workers who continue to work for years together. The wage, are •Jeo cut if there are damagee or the employee tam leave, even if it ii for medical reu0111. There ia no IOda1 NCUl'ity for the workers in teruas of medical, inaurana,, provident fund benefits etc. ~or la there any workers' union. The state if aJ10 indi~t to the needa of the workforce and the labour department ii blind to the problems of these workers. The working hO\lrl are u long u 18 hours a day. However, there is some 1eapite &om work in between meala and when there are no cuatomers. Work.en are not provided with any uniform. The relationship between the employer and the work.en ii cordial. 3. 'lranaport Sector This sector ii an important eegment of the touri8m industry. Road transport within the country/dty and from place to place ii a neceaeary service provided by the host country/city. All tourists use road transport either for travelling within the cities they visit or to tourist destinations. Most of the transport used by tourists is provided by the private sector. Private buses, car taxis, autorickshaws and cycle-rickshaws play an important role in tJ\e tourism industry and are mainly in the informal aector. They do not face any handicap in their business vi&-a-vis the organised operatols except a lot of competition

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from within and the organised sector. The labour market is highly informal and it is more so in the autorickshaw and cycle-rickshaw segments. A large section of these activities drives hired vehicles. The entry is easy, invesbnent levels are low, and the required education levels are minimal. There is no fixed location of operation for most of them, and the role of formal sector credit institutions is either limited or nil. Their earnings are relatively unstable though not different from the formal sector and their is a very high competition within the activities and from without. The nature of the job is also flexible and entails no skill requirement for entry. The lack of employment avenues in rural areas and limited opportunities available in the cities initially drive individuals, especially from lower socio-economic strata, into self-employed activities in the transport sector, especially cycle-rickshaw pulling. There is also very little problem in acquiring a driving licence for a car and an autorickshaw. To understand what is really happening in this informal component of the tourism sector, this section looks at these three transport activities which contribute in their own way to the tourism sector. (i)

Area of Operation and Characteristics

Taxis operate from railway stations and their stands within the cities, while the autorickshaws and cycle-rickshaws operate from railway stations, bus stands and various vantage points near hotels, street comers, tourist spots. It is beneficial to operate from a fixed location as it is easy to get business, and parking is available. The customer can also call for a taxi by using the telephone directory where taxi stand numbers are available. There are no other fixed stands/location for cycle-rickshaws. The transport sector is deemed to be the preserve of males in India where all taxi owners/drivers, autorickshaw and cycle-rickshaw pliers are males. This is because of social factors and also due to the strenuous nature of the work. As individuals enter the informal sector at an early age and come from the relatively lower social and economic strata of the society, most marry early. In the case of autorickshaw drivers, the majority are married, though unmarried persons are also found plying the auto-rickshaw. The majority of cycle-rickshaw pullers are also married. However, a higher percentage is unmarried compared to the other categories of drivers. The average age of the taxi drivers is 36 years. The autorickshaw drivers are young-the average age of auto-rickshaw drivers is 32 years. As it is cheaper to hire a cycle-rickshaw for which no license is required, one finds individuals from all ages plying cycle-rickshaws. The average age of cycle-rickshaw pullers is 31 years. As these activities provide an easy avenue for self-employment and entry is at a relatively young age due to family stresses, the formal education level is expected to be low. We find that a majority of taxi drivers have had 10 years or less of schooling. There are illiterate taxi drivers, too. Against this, the education level of autorickshaw drivers compared to taxi drivers, is much lower; only 8 per cent have had 10 years or more of. The educational level of cycle-rickshaw pullers is still lower-only one driver was found with 10 or more years of schooling. The above features clearly show that the transport sector is a source of employment for less educated individuals, and as the nature of a vehicle Digitized by

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becomes relatively more mechanical, the education level of the operations goes up. The cycle-rickshaw plying is generally considered a low grade menial job in India, in which basic education is expectedly low. It is more of a physical, hard-labour activity. Most of these drivers have problem in speaking English and this hinders their communication with foreign tourists. The taxi and autodrivers have driving skills and also a knowledge of engine and are in a position to do minor repairs. We have observed that the education level is low for most operators and this could be because of their family background. It is revealed that the occupation of the fathers of these drivers is mainly agriculture, wage labour and service in both the cities. The other occupations in which fathers have been involved are: artisan, cycle-rickshaw pulling and autorickshaw driving. Another point that emerges here is that there is inter-generational occupational mobility and also upward occupational mobility. Above all, it is observed that these individuals come from poor socio-economic backgrounds and not much difference is observed in their activities. The rural background of these individuals is also evident. Most of the taxi operators and all auto-drivers are from the same city at both the places. However, the majority of cycle-rickshaw pullers were found to be migrants from rural areas, other districts, other states and even Nepal. Here, one may point out that the economic development of the surrounding areas does determine the flow of migration. The major reason for migrants has been employment and livelihood. (ii)

Ownership and Investment Pattern

To drive a self-owned vehicle gives added prestige. In the informal sector, the new entrants initially drive hired vehicles and subsequently purchase a vehicle either with their own savings or by borrowing from informal or formal-sector institutions. The survey found that most own the vehicles and operate themselves. This is not to say that there are no drivers employed on a monthly basis by car/taxi owners or drivers do not hire cars on a daily basis. There is an increasing tendency, however, to purchase the vehicles as finance is available through various formal sector channels. Autorickshaws are within the reach of many prospective drivers. We found that, there are individuals who have autorickshaws in large numbers and give them on rent. Further, there are both types of individuals plying cyclerickshaws those who own it and those who hire the cycle-rickshaw on rent. The others operate hired cycle-rickshaws. This implies that the costlier and more mechanical the vehicle is the higher is the possibility of it being owned. Moreover, a strong rentier class exists in the formal sector on which the informal sector operators are dependent. Of the three modes of transport, the cheapest is cycle-rickshaw followed by autorickshaws and cars. There is the tendency to purchase a second-hand vehicle which lowers the cost. The cycle-rickshaws are locally assembled, while the autorickshaws are of two models-Bajaj and Lambretta-while the cars are mainly Ambassadors, though a few Maruti vehicles are also in business. There are very few AC cars in operation in the informal sector. The condition of autorickshaws and cycle-rickshaws is largely bad.

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What it the IOUrCe of thil inveltment? It it oti111Ved that a majority have borrowed hom varied eource,. Banb do not contribute to the ftnandng of cyde-ricbhaw1 though they have financed autorkbhaw1 and can. Own fund, are important in the ca1e of cycle ricbhaw1 (50-100 per cent lhare in total cott), and 1llghtly lower in the c,1e of autork.bhaw1 and can. Relattva, too, are dependent on theN lnformal•HCtor operaton. The role of non..flnandal inttttutionl it vital in the CIII of cyclHicbhawt in the NIIH that it it either fully financed by the manufacturer or it .. not, while contrtbutionl in the CIII of autortcbhawt ranp fron, 51 to 100 per cent and in that of can from 25 to 100 per cent. The lnttitutionl (NPII) are dealan, nw,.ufectwwt, bUltwmm in the dty who Ngul1rly lend to Informal 11c:tor entNpreneun, n.. indlvtdual1 charge high rate, of lnt1r11t (2' to 36 per cent) and thay becoma important if a HCOl\d·hand vehlda ii to be purchuld u ii done in many CIIII. Thi, mew that the CNdit linkapt with both the formal and Informal credit market do m1t with varlationl ICl'OII the type, of vehida. The dllcuttlon reveal, that informal 11ctor characteriltict are evident in the trwport IIChlr. (ffl) Work Enutronment 1111d Incoma

In view of the nature of work, working houn are epect~!y long for all the operaton in both tlw dtiel extending beyond 12 houn a day. However, the 0w1wa=operator hu ttw ftedbtllty to either reduce hll working how, or lnc1111 them. The houn worked have a diNct relation to income eamed. It ii al,o a lituation where regular daily income ii eamed in fewer houn in leM number of day worked. In the ca1e of taxi driven, thil dependl on the client and the locatton1 they vtait or the ttm, taw in waiting for C\lltomerl, In many ca111 on many daye, they idle around without any b111l11e11. Delpite the fact that the working houn are long, tllele worken do not get any fadllty at the ttanda. The driven moetly aJ,o ut at different placet &om the touriltl they carry. They lON a lot of aleep, too and there are no wuhlng or toilet fadlltiet readily available to them. The 1tate highwaye al,o do not have many IUCh fadlitiel. There it limited vertical integration with travel agenda and hotel, of informal 11etor taxis. All taxi operaton are memben of a taxi 111odatton and a majority of autorlcbhaw driven are members of an auto-driven' The cyclerickshaw pullen are not unioniled. The driven eam income only if the vehidel are hired and after which expen,es are incurred on petrol/ die1el, rent for hiring the vehicle maintenance, perntit feea and personal requirements. A taxi is available on rent to a driver for R,.100 per day. The daily rent for autoricbhaw varies &om Rs. 50 to Rs. 100 (12 hours a day), while that for a cycle-rickshaw varies from a low of R,. 7 to a high of Rs. 35. The rent depends upon the condition of the vehicle th.! older the vehicle, the lower the rent. The cycle rickshaw, therefore, is relatively cheaper to hire than the autorickshaw which is cheaper than the taxi. The quality of internal transport services is not at par with intem.ltionaJ standards. The taxi service is limited to a few car makes and most of them are not airconditioned. The condition of most cars and autorickshaws is bad, too. Though the fares are, reasonable. Thus, 8U8tenance for most driven is very difficult The upward mobility within the transport sector is not strong. The

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linkages of this sector are largely with the informal repair activities, eating places5 and a lower level of housing (slums). A large number of these individ11als Ne liquor and drug addicts. Most cycle-rickshaw and auto-driven do not take care of personal hygiene and this dete,s paseengers at times. The labour market is open and competitive in the lower segments of this sector. It is restricted only in the taxi segment bec,111ae of the higher cost of vehicles. However, jobs are available for able and experi~ drivers and some do graduate to formal-sector jobs. In the informal transport sector, the income levels are mostly low. The evidence as to the effecti\'eneae of self emyloyment in informal blURNMPA • a 110UKe of livelihood is confticting because of the very cfu.asity of activities which the tern, embraces. The fact that informal incomes are in many places higher than thme from formal employn11e11t, is not nerftWlrily an jrvlicafion that they are good incon1£S (Harper, 1996). The average monthly earnings of a taxi driver ranges between Rs. 3,oo) and Rs. 15,oo). The income levels are influenced by the nmning expe:~ of the vehicle, amount of b,ismess, ascent of JoaiJ oompetition and tariff rates. The average income earned by an autorickshaw driver is Rs. 6,881 per month. The income levels are influenced by competition, type of vehicle (now cities have autorickshaws like Becaks of Jakarta). There is intense competition in the cycle-ricbhaw segcwsi~ which affects the income of cycle rickshaw pullers. The average income in this segment is Rs. 7,9(17 per month. The offseason ina,ca:s are relatively lower in the three segments.' Moreover, as the vehicle bec()L.es .nore mechanical the income aoc::r■MIIS go up.

4. Toariat Guides The above disn1ssion has ievealed some impo, laa•t features of major tourism activities. The analysis, however, is incomplete without having a look at the tourist guides who are vital cogs in the wheel of the tourism sector. Th.is section presents details about tourist guides. The institution of guides is a very basvcomponent of the tourist services for both international and domestic tourists. 'There has been a continuous flow of international tourist arrivals in India. Also, as a result of increasing affluence, domestic tourist movement has increased. To cater to this rising demand, a three-tier system of guides was introduced in February 1996 by the Tourism Department of India. These are, viz., regional guides, state level guides and local guides. The first category is trained by the Ministry of Touris~ Government of India through tourist offices or by the Indian Institute of Tourism and Travel Management or their chapters or by The Indian Institute of Hotel Management. The second category is trained by the state governments while the thud group is trained under the supervision of the state government/ local administration. ( i)

Characteristics of Guides

Like other components of the tourism sector, this component is also exclusively a male bastion. The major reasons for this are social factors, long working hours and difficult working conditions. The marital status of guides is mixed as one does find uiunarried individ,,als; 31 per cent guides were found to be married. As guides have to be below 30 years of age at the time of recruitment, the average age of guides is 34 years.

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The approved guide is supposed to be a graduate and, like many persons in India, the majority of entrants to this profession are over-educated and; a significant proportion (65 per cent)are post-graduates. The knowledge of a foreign language is vital for the effective performance of guides. Quite a few have a knowledge of a foreign language.7 They are proficient in foreign languages such as German, French, Italiari and Chinese besides English and the local language. As regards the training/course related to tourism, all the guides have received training either from the Department of Tourism, Government of India, or state tourism depa, tn,ents for a duration of one to 18 months. The courses did help them in their career as they learnt about tourism, art and culture. Some guides reported skill enhancement after joining the profession in terms of articulation, leadership, oratory skills, group handling and coordination.

( ii) Background The tourist guide as a profession does not seem to have many takers and those who have taken up this profession must have done so due to parental background and influence. These individuals were asked to report on their fathers' occupations. We found that the fathers of a majority of guides are in service government/private followed by business and agriculture. This means that these individuals come from urban and educated families and there is total occupational mobility. Why did these individuals choose this profession? The reasons for doing so are varied. Some feel that one can be a freelancer and independent; some became guides because this provided them an opportunity to explain the culture and history of the country to others; some due to their interest and hobby and some because it did not require doing any written work like other office jobs, while some took up these jobs because they were unemployed. Other factors that attract people to join this profession are its glamour, a chance to travel and meet new people, and to make a career. ( iii) Labour Market The labour market is restricted in the case of tourist guides. New entrants not only have to have a minimum education and age, and clear a written test and interview, but also need to procure a license. The licenses are issued by the Indian Tourism Development Corporation (ITDC), Department of Tourism of the Govememnt of India, state tourism departtr,ent, and local palaces and museums. Some guides have licenses from more than one organisation. The Government of India does not charge any license fee and the state governments have a token fee but, in the case of local palaces and museums, the license fee varies from Rs. 250 to Rs. 1500 per year. There is no problem in obtaining the license provided the conditions set by the Tourism Department of India are fulfilled. 8 The license fee is determined by the requirement of guides at a time and, from time to time, the Tourism Deparbttent advertises for guides. This procedure is not approved by guides, and unions and they have been contesting against it at different forums. The majority of the tourist guides work independently but they do get work through hotels and travel operators.9 Top and middle-level hotels have

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tOUJUSM SECTOR: INsIGHTS PROM Two CrrJFS

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travel desks which provide assignments as guides to group tourists or individual tourists. In this sense, there are strong vertical links with the formal sector. The guides, however, dislike to work for the travel operators/ agencies as they do not make payments regularly and on time. At times, guides get their payments after six months. Because of this problem, no one wants to be attached with one particular agency. The majority of the guides intend to continue with the profession primarily because not many alternative opportunities are available. However, a few are willing to change their profession because of its uncertain future and insecurity. It is also noticed that there has been an upward mobility among guides. There are individuals who have graduated from simple guides to group escorts, and the experience of the profession has led some to set up export businesses. This has been possible because of the contacts they were able to make. There are those who were initially employed in a hotel and subsequently learnt a foreign language and became guides. This led to an increase in tl\eir incomes. In this sense, the profession does provide added opportunities to grow if hard work is put in. (iv) Earnings and Work Environment

What are the returns from this profession in terms of earnings? The earnings have a seasonality. In this part of India, the season starts from October and lasts till March. The monthly income, during the season, for a significant proportion of guides is between Rs. 5,000 and Rs. 10,000. There are, of course, some guides reportedly having an income of more than Rs. 10,000 per month. These individuals work as escorts to foreign groups. On an average, the seasonal monthly income for tourist guides is estimated to be Rs. 7000. The offseason income declines considerably. The remuneration for services are as per the Government of India rates.10 The outstation wages are higher but there is room for bargaining at times. This also depends upon the competence of the guide. Often, the rates are also set by the guides' association. The working hours of guides are long and invariably extend beyond 10 hours even if there is no work. There are days when there are no assignments for them. The association, however, does ensure that all members get some assignments. When the season is on, some guides have to stay away from their families for a fairly long period-at times up to 10 days a month or in some cases more. There is extensive competition in the profession, both from within and from unauthorised guides-the guides face lapkas , the customersnatchers.11 Most guides reported that incomes have been going down over the years as a result of training competition, due to which the number of working days have also gone down; some reported a decline in working days from 28 to 18 days. The guides also reported nepotism in the profession practised by travel agencies. The general standard of guides is low,-a fact which is exploited by the travel agencies by undercutting services and wages. Most guides do not have their own offices; only the senior guides have offices at their homes fitted with all modem telecommunication equipment. However, the union office is available to all; but; except the union leaders, none are allowed to use the facilities. In the union office, the guides relax and wait for assignments. Digitized by

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UNIVERSITY OF MICHIGAN

INPoncALSa:iOk IN INDIA Tourist guides face lots of problems in their operation-the police haruament, payn.ent delays, hawker nuisance, no job-guarantee, dearth of work, insecurity, exploitation by travel agents, unclean monuments, lack of public utilities, beggar nuisance, etc. This is not to say that state governments are not taking positive steps in this direction. The approved guides have associations. However, very few members take an active interest in the ueociation. The association does help in piotecting their rights and eorting out wage problems with travel agents/agencies, etc. Finally, no social security benefits ale available to guides.

ID. THE FlTl1JRE: A RAY Of HOPE The labour foR:e in the informal touriamaedor it largely unorganised and does not have a decent work environment. Overall, the workforce has a low education Jeve), low llkiJJs, low pn>ductivity, low wages and poor working conditions. The labour is largely temporary without tocial and job security. The working hours a1e long and competition is intense. There a1e little or no links with the formal sector. There does •1Cist scope for upwanl mobility but the opportunities are limited. The labour has all the features of the informal sector. In this situation, what could be done to improve the income levels, pn>ductivity and work environment? As all the activities a1e interrelated, directly and incluectly, any impiovement would require both macro and micro policy initiatives. Ultimately these policies have to aim at increasing the inflow of tourists. At the macro level, the go.a:.nw:nta. both central and state, need to have a cleal'-cut tourism policy which dilectly aeata conditions that lead to mn••sed t;ourist inflows. The labour market in the informal tourism sector should be allowed to giow. In this regard, efforts should be .made to strictly enfon.-e labour laws in hotels and restaurants. The trade union movement should taJc.e the initiative in this regard. For social piotection and assuring certain fundamental rights to these workers (hotels and restaurants), employers' organisations have to play a key role. These workers themselves have to link up with other organisations. Such an organisation could also help in the skill-development of the workforce. At the state level, minimum wage enforcement is a must. The number of enterpri.:ies in a city is not so large that this cannot be accomplished. The wagestructure has to be linked to the number of hours worked and this is more so in the case of unskilled workers. All hotels and restaurants should provide uniforms and better sleeping/resting places for workers. Some restaurants do not have even a toilet. Above all, these workers need to have a union like starred hotels and restaurants have. Also, no hotel or restaurant should be allowed to employ workers who are not registered with an employment exchange or any other such body which can register prospective workers. Since, the quality of food is invariably not up to the mark. besides the government food department, the community and associations should take the required initiative in this regard. There should be a pn>per procedure for blacklisting such enterprises and the public should be made aware of it In the transport sector, special initiatives are needed for improving the education and communication skills of drivers, especially the taxi and autodrivers. Here, the adult education cer&bes would be of great help. There should

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be strict enforcement of hiring rates and control over unlicensed drivers. If the tariff rates are properly fixed, advertised and implemented, then the queue system of vehicles can be adopted. At the stands, the autorickshaw and taxis follow the queue system which is imposed by drivers themselves. Here, unions can be involved. The pre-paid taxi system, which is largely a failure, should be rejuvenated. There has to be order and discipline at the airports, railway stations and bus stands. There are no facilities at taxi stands either for the drivers or for the passengers. Night and day shelters should be constructed for the drivers. The unions should be involved in running health centres for the workers of the tourism sector. One hardly finds taxi and autorickshaw drivers in uniform. A clean dress gives a good impression to a tourist. The condition of vehicles itself demands attention. There should be a periodic review of the vehicles, and those in an unsafe and poor condition should be taken off the road. Attention has equally to be given to the needs of cycle-rickshaw pullers. Except for the shade provided by trees, there is no place for them to rest in both the cities. Police harassment also should end. In a country like India, drinking water facilities should be available at the roadside for the rickshaw pullers, who eat at footpath dhabas/ eating joints. As these joints are most unhygienic. The local administration should provide a proper place where these food caterers can be located and ensure cleanliness. In the case of guides, the selection procedures have to be properly designed in which guides' associations, the hotel industry and restaurant owners' associations should be involved. To improve the working conditions, the role of local bodies have to be minimised. More specifically, there is need for a review of the 1996 policy for the recruitment of guides. The poorly-managed guide courses need to be stopped. There is a need for improving the payment system of guides by the travel agencies, while the rates have to be rationalised in view of the changing scenario of tourism. It should be mandatory for tour operators to use the services of licensed guides and tourist spots should be cleared of unlicensed guides, beggars and hecklers. There is a boost in tourist arrivals and this may require a knowledge of additional foreign languages, which calls for setting up of language institutions where guides could be trained in these languages. Finally, direct and indirect linkages of different activities in the tourism sector exist. The formal and informal sector hotels have different types of clientele. However, a link could be established between the two through joint advertising campaigns for different classes.of tourists. This would improve the quality of the services of the informal sector hotels while ~ey could have access to while advanced technologies. A link could also be established with restaurants and this would ensure the high quality of food. Such linkages can also help to ensure financial support from formal sector establishments. The labour force need to be trained and the screening and work-adjustment costs reduced in the informal sector. Already, formal sector hotels themselves are promoting budget hotels/ restaurants. The informal sector hotels have linkages with the informal laundry sector. The transport sector has implicit relations with hotels and restaurants besides the informal repair sector which is mutually beneficial. The formal repair sector is limited and beyond the reach of most people. The credit market is increasingly getting linked now with all the

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activities, though the informal credit market has much stronger links with them. The formal sector has to develop mechanisms to help informal sector players. Guides are linked to hotels and travel agencies much more than to restaurants and transporters. To develop greater cohesion between these activities, respective unions/a~iations have to have better coordination between them. However, a lot depends on how much cooperation could be generated among various actors. With increased tourism, the earnings of the hotel could get a boost. (This paper is 1111 llbridgtd omum of a shuly anulmllktn llt the inltlma of the ILO-SAAT, Nev, ~lhi. I am grateful to ILO-SAATfor giving me this opportunity. The firumcilll help of ILO-SAAT is dilly acknowltdgtd. 1 am also thankful to A.S. Oben1i, Smhi Acha,ya l1'1tl Sondra Rothbotdc for their coopm,tion and help. Prtrr1 Prrlkash and Gopal Singh prwidtd ablt assisuma in amdau:ting this shuly. I am thankful to them.)

Notes 1.

2.

3.

4.

5.

6.

7.

8.

As the study is mainly impressionistic, the number of hotels, restaurants, taxis, auotorickshaws, cycle-rickshaws and guides covered in both the cities were 26, 35, 40, 80, 80 and 26, respectively. In India, availability of accommodation is very important for the tourism industry. In every forum, the lack of accommodation issue is raised and this problem is acute in case of economy-budget tourists. A decent place to stay is vital at the lower end of hotel industry. There are 1,188 approved hotels with 65,598 rooms in India, of which 527 hotels are three star or above category with 52,239 rooms; an indication of the thrust for class tourism (GOI, 1998). This reflects poorly on the tourism policy and neglect of the budget tourist whose number is increasing. The average number of nights a tourist spends in Agra is lower than in Jaipur (Singh. 1999). The starred and other approved hotels in India have an occupancy rate of 65 per cent (Monthly Commentary, August 1998, New Delhi). The autorickshaw driver charges at times 20 to 50 per cent commission on the one-day room rent, while the cycle-rickshaw pullers gets 5 to 10 per cent commission. The commission is also influenced by the occupancy rates the lower the occupancy rate, the higher the commission. These individuals eat at informal food enterprises running on footpaths in the cities which operate under the most unhygienic conditions. They are mainly run by women in groups, and rates are Rs. 10 per meal. The clientele mostly comprise cycle-rickshaw pullers and autorickshaw drivers.

The taxis charge both fixed rates and also operate by kms. The rates are different for petrol and diesel cars, AC and non-Ac Cars, within city and outside city and all have minimum-distance charges. The rates are mostly fixed by taxi unions. Night-halt charges are extra besides other charges outside the city. Taxis operate on pre-paid basis. In the case of autorickshaws, for a given destination, however, the rates are fixed, but the whole-day rates charged by autorickshaw drivers depend upon the bargaining with the customer; invariably, a lower limit is set by autorickshaw stand. As the cyclerickshaws are available in large numbers and there is no union among them, a lot of bargaining is done by the customers. However, the rates are charged on the basis of distance. There are very few cycle-rickshaw pullers operating on a whole-day basis. The foreign language has been learnt from the local university, language institute in Pune, Alliance Franaise, Pondicherry. There are very few non-university specialised language institutions in India. It is alleged that as licences are not regularly issued, the prospective individuals in order to obtain a licence offer high bribes to the officials.

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The travel agencies are approved by the Tourism Department of India. The guide is assigned a task by the travel group opentor. The guide buys entrance tickets to sites,

takes the group around shopping and eating places. Some guides dine with the group and stay in the same hotel, but invariably they are left to fend for themselves. The guides submit bills to the agencies after the group leaves which is honoured at times after six months. Some guides also get commission from shops where tourists are taken. 10. H a guide works for four hours, the rate is Rs. 3'5 and for five to 15 hours' work. the charges are Rs. 460 and beyond that, it is Rs.750. The foreign groups also tip the guides. 11. These individuals operate with the full knowledge of the officials. The unauthorised guides get commissions from the shops, showrooms, hotels and restaurants. If caught, they occasionally bribe the police and officials. The attitude of the government is indifferent to this problem, which gives a bad name to the profession. 1hese individuals are less informed and also work for small-time travel agents. They do not project a good picture of Indian culture besides giving a distorted view of history.

References D'Souza, Errol (1993), "Fluctuations and Employment Institutions in the Tourism Sector'' , The Inllilln Joamu,J of LllboMr Ec.onomics, Vol. 36, No. 4. pp. 660-664. Elkan, W. (1975), "The Relation Between Tourism and Employment in Kenya and Tanzania", Joumil of Development Studies, Vol. 11, No. 2, pp. 123-130. Frederick. Matha (1993), uRural Tourism and Economic Development", Economic Dft1dopment Quarterly, Vol. 7, pp. 215-224. GOI (1998), Anmuu Report: 1997-98, Government of India, Ministry of Tourism, Delhi. Harper, M. (1996), "lhban Planning and the Informal Sector", R.tgionlil Dtoe/opmfflt Dialogue, VoL 17, No. 1, pp. 97-112. Sinclair, M. Thea (1998), "Tourism and Economic Development: A Survey", Jounu,J of D~/opmfflt Studies, VoL 34, No. 5, pp. 1-51. Singh, Swjeet (1~83), "Soci~nomic Status, Human Capital and Earnings", Anwsd, December. - - (1999), "Tourism in Rajasthan and its Impact on Livelihood", Paper prepared for R.llj11Sthlm Vision 2011 Project. (2000), lnfarm1tl Tourism Sector in Inllui: A Cost ofJaipur and Agni, ILO-SAAT, New Delhi. Tooman, L. Alex (1997), "Multipliers and Life Cycles: A Comparison of Methods for Evaluating Tourism and its Impacts", Joumil of Economic Issues, Vol. 31, No. 4, pp. 917932.

Weiermair, Klaus and Matthias Fuchs (1998), "On the Use and Usefulness of Economics in Tourism: A Critical Survey", lnlematimu,I Jounu,I ofDtoelopment Plllnning Literature, Vol. 13, No. 3, pp. 225-273.

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15 Linkage between Informal and Formal Sectors: Some Findings from Micro-level Studies Harjit S. Anand I. INTRODUCl'ION

For a long time, the informal sector was left out from the debates on labour issues, partly by default and partly by oversight. It was left out by default since it was considered as a residual sector, and by oversight, as many expected it to merge with the formal s«tor if appropriate trajectories of development are followed. However, the current economic reality in developing countries bears testimony to the fact that not only has the informal sector survived but also it has been growing, especially in the wake of policies involving structural adjustments and globalisation of the economy. In India, about 92 per cent of the labour force or about 326 million persons work in the informal sector (Ray, 2000). As such, it can well be termed as the 'informal economy.' Although various perspectives have been adopted for defining and characterising the informal sector, in a nutshell, it consists of: (i) small, noncapital intensive enterprises run by self-employed persons with the support of family members and/or a few hired hands and; (ii) a large informal labour market where workers engage in long hours of work in both formal and informal enterprises through the intermediation of contractors in poor working conditions and in absolute lack of any kind of social protection. In this paper, an attempt is made to look at the relationship between the informal sector and the formal sector in relation to skill levels; traditional vs. modem technologi~s; distinction between industry, services and business; gender discrimination; usage of child labour; and levels of insecurity. These issues have been brought out through an analysis of the macro and micro implications emerging from the studies that focussed on five sectors representing the informal sector, viz., construction, handicrafts, scrap collection and trading, information technology and tourism. Though the need for effective linkages between the informal and formal sectors has been an issue of concern in the recent decades, it has not yet yielded any tangible or intangible effects on the informal sector workers. The essential

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linkages in this regard would be product related (market linkages) and those that concern the workers (working conditions, productivity, mobility, security, etc.) By concentrating on the major observations of the case studies of selected sectors, this paper tries to highlight the saga of deprivations that the workers face in the absence of any security mechanisms and abysmally lower levels of productivity in the informal sector, m05tly a result of the residual treatment of the sector vis-a-vis the government policies with regard to support system and social security. To bring out the nuances of deprivation, each sector study is discussed in terms of the key role players, skill levels and scope of skill upgradation of the workers, income levels and indebtedness, etc. These case studies are further discussed in the concluding section to bring out common features and suggest certain policy reccommendations.

JI. CONSTRUCJ'ION SECTOR The construction workers in India constitute the largest non-agrarian segment of the informal economy. According to a NICMAR study, construction industry employed 14.6 million workers in 1995-96 and had an annual growth rate of 8.38 per cent (Anand, 2000a, p. 41). Of late, it has been increasingly recognised that construction sector is sensitive and responsive to increases in growth rate of GDP. However, the significance of this lies in its specific effects on the workers. This section discusses the insights from a study sponsored by the ILO on construction workers in Delhi ( Anand, 2000 b ).

1. Methodology The study was conducted in eleven construction sites selected from the five zones in Delhi. The sites were selected to represent the different types of constructions: residential, shop-cum-office, hotel, educational/institutional and transport. Amongst the 671 respondents interviewed as per the random sampling method, a 70:30 ratio was adopted for skilled and unskilled workers. Within the skilled category, a 2:1 ratio was adopted for skilled workers and semi-skilled workers. As such 300 skilled workers, 170 semi-skilled workers and 201 unskilled workers were interviewed. The skilled segment was broken into four functional groups: masons, carpenters, plumbers and electriciansrepresenting the four major trades in the construction sector. With a view to enabling an indepth study of the four functional trades based on the comparative method, 127 masons, 74 plumbers, 75 electricians and 76 carpenters were interviewed. The number of masons was intentionally kept larger than the other trades since the ratio of masons at almost all construction sites was higher as compared to skilled workers in other construction trades. The critical role-players in the construction sector, at the level of workers, are the rajmistris or skilled masons, junior masons and unskilled labourers; the senior and junior carpenters; senior and junior plumbers; senior and junior electricians; and senior and junior workers pertaining to other trades such as barbenders, stone-layers, tile-layers and allied construction trades besides a large group of unskilled workers. In the supervisory cadre, the critical role players are labour contractors or jamadars, construction supervisors, subcon tractors, building contractors and senior managers of construction

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companies. All the role-players are not present at every construction site; the higher echelons of the construction industry are present only at major projects. In the case of small projects, the hierarchy generally ends with the building contractor. 2. Socio-economic Profile of the Workers

In relation to the terms of trade, the study indicated three wage levels: modest wages ranging between Rs. 50 and Rs. 80 for over 95 per cent of the WlSkilled workers; wages ranging between Rs. 50 and Rs. 100 for about 80 per cent of the semi-skilled workers; and wages ranging between Rs. 80 and Rs. 170 for about 80 per cent of the skilled workers. The study also showed that labour agents were charging upto Rs. five per worker per day as commission. In this manner, the construction workers were 'ingratiated' to labour agents for retaining their jobs. About 56 per cent of the respondents were employed on an average for 2227 days in a month and another 37 per cent were employed for 27-30 days. Clearly, the pressure of economic necessity made availing of rest days a luxury. The practice of a few days of break in service every month to circumvent the assumption of 'regular employment' status was also noticed. In relation to job status, a vast majority of construction workers were 'temporary' or 'casual.' The number of regular or permanent workers was negligible. Wages were paid to over 60 per cent of the casual workers and about 48 per cent of the temporary workers on a monthly basis and others received payment after every two weeks. The longer wage period increases the dependency of workers on jamadars or labour agents. The educational attainments of the workers, as per the study, did not cross 12th class. About 39.3 per cent of respondents were illiterate while about 23.5 per cent had studied upto primary levels with an equal percentage upto 10th class and about 10 per cent upto 12th class. With regard to the religious background of the workers, it was found that the majority belong to various Hindu castes (84 per cent). Muslim communities constitute 15.4 per cent but they formed a higher percentage among the skilled workers. About 80 per cent of the Hindu workers belong to the 'lower' or ' dalit' castes consisting of Other Backward Classes (OBCs), Scheduled C-astes (SCs) and Scheduled Tribes (STs). In contrast, the higher castes contributed 'only about 20 per cent of the labour force. OBCs constituted more than 58 per cent of the total labour force and 60 per cent of the skilled labour force. The study showed that members of the OBCs have a favourable social orientation towards construction work.

3. Savings, Remittances and Indebtedness In spite of the modest monthly income, the construction workers save a significant portion of their income for supporting their family members at their native places and also for visiting their native places once or twice a year. More than 64 per cent of the workers in all the three categories-unskilled, semiskilled and unskilled saved more than 10 per cent of their income. About 40 per cent of skilled workers, 20 per cent of semi-skilled workers and 16 per cent

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of unskilled workers send regular remittances to family members in their native places, the amount ranging between Rs. 500 to Rs. 1000. About 27 per cent of the respondents were indebted. Among the indebted unskilled workers, about 59 per cent took loans for consumption and social purposes and about 41 per cent took loans for economic reasons or for emergencies. In the semi-skilled category, about 76 per cent had taken loans for consumption and social purposes and 24 per cent had taken loans for economic and emergency reasons. In the skilled category, about two-thirds had taken loans for consumption and social purposes and the remaining had taken loans for economic and emergency reasons. It is interesting to note that only 7.7 per cent of the respondents in all the three categories took loans for education related needs and 9.4 per cent for health purposes. However, the high indebtedness amongst these workers reflects their vulnerability.

4. Demographic Profile and Findings The study has interesting findings pertaining to the sex profile of the workers as well as about the maltreabnent meted out to women workers. Though female workers constituted only 8.3 per cent of the total workers, they contributed to almost 25 per cent of the unskilled labour force. Also, their presence as skilled and semi-skilled workers in the sample is as meagre as 0.7 and 2.4 per cent respectively. Nevertheless, it was reported that one out of three respondents in the sample acknowledged the fact that women do not recieve equal remuneration for equal work in comparison to men. The reporting of maltreatment of women workers in the study is fairly high and poses a serious issue for concern. · About 8 per cent of the respondents reported maltreatment of women workers by the contractors, 40 per cent reported maltreatment by subcontractors and 32 per cent reported maltreatment by labour agents. In terms of the nature of maltreatment, 12.2 per cent respondents reported lower payment of wages, 8.5 per cent delayed payment of wages, 56 per cent respondents reported use of abusive language and 14.6 per cent referred to sexual harassment. These, undoubtedly, are indicative of the various levels of gender discrimination that prevail in the construction sector. Even among the male workers only a minority of them reported to have satisfactory treatment from the contractors. A majority of workers in the study were first generation migrants. They have migrtated from the comparatively less developed states of Bihar, Uttar Pradesh, Madhya Pradesh, Rajasthan, West Bengal and Orissa due to prevalance of poverty and unemployment. Migration is also facilitated by the advance money paid by the jamadars or labour agents, who also arrange conveyance for them. The high degree of casualisation is further complicated by varying modes of payment. Temporary workers are paid on a fortnightly and monthly basis whereas 'extra hands' or casual workers' are employed occasionally on a daily basis from Naka-Mandis or street comer labour markets. However, it is significant that many workers continue to work for the same contractor for many years without ever attaining the status of 'regular' or 'permanent' worker.

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The labour market for construction workers is largely a demand-led with the buyers calling most of the shots. There are multiple Naka Mandis or street comer labour markets in the national capital from where casual workers are recruited by contractors especially ra;mistris or masons, beldars or junior masons and unskilled workers. There are noticeable variations in daily wages between, say north Delhi and the posh area of south Delhi. There are 'intra-labour markets' within the construction sector for specialised kinds of work: electrical work, wood work, plumbing, stone laying and other specialised trades. These intra-labour markets show significant wage fluctuations between say the festival period of Dushera and Diwali and slack periods. Skills are generally acquired on-the-job through an u.stad, and the process of skill acquisition is long and ardous and scope for institutional training is extremely limited. The substantive provisions of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 and the rules framed thereunder reamin elusive for these workers. As most of the workers engage in eight to ten hours of work on the site and for the rest of the day too they remain on site . To sum up, the major points that emerge of this study are as follows: (a) The construction workers in Delhi are extremely vulnerable since most of them are first generation migrants and pay a significant commission to labour agents to retain their jobs; (b) Construction workers, especially unskilled, suffer from cumulative deprivations on account of low literacy, poor economic background, high levels of dependency, low levels of skills, arduous working conditions and non-membership of any organised group. These cumulative deprivations make the linkages between the formal and the informal sector difficult as well as a necessity. For better implementation of the Building and Other Construction Workers Act, 1996, inspectors, as stipulated under the Act, have ~'to be supported by community-based organisations of workers (CBOs) and trade-specific guilds. Further, an effective interface with employers' organisations, trade unions, selected NGOs and local government representatives need to be developed. Implementation of provisions relating to working/living conditions and social security have to be combined with sustained efforts for improving the productivity of construction workers" (Anand, 2000a, p. 55). It is also "essential to have an overseeing body patterned on the lines of the Construction Industry Training Board (0TB) in the UK and Singapore. In U.K, the Cl'l'B levies a 0.25 per cent fee on the project value of all construction projects at the time of approval of building plans undertaken by registered firms and a 2 per cent fee on "labour supplying firms." In Singapore, the CIOB makes all registered construction firms to pay a fee and levy for financing its training activities. "It would be advisable to levy a cess at the local government level on all registered construction firms at the time of approval of building plans and at the time of securing completion certificate. The corpus of funds so generated could help finance a part of the comprehensive HRO efforts relating to both skill upgradation as well as technological improvements in the Indian construction sector" (Anand, 2000a, p. 61). Further, one plausible strategy to develop a symbiotic relationship between the two sectors is to improve the productivity of workers through

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high quality training and technological upgradation. Organising them on the basis of rights awareness will also facilitate in tackling many of the overt exploitations. It is high time that the various CBOs and NGOs exert pressure on the concerned agencies to implement both the Building &: Other Construction Workers Act (1996) as well as the Building&: Other Construction Workers Welfare Cess Act (1996). Setting up of a Construction Training Board for overseeing both human resource development and technological improvements would be an ideal intervention in this context.

DI. HANDICRAFTS SECTOR: THE CASE STUDIES OF APPLIQUE AND COIR PRODUCTS The handicrafts sector is traditional in nature and consists of small microenterprises. The discussion in this section is drawn from a study on handicrafts in Orissa(Rath, 2000). The region where the study was conducted is often referred as the golden triangle of Orissa, consisting of Bhubaneswar, Cuttack, Puri and Konark and their hinterlands. Two specific crafts are selected for a detailed discussion, viz., applique and coir. In the case of coir craft, SO coir workers and 25 micro entrepreneurs were interviewed which constitute about 7 per cent of the total number of workers and 5.8 per cent of the total number of micro enterprises in the concentrated cluster areas of Sakhigopal and Salasanka in Puri and Cuttack districts.

1. Applique Craft (i)

A Brief Description

The applique craft refers to positioning of bold, brightly coloured motifs on a 'base' fabric further adorned with laces, decorative stitches and mirrors. The common applique craft products consist of items like canopies, wall hangings, bags, centrepieces, teapoy covers, dining table covers, bed-spreads, letter holders, garden umbrellas, lampshades, dresses and file folders. The 'base fabric' used is usually handspun and hand-woven cotton cloth, markin, salu, satin, synthetic satin, full goan mill cloth , water proof sheeting, poplin and organdi cloth. The cloth is generally purchased by manufacturers in the wholesale and the wholesale prices for cotton cloth including markin and salu range between Rs. 12 to Rs. 24.50 per metre; synthetic velvet cloth is about Rs. 82 per metre; water proof synthetic mixed cloth is about Rs. 49 per metre; full goan cloth is about Rs. 11 per metre; and organdi cloth is about Rs. 21 per metre. The wholesalers supply cloth on creait basis ranging between 30 to 90 days. Besides the base fabric, the other accessories used are laces, threads, crochet white thread, aluminium frames, cardboard, bamboo sticks, round iron frames, mirrors and brass rings. The machines and tools used consist of Merrit and Usha Sewing Machines, scissors, tapes, stools, pencils and chalk.

(ii) Profile of Workers In the study, 70 applique workers and 25 micro entrepreneurs were interviewed constituting about 5 per cent of the total number of workers and micro entrepreneurs located in the concentrated cluster areas of Banimalipur, Bhubaneswar, Puri and Cuttack districts. In this craft, women workers Digitized by

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'Iablel Detail• about the Key Role-playen in an Applique EnterpriH lypeof workers

Sex

Work allotted

Male Regular managerial, marketing

worken Family workers

Male Female

Regular

Male

craft workers Female

Casual, daily wage workers

Male Female

Skilled

Skilled

Terms of payment Monthly Manager-around Rs. 5,000 Supervisor-Ra. 3,500 Accountant-Rs.1,600 to 2,000 Salesman-Rs. 600 to 1000 Monthly Rs. 2,500 to 3,500

Semiskilled Skilled

Unpaid

Skilled

Rs. 65 to Rs. 90 per day

SemislciUed

Rs. 25 to Rs. SO per day

Monthly Rs. 1800 to Rs.2700 depending on their efficiency and productivity Unskilled Rs. 250/-

Piece-rate payment for stitching a motif like workers at unit peacock-Rs. 2 betel leaf Rs. SO paise laces per SO paise lampshed fitting Rs. 5 Chain fitting Rs. I .SO Dancing girl-Rs. 1 For chain stitching on the motifs if small Rs. 1 for 4, for medium Rs. 1 for 2, for big Rs. 1 for I .On an average, they earn Rs. 600 to Rs. 900 per month. Home-based Males Mounting Skilled Rs. 350 for garden frames; piece-rated umbrellas, for alatas Rs. 90, workers for ladies umbrellas Rs. 45, for children's umbrellas Rs. 25 Semi12 betel leaves &: 5 elephant for Rs. 5, 12 elephants-Rs. 6, skilled 50 flowers-Rs. 7, 50 chains or pullis - Rs. 10, 2 parrots - Rs. 4, as piece rate payments Female Stitching motifs, making Unskilled 100 mirror fittings- Rs. 3 kanguras, minor fittings, flower making, making chinas &: pullis Piece-rated

Female

Management of the enterprise, maintaining job records, accounts maintenance &: salesman in the showroom Liaiaoning, designing cutting, supervising Hand-stitching of motifs, kanguras &: laces Designing, cutting base &: motifs base stitching with machines Cutting the extra clothes folding the finished products Stitching the base pieces, kanguras, laces with machines Hand-stitching, machine stitching of small base pieces of bags, pillow covers, laces, kanguras Hand stitching of motifs, kanguras, laces on the bases, chain fittings, framestitching in the lamp shade

Skill gradation

Semiskilled

Sou~: Rath (2000).

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outnumber men workers. Out of the 70 workers interviewed, 70 per cent were women. About 52.86 per cent of the workers were in the age group of 18 to 35 years. More than 50 per cent of the workers were Muslims and about 30 per cent belonged to Other Backward Classes (OBCs). Most of the workers had studied upto primary level (47 per cent). While 5.7 per cent of the workers had education upto graduation , 8.57 per cent were illiterates. A significant point to be noted is that all the skilled workers were males (Table 1). Women largely performed semi-skilled or unskilled tasks. Most of the applique workers (58.6 per cent) had acquired their skills on a hereditary basis while 20 per cent had acquired their skills on-the-job from a master craftsman and about 21.4 per cent had acquired their skills through training from cooperative societies. The key role-players in the production of applique handicrafts are given in Table 1 which also indicates the nature of work allotted, the level of skills, sex of workers and the monthly wage or income. It is evident from the table that regular workers both with managerial or marketing duties along with family workers were the best paid. Between regular craft workers and casual daily wage workers, the former were better paid. The home based, piece-rated workers earned the least. The supervisory jobs like designing, cutting and machine stitching which fetch better prices are, generally, performed by male workers and thereby exemplify a clear-cut gender bias. On the basis of the enterprises surveyed, the average number of workers of different types employed per enterprise, their sex distribution and the average wages for men and women are given in Table 2. Table2 Average Number of Workers Per Enterprise in Applique li'ade by 'fype of Workers, Sex &: Wage Levels Nature of workers

Average no. per enterprise

Regular managerial/ marketing workers Family workers Regular craft workers Casual daily wo rkers & piece-rated workers at unit Piece-rated home based workers

Male

Female

No.

Wage (Rs.)

No.

Wage (Rs.)

1.2 3.2 8.96 12.2

1.2 2.5 6.38 3.5

2275 2067 1950 1470

0.70 2.58 8.7

750 600 472

66.24

10.08

1200

56.16

325

Note: Wages and average wages per month. Source: Rath (2000).

It can be discerned from the table that the average number of regular managerial or marketing workers employed per enterprise is only 1.2. Piece rated workers at the unit premises and the piece-rated, home-based workers are the largest in number and consequently, their average number per enterprise is 12.2 and 66.24, respectively. The disparity in the average wage differentials between men and women workers is also found to be quite large in the applique craft industry. Digitized by

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(iii) Marketing Applique products are sold in the market in terms of three quality categories: regular or ordinary, standard and high quality or export variety. The market for applique products can be broken-up into four segments: rural buyers, urban buyers, national tourists and international tourists and importers. The rural buyers constitute 3 per cent of the market, urban buyers 36 per cent, national tourists 38 per cent and international tourists and importers 23 per cent. The sale of applique craft is organised through six different marketing channels. Direct sale is done by the applique enterprises by establishing their own show-rooms on the roadside. Order based sales are done by procuring orders from show rooms in Puri and Bhubaneshwar as well as by selling to other private agencies located within and outside the state. "Push sales" are done through liaisoning agents who procure orders from institutions like office and hotels for the production units. Sales are also undertaken through government agencies like the Handicrafts Corporation of Orissa as well as through cooperative societies. Sales are also organised by participating in fairs and exhibitions. Export orders are organised through intermediaries or by direct contact with exporters. Only four units in Pipli have fulfilled orders from foreign countries.

2. CoirCraft (i)

Products, Workers and Wages

Coir craft items are largely utilitarian in nature. The range of coir products includes items like ropes, doormats, toys and curled coir. The products are of two q,,alities: ordinary and superior q11ality. Ordinary products consist of fibres, yam/strings, ropes, doormats and toys. The superior quality of coir products are office mats and curled coir. The superior quality coir products are, generally, produced in semi-mechanised way by the larger enterprises. Coir products are generally standardised in character though some new designs are transmitted, from time to time, by the Kerala Coir Board and the Orissa Coir Board. An overwhelming majority of workers in the study was found to be women with a 10 per cent of girl child labourers. The skill level of women in this craft is comparitivly high (89 per cent) but in terms of wages, their skills are rated at a lower level. An interesting correlation is observed between educational attainments and skill level. Whereas in the category of skilled workers, 35.1 and 13.5 per cent are middle and matriculates respectively, in the unskilled category, no workers are either middle pass or matriculates. The key role-players in the production of coir pro.d ucts are indicated in Table 3, which also correlates the types of workers with the nature of work allotted, their sex, their skill gradation and terms of payment It can be seen in Table 4 that all the managerial, supervisory and skilled jobs are performed by male workers. The table shows that the average number of regular managerial/supervisory staff for various coir units is only 0.48. In fact, only medium and large units go in for regular managerial/supervisory workers. In terms of salaries also, this category of workers are paid higher Digitized by

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UNKAGE BE'IWEEN INFORMAL AND FORMAL SECTORS

Table3 Detail11 of Key Role-playen in a Coir Enterprise 'Iypeof workers

Sex

Work allotted

Male Regular managerial/ supervisory watch and ward workers Regular craft Male workers

(a) Management, supervision, accounts maintenance and job record maintenance (b) Guard and store keepers (a) Loading and unloading of husks, soaking them in water (b) machine operators Casual piece- Female (a) Separating knots rated workers from the fibres, at unit giving finishing touch to the mats and toys (b) Rope making and preparing dyes (c) Mat making and toy making

Slcillgradation

Terms of payment

Slcilled

Monthly Rs. 1300 to Rs. 2000 Rs.700

Unskilled Unskilled

Monthly Rs. 700 to Rs. 900

Skilled Unskilled

Rs. 1600 Rs. 150 to Rs. 250 (for 1kg. Rs. 8 for each mat .30 paise)

Semi-

Rs. 350 to Rs. 450 (for 40ft. -30 paise) Rs. 600 to Rs. 700 (for each sq.ft. 1.25 p)

skilled Slcilled

Source: Rath (2000). Table4 Avenge Number of Worken per Enterprise in Coir 'Irade by Type of Workers, Sex and Wage Levels Nature of workers

Average no. per enterprise

Male No.

Female

Wages

No.

(Rs.)

Regular managerial/ supervisory &: watch &: ward workers Regular craft workers Casual piece-rated workers at unit

Wages (Rs.)

0.48

0.48

1233.33

0

0

0.8

0.8

825

0

0

12.64

0

0

12.64

400

Note: Wages and average wages per month. Source: Rath (2000).

wages. Further, the male workers get higher remuneration than women. Women workers are large in number in coir units but are found only in the casual piece-rated category. (ii) Marketing

The coir market for the coir producers of Orissa can be divided into three segments: local and rural buyers, urban buyers and buyers from outside Orissa; each segment accounting for 24 per cent, 58 per cent and 18 per cent respectively of the total sales. Coir products are extensively used in rural households, especially coir ropes and mats. Similarly, coir products are also bought by people living in urban areas of Orissa. The comparatively better quality of coir

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products of Sakhigopal and Salasankha are also sold in the neighbouring states of Bihar and West Bengal. Four types of market channels are generally used by coir manufacturers to sell their products: direct sale, sale through intermediaries, sale through cooperative societies and sale through coir board as well as government corporations. Direct sales are extremely limited and restricted to daily markets of various villages and towns. The coir entrepreneurs mostly take the help of intermediaries for the disposal of their products. The intermediaries pay lower price. For instance, when the intermediaries pay Rs. 1.80 per sqft. for a coir product, they sell it in towns and neighbouring states at Rs. 2.25 to Rs. 2.40 per sqft.Since the entrepreneurs are short of cash and raw materials, they continue to sell their goods to intermediaries. Some of the bigger enterprises also make direct delivery of products to organisations like Khadi Bhandar on the basis of orders. Cooperative societies are also a significant player in marketing and about 40 per cent of the units use this channel. The coir boards and state corporations are used largely by bigger producers.

rv.

SCRAP COLLECTION AND TRADING

1. Trade Profile The small trading sector has been classified into three-digit sub-sections by the National Industrial Classification (NIC) pertaining to both wholesale and retail trades. In the wholesale sector, classification 638 refers to 'wholesale trade in wastes and metal scraps'. In the retail sector, classification 689 refers to 'retail trade not elsewhere specified', and includes junk shops and free collection for the retail trade of waste-paper and rags, etc. An analysis of NIC groups 638 and 689 gives a comparison of trends in wholesale and retail trading in the scrap sector between the NSS 46th (1990-91) and the 53rd rounds (1997). In terms of the number of enterprises the number has increased from 41.84 thousand in the 46th round to 138.54 thousand in the 53rd round, in NIC group 638, thereby registering an increase of 231.12 per cent. In terms of the number of enterprises dealing in retail trade not elsewhere specified (n.e.c.) and including junk shops and free collection of waste-paper and rags, the number has registered an increase of 37.68 per cent between the two NSS rounds. In terms of the total number of workers employed in the wholesale trade of wastes and metal scraps (638), the number increased from 69.17 thousand in the 46th round to 167.17 thousand in the 53rd round, thereby registering an increase of 141.67 per cent. In the case of retail trade pertaining to 689, the number of workers increased by 29.75 per cent between the two NSS rounds. In terms of the monthly gross value added (GVA) in the wholesale trade of wastes and metal scraps (638), the monthly GVA for the sub-sector increased from Rs. 82.28 thousand to Rs. 274.82 thousand thereby recording an increase of 234.02 per cent. In the case of retail trade pertaining to 689, the monthly GVA for the sub-sector increased by 372 per cent between the two NSS rounds. In terms of the monthly GVA per enterprise in the wholesale trade of wastes and metal scraps (638), the monthly GVA per enterprise increased from Rs. 1.97 thousand to Rs. 1.98 thousand thereby recording an increase of 0.88 per cent.

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la'bleS Compuilon of 'D'enda in Whole1aJe and Retail lrading in Scrap Sector Whole sale trade in wastes and metal ecraps

(NIC638) Characteristics

1. Estimated employment 2. F.stimated number of worker 3. Monthly gross value added 4. Monthly grosa value added 5. Monthly gross value added per worker

46th round

53rd

%

round

41.84 69.17 82.28 1.97 1.19

Retail trade not

elseware specified (NIC 689) 53rd

%

age

46th round

roWld

age

138.54 167.17 274.82 1.98

231 .12 141.67 234.02 0.88

530.83 851.54 451.13 0.85

730.86 1104.91 2130.20 2.91

37.68 29.75 372.19 242.35

1.64

38.22

0.53

1.93

264.15

Notr: Employment figures are In thousand. figure& fn. grow ✓ahie added are in thousand rupees. Smna : Derived from data given in Sm11U Thuling Units in India and Their Basic Chlmu:tmstics, NSS 53rd round 1997, Volumes, I and ll, Report Nos. 443a,444; and Snuul Thuling Units in India, NSS46th roW1d, 1990-91, Report No. 403.

In the case of retail trade pertaining to 689, the monthly GVA per enterprise increased by 242 per cent between the two NSS rounds. In terms of the monthly GVA per worker in the wholesale trade of wastes and metal scraps (638), the monthly GVA per worker increased from Rs. 1.19 thousand to Rs. 1.64 thousand thereby recording an increase of 38.22 per cent. In the case of retail trade pertaining to 689, the monthly GVA per worker increased by 264 per cent between the two NSS rounds (Table 5). An examination of the wholesale trade in wastes and metal scraps (638), between the NSS 46th round (1~91) and the NSS 53rd round (1997), shows that there has been substantive increase both in the number of enterprises and workers. The monthly GVA for the sub-sector as a whole has also doubled between the two rounds. However, on account of the doubling of enterprises, the monthly GVA per enterprise has only incre~d marginally. The per worker productivity, measured in terms of monthly GVA per worker, has also shown a noticeable increase of about 38 per cent over the two rounds. In short, the wholesale trade in wastes and metal scraps (638) has shown all round, resilient growth between the two NSS rounds. An examination of the retail trade in 'n.e.c. including junk shops and free collection of waste-paper and rags', between the NSS 46th (1990-91) and the NSS 53rd rounds (1997), shows that there has been a marked increase in worker productivity and enterprise productivity which is borne out by substantive increases in monthly GVA per enterprise and per worker. In terms of an increase in the number of enterprises and workers, the analysis has shown only a modest rise. In the context of the macro picture presented above, it would be useful to, first, examine the key role-players relating to the wholesale and retail trades in the scrap trade and the framework within which they are organised at the town/ city level. The subsequent discussions in this section is based on two studies by Chickermane and Narayan (2000); and Chickermane, Deshpande and Narayan (2000). Scrap collection and trading is a service activity. This activity is structured in a pyramidical form. Diagrammatically, this framework Digitized by

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288

is shown in Figure 1. At the base of the pyramid are the scrap collectors (Chickennane and Narayan, 2000), who consist of two categories of workers: waste-pickers and itinerant buyers. The waste-pickers retrieve waste materials like used paper, plastic, glass or metal from municipal dumps/receptacles as also from landfill sites where the municipalities transport and unload garbage in large quantities. In this manner, waste-pickers involve themselves in the free collection of reusable waste materials. Itinerant buyers, on the other hand, purchase waste materials from households, offices/shops or commercial establishments on payment of cash or by way of barter. Itinerant buyers are of two types: female itinerant buyers, generally called bartanwalis or dabbabatliwalis; and male itinerant buyers, generally called kabaris or bhangarwallas in different parts of the country. Female itinerant buyers generally carry a basket on their head. Male itinerant buyers use a pushcart or cycle with a sack. Above the scrap collectors, in the activity pyramid, are retailers. The retailers buy waste materials either by weight or by units from scrap collectors. Retail trading can be broadly classified into general retailers and non-bundle retailers. General retailers are those who conduct trade in all kinds of scrap commodities including bundle items such as pustha or corrugated paper, road scrap (RS), mixed mein or mixed poly-ethylene and white record (WR) which are manually packed prior to sale. Non-bundle retailers conduct trade in commodities such as phuga or blow-moulded plastic, kadak or injection moulded plastic, bhangar or ferrous metals, patra or non-ferrous metals, glass and bottles. Figure 1

Rcprocessors

Read. dealers Wholesalers Stockists Retailers Itinerant buvcrs {male & female)

waste-pickcrs The next significant role player is the stockist. Stocking constitutes the first level of the wholesaJe trade. Stockists, generally, always combine stocking with retail trading. Except for glass, stockists deal in all commodities which are collected for purposes of reprocessing. The next level in the activity pyramid is wholesale trading. Wholesalers either deal in a single item or in a group of items that have a common market. The single items are glass, roadside scrap and mixed mein (mixed polyethylene items). Items with regard to which wholesalers deal in groups are: bhangar-patra or ferrous and non-ferrous metals; different varieties of bottles such as loafer

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UNKACB BB'tWBl!N INR:>RMAL AND FoRMAL SBCrORS

289

or one litre alcohol bottle, quarter or alcohol bottles of 250 ml. or one litre rum bottels or beer bottles of 750 ml.; kraft or corrugated board; pustha or corrugated paper and white office record (WR); and phuga or blow-moulded plastics; kadak or injection moulded plastics; cable (PVC pipes); chappal (a kind of PVC) and milk bags. Most of the wholesalers have their own warehousing facilities. However, large wholesalers dealing in mixed mein and road scrap (RS) constitute a distinct category in as much as they do not have warehousing facilities and use their capital for advances, purchases, loading and the transportation of scrap directly to the reprocessors. Above the wholesalers in the activity pyramid are the registered dealers. Registered dealers deal with kraft, white record, glass bottles, bhangar and patTa. Often, they procure better quality industrial and commercial scrap from bulk generators via the tendering system. They sometimes mix high-quality scrap with lower-quality scrap procured from retail traders. Registered wholesalers have large godowns, employ hired labour and sometimes process scrap prior to supply to reprocessors. Coming to the terms of trade in the scrap trade, the study by Chickermane, Deshpande and Narayan (2000), points out that the ownership of the scrap trading shops in Pune is extremely private except the retail store run by the Kagad Kach Patra Kashtalairi Panchayat (KIRMAL SscroR IN OOIA

References Anand, H.S. (2000 a), Critiall HRD Issues Ptrlllining to Constnu:tum

Worurs in the lnfa111"'1

Sector, National Institute of Construction Management and .Research (NICMAR), Mumbai. -(2000 b), •construction Worlcers in De~An Informal Sector Study", Paper preeented .to the n.o Area Office in India (memeo). Bremen, J. (1996), footloo,e l.Abcnlr: Worl;ing in bulill'• Infonnal &:o110ht)", Cambridge Univeraity

Presa, U.IRMAL SBC10R IN INDIA

338

Current occupational pattern of our respondents did not differ much from that in their first job. Home-based work, domestic work and factory work were the three occupations that employed an overwhelming majority of 61 per cent of the workers. This share was 65 per cent in the first job indicating that few had moved to other occupations. In case of wage employees the most important change in employment status was their getting permanent status in factory work. Share of self-employed increased too, especially of those who had acquired skills to work as tailors. Part-time work as domestics continued to be as important in the current, as it was in the first employment. So even after spending about 12 years, on an average in the labour market, not many reported perceptible upward mobility in their occupational pattern. We asked these women whether they had acquired any training for doing their current job. For 45 per cent, the current job, being merely an extension of their housework, did not require training and 37 per cent reported learning the skills on the job. Barely 10 per cent reported attending special classes for learning skills. Most women worked close to their homes and walked to their workplace, which was also important from their point of view. Average income earned in the current job, by all these women taken together, was Rs. 728 per month. Average incomes differed between slums. It was higher in Slum I in the textile area despite the absence of factory jobs and predominance of home-based work. In Slum II, near SEEPZ, the average wage did not differ much from the average income for the three slum pockets taken together. But most women here did low-paid factory work. The lowest average wage prevailed in Slum m, which was exposed to migration. A continuous supply of fresh entrants to female labour market in new in-coming migrant households was responsible for keeping the average wage low in this slum. Also, Muslim women formed almost a third of our respondents in this slum. Due to cultural constraints they were forced to accept home-based, low-paid contract work. Entry to this kind of work was easy as many women in the neighbourhood did similar work. Therefore, as in their first job, many did lowpaid home-based contract work in their current job also which in tum lowered the average wage. Not all women experienc~d increase in incomes, even in nominal terms, uncorrected for price rise. Comparison of the current income with that earned in their first job, revealed that one in every four women either had a lower or the same income in her current job compared to that in her first job in Mumbai. Some of these women, who did not gain, were fresh entrants to workforce with very short duration of less than three years in the labour market. But there were others too, who had compromised and accepted lower wages because the current job was more secure and nearer home compared to the first. For nearly 58 per cent of the women, incomes in the current job were 51 per cent higher, while for 44 per cent of them the increase was over 100 per cent in the current over the first income. Liberalisation demands a very mobile labour force a demand not easily met in countries adopting liberal policies. This is because the nature of jobs changes with introduction of new products and technology. Old skills become obsolete and workers have yet to learn the new ones. Inefficient firms are forced to close down making way for efficient ones. As a result, the labour market

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IMPACT OP EMBRGJNG I..AeoUR

339

MAloorr ON WOMEN

tends to be in a flux. Surprisingly enough, the NSSO data for 1993-94 for Mumbai revealed that over 99 per cent of the workers, male and female, reporting to the NSSO did not change either their establishment or the nature of the job they did between 1991 and 1993. But casual workers, as is to be expected, were more mobile than regular wage and salaried workers. Also mobility was much higher among women than men casual workers (Deshpande and Deshpande, 1997; 1998). Women we interviewed were either in casual or contract work or did menial services. We found them to be relatively more mobile than their counterparts in the general population reporting to the NSSO. Almost 85 per cent of these women had not changed their job in the post-reforms period but nearly 15 per cent did. Even for those who did, the frequency of job change however was very low-1.16 jobs per respondent. More importantly, unlike the women reporting to the NSSO, who were forced to change jobs for reasons beyond their control, nearly 60 per cent of our respondents, who were laid off changed their jobs voluntarily, either for getting higher income or because the new job was closer to their home or offered continuity of work. Nearly 18 per cent of the women gave up their jobs for the sake of job security which the new job offered. So their decision to change a job thus was independent of the employment scenario in the emerging labour market.

4. How Did they Perceive Emerging Labour Market? Nearly 68 per cent of the women were satisfied with their current jobs. About 37 per cent of these women were extremely "down-to-earth" and said that they were satisfied because given their qualifications they could not expect to get a better job; 33 per cent were happy because the job offered them enough money to manage their household, while 26 per cent, who were essentially home-based workers, were satisfied as it permitted them to combine work with housework. Thus the reason for satisfaction differed between women depending upon the circumstances in which each woman was placed. Nearly 44 per cent of the women not satisfied with their current jobs reported low pay as the main cause of their dissatisfaction. Uncertainty of work and income (19.8 per cent) and exploitation involved in getting work through middlemen (11.5 per cent) were the two other important reasons for their dissatisfaction with the current jobs. Nearly 25 per cent of the dissatisfied workers would have been happy to do home-based work contracted out by garment manufacturing units which they knew was better paid than their current work. Another 17 per cent were even prepared to travel if they were given a higher pay, while 13 per cent wanted to be in food-processing business. Almost one-third of our respondents said that low income was the most important problem faced by them. Women engaged in tailoring or in petty trade viewed intense competition from others in the trade, living within the same slum, as a serious threat to their income. For women doing home-based contract work, low piece rates given by middlemen and contractors was the most urgent problem. But despite these problems, many were aware that they had no option but to continue in their current jobs. Clinging to their current job was, in fact, their survival strategy in the absence of a better alternative in the face of economic uncertainty that had emerged in the labour market. Many Digitized by

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340

accepted their own circumstances as a challenge and were prepared to struggle and fend for themselves a realisation, most probably, prompted by their own labour market experience. 'lllblel Labour Market Charaderlstie1 of the Women Rupondenta

Job characteristics of women Age at entry into labour market Age at survey Education Never attended school (%) Average years of schooling of those who went lo school First job characteristics Three major occupations (% shares) Domestic work Factory work Home-based work Average income Rs. (per month) Current job characteristics Three major occupations (% shares) Domestic work Factory work Home-based work Employment status(% shares) Permanent workers Temporary workers Casual workers Contract workers al establishments Self-employed Home-based workers (put-out work) Unpaid family workers Part-time workers Total Average income (Rs. per month) Average income of the household Current income as peI'Cel1tage of household income

Sluml

Slum II

Slum ID All slums 23.2 23.2 35.6 35.7

24.7 38.3

33.2

46.0

55.0

40.0

47.0

5.4

6.6

5.4

5.7

27.0 7.0 32.0

28.0 9.0 37.0 275.37

21.3 16.0 28.0

235.36

9.0 32.0 15.0 295.27

268.70

28.0 5.0 26.0

6.0 38.0 11 .0

25.0 7.0 36.0

19.7 16.7 24.3

9.0 0.0 15.0 0.0 25.0 17.0 5.0 29.0

11.0 31.0 7.0 10.0 26.0 8.0 1.0 6.0 100.0

5.0 8.0 4.0 16.0 19.0 22.0 2.0

8.3 16.0 8.7 8.7 23.3 15.7 2.7

24.0

19.7

100.0

21.8

100.0 830.50 2240.41

728.00

628.00

2390.40

2030.42

100.0 727.79 2220.41

37.1

30.5

30.9

32.8

This short profile of women workers living in three slums of Mumbai (See Table 1) vividly describes the job opportunities that were emerging for poor women in the wake of economic reforms. It also indicates the type of workers that were in demand in the informal sector in Mumbai. Many of these jobs did not demand either education or sophisticated skills; women always did this kind of work within their households. Our respondents, given their low levels of education, were probably the best candidates for such jobs. Also though low paid, they permitted women to contribute just over a third of the total household income. So they could not afford to give up the work they did, however low-paid it was. Many were aware of their own limitations and the limited options they had in the job market. In order to know why they chose this strategy, we need to know how men in their households, were affected by economic reforms.

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S. Impad of R~fotnld on Male Earnen In the post-refonns period poor men were expected to face job losses to a much greater extent th}ln women. This was so because these men were likely to be wage employees in the informal sector of the economy while women, as we saw earlier, were home-based contract workers or were in menial services. Liberalisation was likely to have negative impact on small units in the informal sector and men employed therein were likely to face job losses. Data from the NSSO's 50th round, as noted earlier, had shown that nearly 99 per cent of the men had not changed their jobs in the first two years of refonns. We tried to see if this were so for the male earners in the respondents' households. In majority of the households, male earners were husbands of the women we interviewed. Jn case of older respondents they were their sons. In case of very young women workers they could be their fathers or uncles. A male main earner was on an average 37 years old, marginally better educated than the woman respondent and had about seven years of schooling to his credit. Most of them were rural migrants largely drawn from other districts of Maharashtra and from other states. At the time of Survey only 82 per cent of these men were at work. Nearly seven per cent of the principal male earners were unemployed in the week prior to the investigator's visit to the household. The rest were retired older men. Most of these men were in precarious jobs in the informal sector. Those employed in the secondary sector were either wage employees in small factories or were construction workers. Very few were small entrepreneurs in manufacturing and fewer still, skilled own-account workers like plumbers, electricians, drivers, die makers, tailors etc. Industrial distribution of these men revealed that almost one fourth was in service industries. Nearly 14 per cent of the men worked in construction, 12 per cent were in garment industry, 10 per cent were in textiles whereas 9 per cent were in trade. Curiously enough these men were concentrated in traditional manufacturing industries like textiles, garment making and leather, which were relatively low wage industries in Mumbai. Not many reported working in modern high wage manufacturing industries like rubber, chemicals and engineering. The latter had registered a perceptible growth over the 1970s and the 1980s in Mumbai's economy (Deshpande and Deshpande, 1991; 1993). But not many men in the ho11seholds had been able to have access to these jobs. This was not so with men reporting to the NSSO in 1993-94, many of whom were in modern than traditional manufacturing industries (Deshpande and Deshpande, 1997; 1998). Majority of the men worked as wage employees but unlike women, they were more likely to work in the capacity of permanent than temporary or casual employees. Unlike in the NSSO survey where nearly 31 per cent of men were self-employed barely 14 per cent were self-employed in the survey population. These men were too poor to start any business on their own. Not many possessed skills with which they could be on their own as self-employed. As a consequence they were forced to accept low-wage employment in the informal sector in the city's economy. The average income of a principal male earner in our respondents, household was Rs.1,444 per month. Men in Slum Il reported an average income of Rs. 1,540 while men in Slum I and Slum Ill earned on an average Rs. 1,420 and Rs. 1,360 per month, respectively (Table 2). Digitized by

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lablel Labour Market Characteristlca of Men In Respondents' Hou,ehold Job characteristics of men Relationship with respondent Percentages of husbands Percentages of sons Average age Never went to school (%) Average years of schooling for those attending school % employed by weekly status % unemployed by weekly status Rate of unemployment (% of LF ) Ave. duration of unempl. in months Employment status (% shares) Permanent employees Temporary employees Casual employees Contract workers Self-employed Current income (Rs. per month) Average duration in current job % with less than five years Reasons for job change Voluntary change(% share) Higher pay/earnings New job near the residence New job more secure Involuntary change (% share) Changing as company closed Changing as company shifted Changing as retrenched Average duration of unemployment in between jobs in months Average income 5-6 years back

Slum I

66.7 21.8 35.2 8.0

Slum II

SlumW

All slums

80.0 7.4 37.7 16.8

79.4 6.5 40.2 32.6

75.6 11.7 37.7 19.3

•

7.14 82.7 8.1 8.8

7.37 84.1 3.2 3.6

23.14

7.27

7.26 82.0 7.0

79.4 9.8

7.7

14.00

11.0 19.33

19.89

37.0 30.2 2.7 8.2 21 .9

32.9 34.1 13.4 9.8 9.8

20.6 43.8 10.9 9.6 12.3

30.3 36. 9.2 9.2 14.5

1420.64

1539.87

1360.02

37.5

58.8

57.1

53.1

39.4 7.1 10.7

34.3 5.7 2.9

16.7 16.7 33.3

34.8 7.2 29.0

21 .4 0.0 7.1

34.3 2.9 5.7

33.3 0.0 0.0

29.0 1.5 5.8

9.88 1066.15

8.00 956.74

7.29

905..97

1443.60

8.31 975.13

The rate of male unemployment based on current weekly status in our survey population was 7.7 per cent among men, nearly twice as high as the rate of 3.6 per cent reported among men 15 years and over in the general population in the 50th round of the NSSO in 1993-94. This could be interpreted as deterioration in the labour market situation for men in the post-reform years. But this may well be a consequence of concentration of these men in dead end, precarious and intermittent jobs. Given their low level of education and skills they were more likely to be concentrated in meni.:tl unskilled occupations. Unemployment rates among male members differed between slums. Sun-rise industries around Slum II offered more employment opportunities to men in the vicinity which lowered male unemployment rates, compared to the corresponding rates in other slum pockets. We asked the unemployed males as to why they lost their last job. Nearly 68 per cent of the men lost jobs due to involuntary reasons; some reported closure of the company they worked for, some reported being retrenched

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because they were temporary/casual workers. None reported accepting VRS, an option that was more likely to exist in the organised sector. Surprisingly, not many had lost their jobs because their company shifted outside Mumbai. Here too, the experience of these men differed from the men reporting to the NSSO in 1993-94; only 40 per cent of the latter had lost jobs between 1991 and 1993 for involuntary reasons, the rest had done so voluntarily for higher income, better job prospects, greater security etc. (Deshpande and Deshpande, 1997; 1998). It was clear that men in these slum households were affected much more adversely than women. Since they worked predominantly as temporary/casual ~age employees, they were completely at the mercy of the employers. This was not so with the women. They, on the other hand, were either home-based workers or self-employed or in menial service occupations. No doubt all these women's occupations were low paid but one peculiarity, which all these occupations shared, was that they seemed to be always readily available to women in Mumbai if women wanted them. In this sense, women had a choice whether to be in the labour market or to be out of it, depending upon the circumstances at home. We hasten to add, however, that their poverty forced them to remain in the labour market. So this choice, at best, was only theoretical and not real. But the kind of jobs women were in, offered them freedom to choose their working hours so that they could carry out their household chores. Our respondents did not specifically say that they started working because of the economic distress their households experienced but 39 per cent of our respondents entered the labour market only in the postreforms period. The emerging labour market was expected to offer temporary jobs to jobaspirants and these jobs were likely to be intermittent. We tried to find out if these men were forced to change jobs in the post-reforms period. Nearly 53 per cent were doing their current job for less than five years. Some of these were fresh entrants to workforce. But 51 per cent of those who worked when reforms were initiated in 1991" stated that they changed their jobs voluntarily either for higher pay or for job security or less commuting time. Only in case of 36 per cent, job change was due to closure of the company, retrenchment or change in the location of the company. The impact of liberalisation on the small informal sector manufacturing units in Mumbai is clearly brought out by these data. Duration of barely two years between the initiation of the reforms and the NSSO's 50th round could not capture this negative impact on the informal sector, which we could capture in our case study. We conclude from the study that most of the fears expressed about the devastating impact of reforms on workers employed in the informal sector in the emerging labour market were found to be true for slum households we surveyed, partic11larly for men in these households. In order to understand the severity of this impact in the emerging labour market we need to understand first the incidence of poverty in the survey households and population and second, changes in the real incomes of women, men and their households. To this we tum to the next section.

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Ill. POVERTY AND REAL INCOME

1. Incidence of Poverty Analysis of the economic situation of the survey population shows that most of the hp1,seholds we surveyed were extremely poor. They also belonged to · socially deprived classes of the Indian society who are known to be at the lowest rung of the income ladder. It would be wrong however to blame economic reforms alone for their poverty. They were poor before the reforms were initiated and remained so in the post-reforms period. We have tried to isolate the impact of the reforms on these households by analysing changes in incomes corrected for price change but in what follows first we have tried to measure the incidence of poverty among these households at survey by using poverty norm officially accepted in India. A working group of the Planning Commission estimated the wban poverty line at Rs. 25 monthly per capita expenditure (MPCE) at 1960-61 prices. Correcting it for inflation by Consumer Price Index for Mumbai we can obtain equivalent poverty line for later years. The estimated poverty line MPCE was Rs. 204 at 1960-61 prices in 1987-88. In that year 14.8 per cent of the households but 15.6 per cent of the population lived in poverty in Mumbai. Poverty line MPCE for 1993-94, the year of NSSO's 50th round, was estimated at Rs. 369 and according to this poverty line 4.5 per cent of the households and 6.1 per cent of the population could be said to fall below this poverty line MPCE. So the share of households and persons living in poverty seemed to have declined drastically in the post-reforms period (Deshpande and Deshpande, 1997; 1998). Since we did not collect information on expenditures, we had to rely on income data, however crude they may have been for reasons noted earlier, to know the incidence of poverty in these slum households. Generally we could assume that for poor ho11seholds expenditures approximately equal incomes, as they cannot save much out of the income they earn. We therefore used distribution of households and survey population by per capita monthly income instead of monthly per capita expenditure as we do when we use the NSSOdata. Upgrading the poverty line for 1997, the year of our survey, we estimated it at MPCE of Rs. 485. Based on this, 59 per cent of the households we surveyed and almost 63 per cent of the survey population was poor. We need to remember that because of the limitations of our income data mentioned in Section II, these estimates possibly overestimates poverty since incomes reported to us are likely to be underestimates. Despite this qualification, the share of poor households and persons is not likely to be as low as those estimated with NSSO data for 1993-94. Nearly 61 per cent of the households had an income of less than Rs. SOO per month per capita and they accounted for 66 per cent of the survey population. These households had on an average, 5.3 persons per household. Those reporting per capita monthly income between Rs. 501 and 1000 formed 31 per cent of the households and 28 per cent of the population where the average size of the household was smaller, 4.5 per household. Barely 8 per cent of the households had per capita monthly incomes of over Rs. 1000. They accounted for 6 per cent of the population and had the smallest average size of Digitized by

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IMPACT OP EMmlGING lABouR M.warr ON WOMBN the household, 3.3 persons per household. In other words, though all our households were poor but the poorest among them carried a burden of a largem.ed family too. We must also remember that the poverty estimates we derived earlier relate necessarily to the 300 households we covered in our study which was essentially a case study. They cannot be said to be applicable even to the slum settlements that were identified to select our sample households. We are fully aware that the sample of 300 households was in no way representative of even the slum settlements from which they were selected, leave alone the total slum population of Mumbai. Probably as the caste profile of our respondents suggests, the particular households we sampled may have been the poorest of the households from each slum pocket But our findings highlight the need to look at experiences of different segments of population, which cannot be expected to reflect in aggregate data sets like the NSSO.

Change in Real Income Deterioration in the economic situation of the household could be expected to increase the number of earners in the household (Table 3). There were 211 earners per respondent at the time of swvey compared to 1.60, five to six years back. In 51 per cent of the households number of earners had declined while in the rest they had increased. The increase in the number of earners was attributed by our respondents to their own participation as well as participation of their children who were now adults. Not even five per cent attributed the increase to rising economic crunch experienced by the family. Respondents reporting decline attributed the decline to death or retirement of older members as well as decreased participation of children. So in many households the change in number of earners was associated with changes in the life cycle of the household. Change in number of earners could at best be a crude measure to understand the negative impact of the reforms. 2.

Table3 Some Current Labour Market Charaderiatics of Repondent Households Current economic situation Ave. no. of earners per flli Ave. income per month (in Rs.) Respondent Male earner Female earner Total household Situation 5-6 years back ave. no. of earners per flli ave. income per month (in Rs.)

Respondent Male earner Female earner Total household

Stumm All slums

Slum I

Slum II

2.11

2.12

2.09

2.11

830.50 1581.00 903.00 2240.41

728.00 1751.00 861.50 2390.40

628.00 1471.00 669.50 2030.42

727.79 1601.40 809.91 2220.41

1.76

1.47

1.55

1.60

537.83 1189.00 555.00 1405.50

544.00 106?,50 453.50 1210.50

366.00 962.50 615.50 1215.50

486.09 1070.80 547.80 1277.17

We, therefore, relied on changes in real incomes of our respondents, male and female earners in their families and the total household income over five Digitized by

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to six years to understand fully the impact of the reforms. Despite the limitations of income data we collected, we feel that the exercise would give us, at best, direction in which real incomes may had moved for the respondents and their families since liberalisation. It also permits to understand whether the experience of workers and households reporting to the NSSO was universal. By deflating current incomes of our respondents, principal male earners and other household members, reported by the respondents by Consumer Price Index for Industrial Workers for Mumbai for the first nine months of 199697, we estimated change in their real incomes at 1991-92 prices, the year when the new economic policies were adopted. We report briefly the conclusions emerging from the analysis. Only 60.7 per cent of women worked five to six years back. Real incomes of 45.1 per cent of these women were lower in 1996-97 than in 1991-92; for 16.5 per cent, the increase in real incomes was between 1 and 20 per cent; while for only 20.9 of them, the real incomes increased by over 31 per cent, equivalent to the rise in real income reported for casual women workers sampled by the NSSO in the 43rd and 50th rounds between 1987-88 and 1993-94. The most obvious limitation for our comparison is that the real income rise in the NSSO data relates to rise in wage incomes while we had, in our sample, not only wage earners but also self-employed. We also should hasten to add that becai••se of the underestimation of the incomes, we might be exaggerating the share of the losers to some extent. Real income changes were devastating for male earners in the respondent households. For 62 per cent, the real wage was lower in 1996-97 compared to 1991-92. Only 30 per cent of the men reported an increase in real wage, higher than 8 per cent, reported by casual male earners in the NSSO between 1987-88 and 1993-94. Women earners in respondent's households as a group fared a little better. Real wages declined for 45 per cent among them, but for nearly 25 per cent the real income gains were equal to those reported by the NSSO for casual women workers. Similar exercise for real income changes in household incomes showed that 37 per cent of the households experienced a decline in ~l terms. Of the total households 11.4 per cent experienced an increase of 1 and 10 per cent in their household income. At the other extreme, 13.4 per cent reported a gain of more than 100 per cent in the real household incomes between 1991-92 and 1996-97. Real income changes, though tentative, give us a clearer picture of how men and women living in slums of Mumbai were affected in the labour market that emerged in Mumbai after the reforms. It strengthens our earlier observation that the emerging labour market did not treat all men and women alike. The poor households and workers living in these households, who were likely to be in the informal sector of Mumbai's economy, did not gain as much as did households and workers in general population reporting to the NSSO in 1993-94. Only about 37 per cent of the households we surveyed, experienced decline in incomes in real terms. But household incomes for nearly 63 per cent of the households were growing faster than the prices. This was mainly due to the life cycle changes within the households. As a result, the number of earners increased in these households; in fact 39 per cent of our women respondents belonged to this group. So though each one earned a small income, together they could tide over the situation and did not allow real household income to fall.

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IV. CONCLUSIONS

To sum up, this paper based on data collected in a survey of 300 working women and their households living in three slums of Mumbai, was essentially an effort to understand how poor, uneducated women and their households had fared in the labour market that emerged in Mumbai after liberalisation. It describe.s what kinds of job opportunities were coming forth for the less educated and socially deprived sections of population in the informal sector of the city's economy. More importantly it tells us how the poor cope with economic crisis like the reforms. Our sample of slum households covered possibly the poorest households in the three slum settlements in Mumbai. The caste composition, the educational levels of the working women and others in their families suggest that these households operated in a segmented labour market. Their social deprivation and lack of education were responsible for their poverty. Our women respondents were born in poor families, married to men who were equally poor. They had little access to education like their husbands. They were poor even before the reforms. So it was not surprising to find that many continued to remain poor after the reforms. But the uncertainty of work and income had increased much more for men than women in these households, in the post-reforms period. But because of life cycle changes within households, despite low-income opportunities that were emerging, the expected devastating effect of reforms on these households was checked, to some extent. No doubt, some of these households may have been adversely affected in the post-reforms period, but the majority were not. The pace of reforms has slowed down over time. But the labour market in Mumbai has become more flexible now than what it was before the reforms. This was evident from the experience of men in our survey population. Data from the NSSO did not lend support to most of the dismal predictions regarding the effect of reforms on workers and their households in Mumbai. But our study warns us that the impact of reforms is not likely to be uniform over different sections of workers and their households. The vulnerable groups of Mumbai's workers and their households definitely were the worst victims of the devastating effects of the changes in the labour market that had emerged in the post-reforms period.

References Beneria, Lourdes (1991 ), ustructural Adjusbnent, the Labour Market and the Household: The Case of Mexico", in Standing, Guy and V-ldor Tokman (eds.) (1991). Comia, G. A., R. Jolly and F. Stewart (eds.) (1987), Adjustment with tz Hannan Fau: Protecting the Vulnertzble and Promoting Growth, Oxford University Press, New York. Deshpande, L K. (1988), Flexibility in Bombay's Labour Market, WEP Working Paper No. 24, ILO, Geneva. Deshpande, Sudha and Ashish Deshpande (1998), Impact of NEP on Women Workers in Slums of Mumbai, Report of the Research Project Funded by Department of Women and Children, Ministry of Human Resource Development, Government of India, undertaken at the Department of Economics, University of Mumbai, February. Deshpande, Sudha and Lalit Deshpande (1991), Problems of Urbanization and Growth of Cities in Developing Countries: A c.ast Study of Bombay, WEP Working Paper No. 177, ILO, Geneva.

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-----1(1992), .,l'lilew Economk Policy and Female Bmploymenr, Economic ad Politiaal Wesly, Vol. 27, No.41, October 10, pp. 2248-2252 --t(l993), Memorandum Submitted to The Tenth Finance Commission on BehaU of Brihanmwnbai Mahanagarpalika, Bombay (mimeo). --t(l997), "Impact of Liberalization on Work,, Workle11rl!88 and Earninp in Mumbai." Paper presented at the lnternlltionAJ Smtinllr on Work and Worbrs in Mumbai, 1930s to 1990s, Organised by Vakas Adhayan Kendra, at the Darbar Hall, Asiatic Society, Mwnbai, November. ---c(l998), ''Impact of Liberaliuition on Labour Market in India: What Do Facts from NSSO's 50th Round Show?.,, Economk and Political WtitkJy, Special heue on Labour. Vol 33, No. 22, May-June, pp. l.31-1.39. Deshpande, Sud.ha, Guy Standing and Lalit Deshpande (1997), l.Aborlr Flaibility in" Third World Metropolis:: ..-4 Ow Study efBornbcy, Commonwealth Publishers, New Delhi. Ghosh, Arun (1991), "Political Economy of Structural Adjustment", £conDmic and Politiaal WtitkJy, November 30. Ghosh, Jayati (1996), ''Macro-economic 1rends and Female Employment in India and Asian Countries", Paper presented at the Sffltinar on Gender tmd Employmmt: ReanJ 'lmldl, P12ttt,11B tmd Policy Options, organised by the Indian Society of Labour Economics and Institute of Economic Growth, New Delhi, December 18-20. Mundie, Sudipto (1991), "The Employment Effects of Stabilisation and Related Policy Changes in India, 1991-92 to 1993-94", Paper presented at a Workshop on Sodlll Dimensions c,f Stnu:tunll AdjllBlmmt in lndill, ILO-ARTEP, New Delhi, December.

N4yy~ Deepak (1993), Economic Refrmns in lndili: A Critiad Assessment, ILO-ARTEP Working Paper, New Dehli. Palmer, Ingrid (1991), Gender and Popuu,tion in the Adjustment of AfriClln Eamomits: Plmming

far Change, ILO, Geneva. Ravallion, Martin and Gaurav Datt (1996), "India's Checkered History in Fight Against Poverty: Ale There LaBOns for The Future?", Economic""" PolitiClll Wedly, Special No. September. Sen, Abhijit (1996), "Economic Reforms, Employment and Poverty", Economic tmd Politiall Wttkly, Special No., September.

Standing, Guy (1987), Vulnmibk Groups in Urban Labour Proc:tssts, WEP Working Paper No. 13, ILO, Geneva. ---c(1989), .,Global Feminization through Flexih1e Labour", World Dn,elopment, Vol. 17, No. 7, pp. 1077-1095. -1and Victor Tokman (eds.) (1991), Tqwanl1 Sodlll Adjustment Labour Markd Issues in Struchmll Adjustmem, ILO, Geneva.

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19 Unorganised Women in an Urban Setting: Opportunities and Challenges Martin Patrick In India, women pose a major paradox-on the one hand, there is an educated elite with high status background, hardly a million, and on the other hand, there is the mass of women who suffer from discrimination, deprivation and social disabilities. A majority of this the disadvantaged group comprises mainly of housewives without any tangible income, of this and unpaid work carry one by them fall outside the market economy. This is evident from the Female Work Participation Rate (FWPR), which is quite low in India. Moreover, female workforce depends heavily on the informal sector. It is estimated that %.33 per cent of the female workforce, which is 31.5 per cent of the total workforce, is concentrated in the unorganised sector. This is because jobs in this sector, due to the biased social value, require less skills and entry into is easy. Women workers in this sector are assigned traditional roles. Technological advancements in the organised sector have also played an important role in this regard. The women labour in Kerala are no exception to this trend, though in Kerala women enjoy a higher status compared to their female counterparts in other states.

I. A MACRO OVERVIEW OF WOMEN EMPLOYMENT IN KERALA Contrary to the national situation, women's position in Kerala is far above that of women in other States in India in terms of Physical Quality of Life Index (PQU). High literacy rate, high sex ratio (favourable to women), and greater access to education and health care facilities are the reasons for high PQU in the state. These are sometimes at par with European countries. As against the situation in north India Excess Female Mortality (EFM), i.e., the chance of the female babies facing a premature death, is quite low in the state. Further, women, as a part of labour group, are more unionised in Kerala. Despite these impressive gains, Kerala women suffer from many problems like low FWPR, high unemployment, concentration in the unorganised sector, discrimination, etc., which are more severe in other states. In the case of FWPR, the situation in Kerala reflects the same national trend. It is quite low and has been falling over the decades. FWPR in India was 14.44 in 1981 as against 31.70 in 1901, while in Kerala it was 16.6 in 1981 as against 33 in 1901 (Table 1).

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'Iablel A Comparative Picture of FWPR between India and Kerala Year

India

Kerala

1901 1911 1921 1931 1941 1951 1961 1971 1981 1991

31.7 33.7 33.9 27.6

33.0

28.9 25.0 35.6 NA 18.3 19.7 14.6 16.6 16.9

NA 23.3

28.0 11.8

14.44 NA

Sourer. Census of India.

The change in land tenure, the decline of traditional industries, technological advancements, etc., are the important reasons cited for the low FWPR in the state. It is recognised that in Kerala cash crops offered better opportunities for women to earn an income. But the changes in land tenure have adversely affected the position of women. It shows that all the land Acts and other legislations regarding property rights, marriage and inheritance were regressive for women (Saradamani, 1981). The decline of traditional industries also adversely affected women. This hit the urban women harder than rural ones. In the rural sector, it resulted in an increase in the non-agricultural labour force; but in the urban sector, woman had little choice but to stay at home, though the urban FWPR (11 .76 per cent) was higher than that of all India level (8.32 per cent). Even then, within Kerala, the rural FWPR was higher than urban FWPR between 1971 and 1981 a period during which rural work participation (RWP) rose by 35.32 per cent. This was due to the increase in the nonagricultural labour force. It is argued that in 1981 even the marginal increase in total work participation of labourers in Kerala was due to the increase in FWPR of non-agricultural labourers Oose, 1989). In fact, the proportion of females in regular employment in the non-agricultural sector was much higher in Kerala, the share of which increased consistently from 16 per cent in 1977-78 to 17.5 per cent in 1987-88. Self-employment of women in the non-agricultural sector also registered a relatively higher increase. In the urban sector, the increase in female employment was relatively higher in public administration and education. In short, the pattern of employment for women, which is quite different from the national trend, shows that secondary and tertiary sectors absorb a relatively higher percentage of female workforce. But the demand for labour in the two sectors is insufficient to match the supply of females in these sectors, where there is a predominance of educated women. Technological advancement is another factor affecting women's employment adversely. It is generally recognised that the change in technology resulted in long-term trends marked by the decline in female employment (Banerjee, 1985; Savara, 1986). In Kerala, technological advancement led to marginalisation and 4isplacement. Marginality is primarily a female phenomenon, though, it is also found that the female labourers, instead of getting displaced absolutely from the industrial sector of Kerala, get integrated Digitized by

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UNORGANISED WOMEN IN AN URBAN SETTING

with it in new and complex forms. In brief, the change in land tenure, decline of traditional industries, and occurrence of technological progress Jed to marginality and displacement of women labourers. This eventually resulted in an increase in women's unemployment, which is probably the most serious problem faced by women in Kerala. Out of the total labour force in the state, 2.5 per cent is unemployed. Several studies have established that the problem of educated unemployment among women is crucial (Oommen, 1992; Prakash, 1998; Eapen, 1994). It is 43.6 per cent among educated women as against 17.8 per cent among men. Further, in urban areas, unemployment among educated women is 58.7 per cent, but that of men is 20.3 per cent. Women registrants in the Employment exchanges of Kerala constitue 40 per cent of the total. A high rate of unemployment along with the problem of displacement Jed women ultimately to concentrate more in the low-paid occupations in Kerala, both in the organised and unorganised sectors. It was observed that in Kerala, the employment of women can be said to be concentrated more in the unorganised sectors of the economy compared to that in the country as a whole (Gulati, 1975). In short, high employment rate coupled with fewer employment opportunities and other problems mentioned above force women labourers to find employment in low-paid occupations. In other words, they are heavily concentrated in the sectors where less skill is required and there is less competition from males. This finally led to another serious problem that of labour market discrimination-manifested firstly, in the form of gender-specific occupational discrimination and secondly, in that of wage discrimination. II. A CASE STUDY OF SALESWOMEN IN ERNAKULAM

In the context of the above overview, it would be important to study the problem of women workers in different regions of Kerala engaged in the informal sector. Importantly, excess supply of women and the resultant discrimination can be seen not only in the unorganised sector but also in the organised one. It must be noted that many of the petty shops and businesses are registered under the Shops and Establishments Act. Unfortunately, however, most of the studies focus on the problems of women labourers in the unorganised sector, paying less attention to the those of women workers in registered readymade garment units, in shops and establishments, etc., which are equally important. In prawn-peeling sheds, for example, where there is practically no competition from men in peeling the prickly curstaceans at the prevailing wage rate, any study about their problems would be extremely relevant. Moreover, a majority of the women workers come from poor families and are often the sole earners in the family, performing the role of housewives as well as labourers. This again underlines the importance of such a study. The present study relates to saleswomen in urban centres of Emakulam district of Kerala. The broad objective of the study is to assess the discrimination against saleswomen in relation to salesmen in the labour market in terms of wages and in the household sector based on timeallocation theory. The aspect of migration and its process is also considered in the the study. Digitized by

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Primary and secondary data have been used for the study. For collecting primary data a multi-stage sampling was followed on the hasis of geographical location, and the nature and size of business. A total of 1092 shops were selected for the study. Then, the selected shops were classified into four strata viz. textile shops, medical shops, ladies stores and other shops(such as audio-video shops, book shops, bakery, etc.). Lastly, a fifth stratum, viz. door-to-door saleswomen were added. As many as 150 saleswomen were interviewed for the study. They were selected by using a proportionate sampling of 20 per cent of workers on each group, i.e. 20 per cent of the saleswomen in the district. The textile shops were further grouped into public shops, mill shops and private shops on the basis of ownership. In the study, public shops are considered as those which are owned and managed by cooperatives, corporations and boards of central and state governments for example, Cooptex, Hanveev, etc. Mill shops are exclusively for particular mill-made clothes which are owned and managed by private individuals who follow the rules and regulations of mills like Vunal, Raymonds etc. Private shops are thoee which are completely owned and managed by private individuals, who deal with cloth materials of all mills. The tools used for analysing the data were multiple regression and opportunity cost techniques. These were used to analyse the eaming function and economic discrimination of saleswomen, respectively.

1. Income and Skill Formation The average wage of saleswomen was estimated at Rs. 448 per month, which was half the minimum wage as per the Shops and Establishments Act (i.e. Rs. 881 as on 31 December, 1991) and the modal wage rate was eatimated at Rs. 300. This variation indicates the prevalence of a highly complex wage rate system in this sector. This is supported by the fact that the starting salary varied from Rs. 150 to Rs. 500 for the same nature and category of work. With the infonnation collected on saleswomen's wage and on relevant variables such as years of service and years of schooling, multiple n:greuion has been used to estimate the effect of each variable on wages. The earning function developed in the study indicates the extent to which all the variables taken together can explain the variation in wages. The statistical formulation of the earning function is Y=a+b.X;+b.X.. In the equation, X. is the years of service and Xu is the years of schooling of saleswomen. The resulting earning function is usually called the Human Capital Earning Function because the two independent variables are the two constituents of capital theory. The value of the fitted regression equation is given as: Y=298.1449 + 29.8597X1 + 5.113X11 (87.61536) (4.9612) (7.2801)

(3.4029) (6.0186) (0.7024) R2=0.317509 The values in the first parenthesis give the standard error of variables and the values in second parenthesis show the 't' values. The value of the first independent variable is significantly related to the dependent variable at 5 per

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cent level of significance, whereas the second independent variable is not significantly related to the dependent variable. However, the value of R2 gives the idea that the correlation between earning and the two independent variables is not any stronger as the latter explains only a 31.75 per cent variation in the earning. The earning function fitted thus supports the conclusion that the years of service is a more important factor than that of schooling. This is further supported by the correlation co-efficients YXi=0.453 andYxii = o.021 (XXu=.05891). The major reasons for the lesser influence of education on earning is the over-supply of female matriculates(both passed and failed). Further, the high level of education has nothing to do with sales. Skill or efficiency in salesmanship is the factor that is given weightage by the employers. This explains the low influence of education on earning. Investment in on-the-job training, another component of human capital, is almost absent as·the new salesperson learns with the help of experienced hands. In certain situations it was found that this job was treated as an entry in the sector. However, in most situations they are supposed to start their career and retire as saleswomen. The working conditions analysed in terms of duration of work, leisure, etc., also point to the fact that they are put in a vulnerable position. Rotation of work and promotions are quite absent in all the shops. With regard to bonus, there is no common rule for the fixation of the same-it ranged from a half-month salary to two months' salary. Sales incentives are given by a limited number of shops just for promoting sales, for which no formula or a uniform pattern is followed. Medical and provident fund facilities are distant dreams to them. These benefits are denied to them for the simple reason that they do not come under the purview of the concerned Act. In short, low wage level, non-uniform bonus, sales incentives (which are not substantial), absence of provident fund and other fringe benefits are indicative of massive exploitation prevailing in the sector.

2. Activities, Size of Shops and In-group Analysis In the light of the above findings, it is worthwhile to know whether the activities or siz.e of shops help improve the position of saleswomen. First, an attempt is made to examine the relation between various activities and the earnings of saleswomen(Table 2). Table2 Average wage, SD and CV across Activities

Textiles

Nature

of shops Mean

473.23 171 .14 37.43

SD CV

Medical

Ladies

shops

stores

449.36 177.71 39.55

280.77 93.62 33.34

Others

Door-

to-door 418.33 147.33 35.22

490.00 142.83 29.15

It is evident from the table that the saleswomen in ladies stores are severely hit by the very low wage paid to them. The door-to-door saleswomen are lucky to receive a comparatively higher level of wages because of their hard work which is mostly on a commission basis. Further, an attempt is made to see Digitized by

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whether the employment in large shops, as against that in the medium and small shops, helps to enhance the earnings of sales women. The mean, standard deviation (SD) and co-efficient of variation (CV) in these shops are given in Table 3. Obviously, medium shops give the impression that variation is comparatively less in large shops. Hence, using 't' test, it was found that at 5 per cent level of significance large and medium shops were paying higher wages than small shops, but in medium and large shops, there is not much difference in the payment of wages. ., Size of shops

Mean

so

CV

Table3 Average wages, 5D and CV & Size of Shops Small

Medium

Large

413.00 166.00 40.12

511.00 214.00 42.00

503.00

149.00 30.00

Working conditions are almost the same in all shops though the benefit of bonus and sales incentive are enjoyed by the employees mostly in large shops. Moreover, women in small and medium shops assumed that the workers in large shops enjoyed more benefits. All these definitely enhanced the status of saleswomen in large shops. However, a close 'integration' has been noticed among the employees and employers in the small and medium shops. Integration takes place: by moving the workers from one shop to another of the same nature owned by (a) different employers and (b) the same employer. The former is called 'inter-integration' and the latter 'intra-integration'. More than 30 per cent of the women had previous experience in other shops; out of which 22 per cent , who are working in the textile shops, had experience of working in there shops. Some of them had previously worked in more than one shop and many were working under the same employer. As the textile sector presented a vividly complex picture, a further analysis was done by grouping them into public, mill and private shops. The mean, SD and CV of these shops are given in Table 4. Table4 Avarage wage , SD &CV across Various Textile Shops Textile sector

Public

Mill

Private

Mean

573.00 79.18 13.18

620.00 204.00 33.00

32.00 154.24 35.76

SD CV

Though the mean wage in mill shops is obviously high, by using 't' statistic again, it was found that at 5 per cent level of significance, mill and public shops were paying higher wages than private shops, but that women in mill and public shops were equally paid. A comparative analysis of the working conditions of the women shows that women in private shops work in poor conditions. While permanent employees in mill shops get free uniforms, and sales incentives, and are provided training for a short period, the saleswomen

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in public shops get more leisure time and are expected to get absorbed permanently. Unfortunately, contrary to their expectations, there were temporary saleswomen with five years of experience in public shops having faced a break every three months in order to discard their claim. As promotional chances and sales incentives are the benefits provided to the permanent employees of these shops the problems of temporary women are more crucial than that of others. III. DISCRIMINATION IN LABOUR MARKE'I'

Saleswomen are not only paid low wages but they are also discriminated against in the labour market. It was found that there existed both occupational segregation (Employer's discrimination) and wage discrimination. Occupational discrimination existed in the sense that most of the women employed in the sector were in sales section. It was observed that a very limited number were engaged in accounts or clerical work. A high rate of unemployment,reduced mobility and lower levels of skills, absence of alternative employments available to them, less competition from males and thereby ease of entry, and above all prejudice of the employer against women led to occupational segregation. Becker's (1957) model of labour market discrimination which treats the discrimination as resulting from the employer's preferences for and prejudices against a certain group of workers, is relevant here. In fact, employer's strategies play a crucial role in the labour market discrimination against females. Regarding wage discrimination, it was noticed that the supply of male labour hardly affected the wage differences. Even if they were available in large numbers, employers were reluctant to recruit them as they feared more problems from employing them. But whenever they were recruited, it was because of the employer's preference for the same. Naturally, they were given a higher starting salary. How-ever, wage differences were calculated on the basis of age-group and length of service as shown in Tables 5 and 6. The average earning of females by age-group was estimated at 78.47 per cent of male's wage, but their average earning by length of service was estimated at 80.2 per cent of the male earnings. Further analysis made it clear that men's salaries increased in proportion to the length of service while that of females were adversely affected. The same reverse trend could also be seen in the earning gap by agegroup. It was noted that saleswomen with higher qualifications were also recruited for clerical jobs and hence paid a higher wage. But whenever women Tables Male-Fem.a.le Earning Gap by Age-group

Age-group

Gap (in Rs.)

15-20 21-25

26-30 31-35 36-40

Earning proportion (females to males)

53

86.91

54 100

89.91 82.01 58.92 61.68

327 342 210

41-45

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Table6 Male-Fm,.all! Earning Gap by Length of Service

Gap ( in Rs.)

Length of service (in years) 0-2

Earning proportion (.females to males) 71.78 73.71 78.42 87.88

100 148

2-4

137 83 117 157

4-6 6-8

8-10 10-14

85.15 82.69

with higher qualifications were recruited for the job of saleswomen-cum-clerk, they were paid a little higher wage, but this was never as high as that of men in the same category. Here, woman always stuck on to dead-end jobs as they were paid little more than their starting salary. The reasons for wage discrimination are many. Firstly, employers deliberately underestimated the women's probable length of stay in the employment sector. Even in cases where women were absorbed permanently but it was found that they were permanent only till the time of marriage. Hence the perception that women are temporary participants in the sales force was often cited as a rationale for paying them a low wage though this cannot be generalised. It was also found that women themselves underestimate their possible length of stay in the labour force. Secondly, many employers also cited low level of skills as a reason for the pay difference. However, this was not substantiated by them properly. Thirdly, it was observed that the low level of trade union activities or their virtual absence among saleswomen was the major l'E'ason for wage discrimination. Lack of time and fear of loosing employment were noted as the major factors behind their limited union activities. Traditional and cultural values also stood in the way of their participation in theSt! activities. It was quite interesting to note that the Minimum Wage Act was effectively implemented in two shops where all the employees were men only. Finally, women labourers are not as well unionised as men in Kerala, though Kerala women are more unionised compared to their counter-parts in the country. Above all, saleswomen, especially married saleswomen, had no alternative except to carry out their work both in the labour market and in. the household sector. This gives an insight into another problem viz. discrimination in the household sector. This is very important because the status of women is determined by their role in workplace and within household sector. An attempt is therefore made here to analyse discrimination in the household sector with the help of 'time' allocation theory.

IV. TIME ALLOCATION AND DISCRIMINATION IN HOUSEHOLD SECTOR There have been a number of attempts to apply the theory of consumer choice to ho,asehold decision-making based on the pioneering work by Becker (1965). This branch of study is called New Home Economics. Its important contnbution

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is the study of time as a productive economic resource that is subject to optimal allocation among its uses. Based on the theoretical principle of the new home consumption theory which was reformulated by Gronau (1977), many have developed an economic model of household behaviour under different situations in India ( Malathy, 1988, 1990; Duraiswami, 1992). Taking the household family as the basic unit of analysis, an economic model of saleswomen's household behavi~ur was developed (Patrick, 1997). The idea behind the model is that in recent years, economists have increasingly recognised that a household is truly a 'small factory' which combines capital goods, raw materials, and labour to clean, feed, procreate and otherwise produce useful commodities. This model has been developed for analysing the allocation of time to non-market work and leisure of saleswomen. Strenghening the neo-classical theoretical formulations, the model is based on the assumption that the household maximises its utility which is not subject to a simple budget constraint but to its production function and a total time constraint. However, our task is to know the implication of this model. For this, we need to know the money value of holtSehold work. This section deals with this aspect.

Time Allocation and Money Value The analysis of the data on time allocation reveals that saleswoman were compelled to spend more time on housework as revealed by Table 7. Hence an attempt ,vas made to estimate the money value of housework done by them, which shows the extent of discrimination against them in the household sector. Discrimination in the household sector is not conventionally an area of economics. But now, household activities and thereby discrimination in the household sector have become part of economics, especially when one can quantify household work. Attempts, though limited, were made to calculate the value of household services. One such exercise estimated the money value of household work, using a sample data of all Indian women. This yielded a value that constituted about 47 per cent as net domestic product (Malathy, 1988). As regards saleswomen, they generally do not get much help from male members of the family for housework, though their role in decision-making, especially those of married saleswomen; widened. However, time is inversely related to housework, as is shown in Table 7. The average time spent for the housework is 3.2 hours. The money value of housework was estimated with the help of the multiple regression method and the opportunity cost of time approach. According to the latter the value of work done by saleswomen at Table7 nme Spent for Household Work Number of hours

Number of saleswomen

Percentage

0-2

32

2-4

80

4-6

29

21.33 53.33 19.34

6-8

9

6.00

150

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home is equal to their opportunity cost of time, which is the wage foregone by abstaining from the market and choosing to remain at home. To find the opportunity cost of housework, first, the wage per hour of the work for each and every saleswoman was calculated with the help of the estimates of the earning function. This was Rs. 1.50 per hour, which is the opportunity cost of time spent for the housework for every woman. As a result, the value of average monthly income was calculated as Rs. 144. This came to about 32.14 per cent of their average salary and 16 per cent of the family income. This is certainly not an insignificant amount Hence, it is clear that these women were subordinated and discriminated within the household sector by the so-called domestic ideology, apart from the exploitation to which they are subjected in the workplace. Even the migrants in the study were not flee from this problem. It was because of their low level of wages that they were forced to take up domestic work after the job to make both ends meet. A brief survey of the migrated labour will help to give us almost a complete picture of the saleswomen. V. MIGRATION AND MANPOWER SUPPLY AGENCIES

Migrated labour constitutes 9.33 per cent of the saleswomen in the study: It was seen that migrated labour comprise the door-to-door saleswomen and the seasonal saleswomen. In most cases these were 'entry' jobs. Migrated labours came to the urban city mainly through some recruitment agencies called "manpower supply agencies". They came to know about these agencies through an advertisement and own efforts. Local saleswomen were also recruited in the shops through these agencies. Five such agencies have been identified during the survey period in Kochi city. Though their target is job-seekers, yet in practice, they are canvassing the job of saleswomen and security guards. As soon as the job was canvassed, the job-seekers who had registered their names with the agencies, were asked to join duty provided half-month salary was given to the agency as commission. Certain agencies charge even one-month salary as commission. It was found that a number of such saleswomen were working on daily wages in exhibitions, sales counters and in unregistered shops. They were even found working in the public shops (government sector) throughout the year. These agencies earn income not only by canvassing jobs but also through campaign work and door to door sales. Campaign work forms part of an agency work, which relates to the popularisation of new products for the producing firms through saleswomen. Women had to cover a fixed number of houses, normally 40 houses a day, for which the wage was fixed at Rs. 25 per day. It was pointed out that the actual payment done by the company for this work was more than Rs. 25. However, the agencies, as a part of campaign work, moved along with the sales-women, from one area to another, mostly from one district to another so that the mobility of these women was enhanced. Whenever the agencies did not have campaign work, they sold different products such as candles, tea-dust, detergent powder, etc., at the door through saleswomen, for which they were paid commission, which ranged from 50 paise to two rupees, depending upon the nature of the product. As the campaign Digitized by

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work was a stipulated one, saleswomen were satisfied with a commission job, which normally fetches Rs. 40 a day. Perhaps due to this reason, their average monthly earning was more than that of other groups. It was found that the door-to-door saleswomen were also included in the self-employed category. Our analysis showed that the push factors played a major role in the migration of saleswomen. Rampant poverty, low standard of living and unemployment were the factors that pushed them to the city-they migrated to the city for supplementing the meagre family income, or at least to sustain themselves. VI. CONCLUSION

A high rate of unemployment, reduction of employment opportunities in the traditional industries due to technologicaJ advances and the resultant displacement, and absence of other alternative jobs forced the woman with medium level of education and poor family background to accept the job of a saleswomen which w-ould fetch them a low wage packet and expose them to poor working conditions. Not only is the wage packet low but there also exists occupational and wage discriminations in the labour market. The earning function developed in the study shows the low influence of education compared to experience on the level of earning. The occupational segregation exists due to employer's prejudice against women and their business strategy to avoid trade union problems. Wage discrimination can also be explained in terms of excess supply of women labour and their limited trade union activities. It also results from the perception that women were temporary participants in the labour force. It was actually the strategy adopted by the employers to discard many of the claims put up by saleswomen. The time allocation of saleswomen showed that overworked saleswomen spend a fair amount of time for housework. The role of married saleswomen, who were limited in number, in decision-making has improved but they hardly get any help from their husbands for housework. The value of housework quantified with the help of opportunity-cost-of-time based on their earning shows that it is not negligible and cannot be brushed aside. Saleswomen also include migrated labour. They are brought to the market mairily by labour supply agencies, which in turn, exploit saleswomen in terms of low wages, long hours of work etc. Expectedly, migration of women is the result of push·rather than pull factors in this sector. The marginalisation is noted for all categories, but it is more severe among seasonal and door-to-door saleswomen. The effective implementation of Minimum Wage Act for Shops and Establishments along with the motivation for gradual and sustained involvement in trade union activities are urgently required for improving the conditions of saleswomen. Healthy and competitive trade union activities, which should take into account the interest of both employees and employers rather than militant activities, should be the approach adopted by trade unions for resolving labour problems.

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Reference, Banerjee, Nirmala (1985), '"Modernisation and Marginalisation", Socitd Sdenti6t, Vol. 13, No.4. Becker, G.S. (1957), TM Economics of Discriminlttion, The University of Chicago Presa, Chicago. -(1965), "A Theory of.Allocation of Tune", Eamomic Journ11l, Vol. 75. Duraiswami, P. (1992), "Economics of the Family: Theory and Application" in Kothari, V.N. (ed) l,sutS in HumAn Oipillll Thlory lffld Hu.m1111 R.tsourct Deotlopmmt Policy, Himalaya Publishing, Bombay. Eapen, Mridul, (1994), "Employment and Unemployment in India: An Overview", Paper submitted to the Worlcahop on Unemployment, Centre for Development Studies", Thiruvananthapuram. Gulati, Leela (1975), "Female Work Participation: A Study of the Inter-state Differences", Economic ,md Politiau Wedly, January. Gronau, R (1977), "Leisure, Home Production and Work: The Theory of Allocation of Tune Revisited", Jo"""'1 of Political Ecmumry, Vol. 88. Jose, A.M. (1989), "Role of Women in Rural Development", Kurulcshdro, July. Maia thy, R (1988), "The Value of House Services of Women in India", Arth4 Vi;yana, Vol. 30, No. 1. -(1990), "The Demand for Non-market Tune: The Case of Married Women in an Urban Setting", TM Indian Jounud of Labour Economics, Vol. 32. No. 2. Oommen, M.A. (1992), "The Acute Unemployment Problem of Kerala: Some Explanatory Hypothesis", MSSI Quarterly, Vol. 10., No. 3.

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20 Technology and Training for lnfom1al Sector: Need for New Initiatives Rajendra P. Mamgain and J.C. Awasthi I. THE CONTEXT Receding employment opportunities in the organised sector have resulted in the growth of infonnal sector activities. At the same time, the lack of education and skills among a large part of the labour force has led to low productivity and low income for the workers. Institutional barriers such as lack of access to training has also led to low returns. Furthermore, such low productive employment hardly encourages investment in training on the part of both entrepreneurs and workers. Therefore, the need to upgrade skills is of paramount importance to improve the productive base. The fast technological changes which are taking place as a result of globalisation has underscored the urgency of training in the informal sector. As global changes proceed, there is greater risk of exclusion of the low-skilled informal sector entrepreneurs and workers from better paid employment. The low skill profile among the workers can lead to further deterioration in employment prospects, particularly for those having no skill at all. Education and training systems are still dominated by general education which is not specific to any job and insensitive to the demands of the labour markets. People educated upto matric and above, account for only about 15 per cent of the total labour force in India (Census, 1991). Their proportion is even lower among informal sector workers. Thus, an overwhelming majority of the labour force in the informal sector is illiterate and unskilled. Also, there are a large number of persons with a non-technical skill-base causing sheer wastage of human resources. A very poor linkage between education and occupation is clearly discernible over two decades (Table 1). There is emerging evidence to show that, if the appropriate support mechanism is provided, the informal sector can absorb ,a large part of the burgeoning labour force. This strength has probably caused a number of countries to recognise this sector leading to direct interventions to promote it. Training, of course, needs to be combined with improved access to other inputs and services for example, credit and technology, which are regarded as the most crucial aspects of intervention policies. Also, intervention to improve skills

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Introduced in 1982-83 as a sub-scheme of IRDP, DWCRA aims at developing income-generating skills and promoting activities among poor women in rural areas, thereby improving their social and economic status. The basic unit under the DWCRA is a group of 10-15 poor women though the size may be smaller in different terrains, and it is being implemented by district rural development agencies (DRDAs), supported by block-level teams. Any economic activity suited to groups of women as per their skills, aptitudes and local conditions can be taken up under the scheme. NGOs are also involved in the implementation of DWCRA, and are supported by the Council for Advancement of People's Action and Rural Technology (CAPART), an organisation set up under the Ministry of Rural Areas and Employment to coordinate the development work by voluntary agencies in the country. Since its inception, about 0.35 million women have been benefited from this scheme up to April 1998. However, due to poor backward and forward linkages, lack of spontaneous finan~ial support and selection of non-viable activities, several groups of beneficiaries have become defunct. Started in 1979, TRYSEM is aimed at developing technical and entrepreneurial skills among rural youth in the age-group, 18-35, from families below the poverty line to enable them to take up income-generating activities. Training imparted under this scheme is based on the needs of the area, and is provided at such training centres as ITis, community polytechnics and extension training centres, krishi vigyan kendras, khadi and village industry boards, state institutes of rural development, or institutions run by voluntary agencies. Training under the scheme is normally for six months, during which the trainees receive a stipend. Besides, financial assistance is also provided to the training institutions and master craftsmen. In all, 4.15 million youth have been trained under TRYSEM up to March 1998. TRYSEM has a weak link with the overall strategy of self~mployment. The training is generally not related to the capacity or aptitude of the trainees and unrelated to the demand for the concerned skill.

(vi) Training under Depart,nent of Women and Child Development The key training activities of the Department are: (a) Provision of support to training and employment programmes (STEP) for women: Since the inception of the programme, 51 projects have been sanctioned and these have benefited over 0.25 million women and the youth in general. (b) NORAD-assisted programme on employment-cum-incomegeneration-production units: Under this programme training is imparted to women including school drop-outs in selected nontraditional trades such as electronics, watch-manufacturing/ assembly, printing and binding, handlooms, weaving and spinning, garment making, beauty culture, typing and shorthand, etc. The programme provides for the offer of financial assistance to the grantee organisation for renting sheds required for training-cumproduction purposes, meeting training cost, payment of stipend to trainees, and the purchase of machinery and equipment required, dormitory facilities and day-care centres.

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(c) Scheme of condensed courses of education and vocational training programme for women: This scheme, started by the Central Social Welfare Board and revised in 1~91, aims to provide educational opportunities to needy women to enable them to acquire requisite qualification and develop relevant skills so as to make them eligible for identifiable remunerative work. Also, voluntary organisations are given grants to impart training to needy women in the 15+ agegroup in different vocations providing them opportunities for employment/self-employment.

(vii) Training under the Khadi & Village Industries Commission The Khadi and Village Industries Commission (KVIC) has set up 51 training centres comprising of 12 multi-disciplinary training centres, 12 khadi gramodyog uidyalayas, 24 village industries training centres and three state board training centres. In addition, there are 10 training-cum-production centres, which are owned by societies. At present, training is provided in 120 courses of which about 100 courses relate to only about 25 industries and the remaining 20 courses relate to various sponsored and special programmes. Training is imparted in nine broad areas, namely, artisans courses, general management, salesmanship, marketing management, entrepreneurship development, supervisory courses, textiles chemistry, accountancy and refresher courses. During the period, 1~91 to 1995-96, a total of 52,377 persons were trained in KVIC training centres. The training under KVIC has not been considered a succes.s. IAMR study (1997) shows that apart from not being employment oriented, the training does not appear to encourage self-employment among rural youth. The study also observed that some of the courses are outdated and the quality of training is also poor. The certificates awarded by the KVIC are not recognised by employers other than KVIC itself. The existing training capacity is not fully utilised and the infrastructural support available in training centres is inadequate as most of them are not equipped with modern equipment Further, the existing teaching staff is not qualified as only one-fourth of them possess the prescribed qualifications. Another striking observation brought out by the IAMR study is the complete absence of linkages between KVIC and other institutions such as the departments of rural development, small scale industries and community polytechnics, which offer similar courses to rural youth.

(viii) Prime Minister's Rozgar Yojana Prime Minister's Rozgar Yojana (PMRY) was launched on 2nd October, 1993. It aims at providing employment/self-employment to educated unemployed youth within the age-group, 18-35 years. The scheme envisages compulsory stipendiary training for entrepreneurs for a period of 15 to 20 working days for the industry sector and 7 to 10 working days for the service/ business sector after a loan is sanctioned. The scheme is targeted to provide assistance to 0.22 million educated youth during the year 1999-2000. An evaluation of PMRY (IAMR, 2000) revealed that it generates employment for about 2.4 persons per unit. The employment generation Digitized by

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potential is found to be more in the case of industrial units (3.5 persons} than in the service (2.2 persons) and business (1.9 persons) sectors. 'Iraining has been useful for an overwhelming majority of the beneficiaries (81 per cent). Many more youth seek assistance under PMRY. But almost a half of the total applications are rejected by the taskforce committees of the district industry centres (DICs). The most important reason for the rejection is inadequate technical skills. Therefore, the need for more training facilities is being increasingly felt by the youth for starting their ventures. Also, there is a lack of public campaigns.on various aspects of PMRY like eligibility, funds availability, slciJls required, market, etc. As a result, there is little awareness among the youth about the scheme. ( ix)

Community Polytechnics

The scheme of community polytechnics (CPs) was started by the Department of Education, Government of India, in 1978-79. It aims at promoting rural industrialisation through applications of science and technology without environmental degradation. More specifically, it seeks to bring about socio-economic upliftment and improvement in the quality of life by way of providing location-culture-specific, non-formal, need-based, shortterm training in skill-oriented technical/vocational trades irrespective of age, sex or educational qualifications. The target groups for training specifically include unemployed/ underemployed youth, school/college drop-outs, the underprivileged, and disadvantaged groups including women, minorities and weaker sections of society. It may be noted that community polytechnics are not separate institutes. Rather, some of the existing polytechnics have simply been designated as C~s, and selected for receiving central assistance under the scheme. There are 516 CPs, of which 83 were exclusively set up to cater to the needs of women. It has been found that 43 per cent of those trained in CPs are women, 18 per cent belong to SC, 4 per cent to ST and 13 per cent minorities. In all, about 0.62 million rural youth have been trained by CPs till March 1999. Persons trained in civil construction, plumbing, fabrication, welding, sheet metal, moulding, electricals, etc., have better opportunities for wage employment. Some CPs have done good work in manpower development and training but their impact on the rural sector as a whole has been limited as they work in a limited and isolated manner. In most of the cases the benefits of the scheme go to well-off groups and this entails a wastage of scarce resources. Because the multiplicity of agencies involved in rural development, both government and voluntary, it becomes difficult for CPs to collaborate with them. This has result~ in considerable duplication of efforts. Training under the community polytechnics scheme is not recognised by the employment exchanges for employment or loan purposes ('I"I"l'I, 1999). (x) Bharatiya Yuva Shakti Trust

Bhartiya Yuva Slzakti Trust (BYST), set up in April 1991 with the support of the Confederation of Indian Industry, aims at helping unemployed or underemployed youth in the age-group, 1~35 to set up or develop their own business. Their support takes various forms such as donations, sponsorship of Digitized by

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events, professional assistance and mentoring on a purely voluntary basis. The most remarkable feature of the trust is to provide each beneficiary with a mentor, on a one-to-one basis in the guru-shishya tradition, according to which the teacher not only teaches but guides and helps develop the disciple. The mentors give professional advice, maintain regular contact with the business, monitor progress, help- in sharing the problems of the assisted units and develop the business units. Since its inception the BYST has helped over 450 business units employing more than 1540 people in Delhi, Haryana, Chennai,

Hyderabad and Pune. (xi)

Entreprmeurship Der,elopment Centres/Institutes

There are a number of entrepreneurship development centres in the country which have been providing training in different fields based on the resource endowment of the area. These centres have also prepared prospective tiny sector product-profiles like textiles and garments, agro-based food processing, automobile, mechanical, electrical, chemical and electrical-based industries, paper and printing, forest and animal-based service enterprises, leather-based undertakings, etc., and provide enterpreneurship training. Also, there are training and wage employment programmes. A large base of training and R & D has been created in the public and private sectors. In addition, there are specific activities which also have a training component (e.g. silk, handloom, handicrafts, coir, etc.).

2. Training under NRF In the wake of the structural adjustment programme (SAP), a large-scale labour redundancy has taken place in the organised sector. This redundancy has resulted from modernisation, technological upgradation and restructuring (including revival or closure of industrial units). In 1992, the government launched the National Renewal Fund (NRF) as a social safety net to provide: (i) assistance to cover the costs of retraining and redeployment of employees arising from modernisation, technology upgradation and industrial restructuring; (ii) funds, where necessary for compensation of employees affected by restructuring or closure of industrial units, in both the public and private sectors; and (iii) funds for employment-generation schemes in both the organised and unorganised sectors in order to provide a social safety net for labour needs arising from the consequences of industrial restructuring. For retraining and redeployment of redundant workers, the Employees Assistance Centres (EACs) were set up under the NRF. For assessing the training needs of redundant workers, the EACs make a quick survey with a view to obtaining broad information necessary for framing an annual action plan for workers' retraining. The survey envisages collecting information on the size of the target group, training facilities available in the vicinity and costs, and possible avenues for self- and wage employment. It is expected to provide skill profiles of eligible rationalised workers and their preference for either wage or self-employment or to counselling. The survey is also required to project possible vacancies in different categories of vocations. Surveys were conducted on the prescribed lines by almost all the EACs.

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EACs undertake the identification of appropriate training institutions by collecting information through formal questionnaires and visits where necessary. Feedback is also collected from the trainees. EACs further help in the redeployment process by liaising with prospective employers. Also, they assist those who prefer to set up their own ventures. Despite variations in training methodologies, by and large, most of the training institutions follow a logical approach to information gathering, development of action plans, systematic surveys, counselling, identification of training resources of both the public and private system, follow-ups and consultations with beneficiaries as well as the employees, employers' associations and trade unions. The NRF experience in retraining redundant workers, however, hdS not been successful. A large number of workers has availed of NRF funded voluntary retirement (VR) from central public sector undertakings (which has been estimated of the order of 1,18,509 workers as on 31.8.98). It is noted that only a quarter of the VR availees were retrained, of which 7 per cent were redeployed through retraining. Among the retrained workers, about 30 per cent could be redeployed. It is quite surprising that out of the total expenditure of Rs. 2,222 crores, only Rs. 22 crores was spent on retraining and the remaining amount on providing assistance to VR (Chandra, 1999). Most of the VR availees were older workers about 50 per cent were in the age-group of 50 years and above and 41 per cent were in the age-group of 35-50 years. A small percentage of (about 5 per cent) VR availees were in the age-group below 35 years. It was observed that a majority of the workers covered by VRs had 10 years or more of productive period ahead of them. And those who had a relatively long productive period ahead (i.e below 35 years old), should be a major concern for retraining and rehabilitation (Chandra, 1999). The educational profile of VR workers shows that a large percentage has very low educational levels, i.e. illiterate, below middle school, and below matric. This has clear implications for the kind of retraining that can be provided to them. The employment opportunities and activities for which they can be prepared through retraining obviously vary between unskilled to jobs requiring very low levels of skills. It is also an important issue whether, even after retraining, these people will have reasonable prospects of sustainable employment in industrial enviornments which may increasingly require different and higher levels of skills. Each training institution has developed a variety of trades in which training has been organised. Training durations range from two weeks to three months depending on the nature of training. It has been observed that a large number of trades require only a limited amount of skills in narrow areas, e.g. book binding, chalk making, pulses and cereal processing, honey processing, etc. Some trades are more generic but in traditional areas such as mechanist, fitter, electrician, welder, carpentry they may well be saturated. It is noted that the proportion of redeployment of displaced workers is quite small. However, the redeployment as a percentage of rationalised workers is comparatively better. It is interesting to note that the red_e ployment efforts in Gujarat has proved successful to a large extent. The study conducted by the Gandhi Labour Institute shows that 60 per cent of those retrained were continuing the work for which they were retrained, and about 55 per cent of

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them were engaged in self-employment and 45 per cent in wage employment. In the case of wage employment, government agencies took active measures to redeploy workers. 'Iwo experiences are noteworthy in the state: one organised in Varodara as rozgar mela which proved to be quite successful, and another, maharozgar abhiyan, which resulted in the place11,ent of nearly 15,000 workers. V. SKILL DEVELOPMENT IN INFORMAL SECTOR:

MICRO-LEVEL EVIDENCES There is considerable micro-level evidence which conclusively suggests the need for a deliberate attempt to promote the informal sector through skill development programmes. This, in tum, can promote sustainability of employment and income opportunities. A study (IAMR,1994) in six urban towns, though has a limited focus on skill development, provides interesting findings of the process of skill formation and routes to skill acquisition. It finds that about 40 per cent of those hired are migrant workers lured largely by such pull factors as better job prospects and high wage rates at the place of work. The hired workers have also started with low education and skill backgrounds. Sktlled workers among them are also in a minority and the skills have been acquired mostly through on-the-job experience. Formal skills training institutions played an insignificant role in imparting the skills. It is manifested that the hired workers are the least cared for by any policy action. They are from poor economic backgrounds, migrate on their own, seek jobs through personal contacts and, in the process, wait for long periods to get the first job and try the hard way (through on-thejob training) to acquire requisite skills. It was found that informal sector establishments are capable of training their own participants and they do not depend on any other mode of skill development. A large majority (71 per cent) of entrepreneurs had no employment experience before setting up their own establishments. Among those who had some employment experience, over 60 per cent were wage earners prior to becoming entreprenurs in informal sector establishments. Again, in 76 per cent of the cases, employment experience was acquired by working in informal sector establishments. Further, barring repair and other services, which account for less than 10 per cent of workers in the sampled establishments, employment experience gained by a majority of entrepreneurs was unrelated to the current economic activity. Thus, the informal sector provided the necessary enterpreneurial skills through on-the-job training given to the entrants with no significant job related background and experience. Family workers largely do not possess skills. A compelling reason to associate family workers is to supplement family income by engaging them mostly in the manual unskilled tasks. Wherever they are skilled they have acquired their skills on-the-job while assisting in the family enterprises. Education, skills, experience and economic background of the informal sector participants are not adequate to sustain the economic activities pursued by them on their own, for long. As a result, they are being exploited and harassed in many ways. Also, the risk bearing capacity is very low. Thus, in a way, informal sector participants are like the small and marginal farmers in the agriculture sector. Policy support extended to them may therefore have to be similar to that extended to these farmers.

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Similar are the findings of a study on Delhi's informal sector which reveals that almost all the workers acquire their !'kills nn-the-jobs in the informal sector. The need for formal training is regarded as wasteful by the informal entrepreneurs as they have already acquired such skills. Regarding the need for upgradation of the skills of workers in the wake of increasing competition, most of the entrepreneurs consider it not necessary (Sankaran and Rao, 1995).

NGO Initiatives NGOs have also sought to provide training in skill development. Out of around 8000 NGOs liaised by CAPART, many have been providing training in skill development. National Institute for Entrepreneurship and Small Business Development (NIESBUO) has also been providing training and has developed project profiles and other technical details for entrepreneurship. Indeed, many of them are enhancing the skill base of entrepreneurs and strengthening their economic bases. But one of the basic lacunae in these skills development training programmes is that these programmes are not updated regularly as per the changing market demand. There is also no convergence of these programmes nor any integration among various programmes. Some NGOs have made commendable efforts to improve productivity and impart training for the informal sector workers through their better delivery mechanisms. The examples of a few are worth emulating. Ramakrishna Mission, an NGO located at Calcutta, is devoted to making slum dwellers self-reliant through an integrated process of educational development. It was noticed that a majority of the slum people including the women, were found to be engaged either in small trades or in employment based on cottage industries, particularly in cane and bamboo work, commen::ial painting and playing of traditional musical instruments. The Mission, therefore, tried to organise vocational training in order to upgrade the quality of products with new designs and techniques so that these products could get a wider market. Following this experience at Rambagan, Mission organised vocational training programmes by trying to identify the indigenous talent, knowhow, traditions, etc. For example, in the Goabagan slum in north Calcutta, people have a tradition for making dolls. The Mission, therefore, made efforts to improve the quality and design of doll-making so that it could capture a larger market. In Tiljala slums in south Calcutta, people have a tradition in leather crafts and, Mission too supported to upgrade their skills and technology so that their products can attract a better price. The major lessons from the Mission experiences are as follows: (a) To promote development in an isolated manner is fraught with uncertainities, and therefore the approach should be based on the convergence of services, which is lacking in most of the development programmes. The Mission's strategy relied on convergence of the different programmes at the single point which is basically supported by the community-based institutions. From the experience of the Mission, it has been found that promoting employment programmes in the informal sector without relating it to other services does not go far enough. Education, technology, health, vocational training and community support are all to be integrated at the level of the individual beneficiary; (b) Educational programmes, both general as well as vocational, need .to be non-formal in Digitized by

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character and flexible in tune with to the learner's needs, duration, etc. Even the venues of the courses are also adjusted according to the convenience of the learners. Course designs are also upgraded from time to time based on changing situations. Yet anot.her example is from of the Centre for Youth and Social Development (CYSD), Orissa, which has been striving to empower poor people through knowledge and skill development in both the farm and non-farm sectors. CYSD has been working in eight blocks of six districts and slums in Bhubneshwar covering 50,000 families in 20()-odd locations. It has also been (a) providing training in new skills, (b) upgrading existing skills, and (c) introdu-;ing improvement in technology for small individual entrepreneurs in non-farm activities. So far, it has helped 300 entrepreneurs in urban slums of Bhubneshwar. The activities range from grocery shops to cycle repairing, fruit stalls to pottery work, bamboo crafts to weaving and trading activities to rickshaw pulling. It covers a diverse array of activities. Many of the beneficiaries have established themselves as successful entrepreneurs. The impact assessment done by CYSD has amply shown that there has been a greater perceptible improvement in the economic conditions of people in 'observation areas' than in the 'controlled villages' which seemed to have remained unchanged. Skill-related training has not only empowered them but has also enhanced their capability. VI. TRAINING STRATEGY

If the productivity of micro enterprises is to be improved, it is necessary to improve their traditional training system by deliberate intervention from outside in the form of improved training materials, tools, and upgradation of skills through extension service support. Governments and NGOs have also been helpful in training informal sector workers. Government-run training schemes, however, have not generally fared well due to number of lacunae. NGOs, on the other hand, have produced successful results. Increasing involvement of NGOs in upgrading training skills is a paramount necessity. The nature and scope of training in the informal sector is altogether different from that of the formal sector training. Instead of class room-based, hands-off instruction and theory-based learning with relevance to textbooks, written messages, a predetermined sequence of instructional activities at fixed times, and standard curricula and courses, training in the informal sector, by and large, has to be on-the-job, hands-on, practice-based, modular, flexible and competency-based . Courses have to be short and the curriculum individualised. Unlike the formal sector, where the professional trainer is not involved in production, the trainer in the informal sector is himself a practitioner. The informal sector would require, in contrast to formal training, more decentralised planning and decision-making, participation of target groups in decision-making, dependence on local resources and better assessment of needs at the micro-level using community and local market opportunity surveys. Since many of the informal sector workers cannot afford to be away from work for long for training due to the higher opportunity cost, the training should be a short-term modularised training. There is a need to develop small Digitized by

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business management skills as persons in the informal sector have little formal training in management and are unable to hire professional expertise. Training needs to be organised separately for different occupational groups like crafts, metal workers, restaurant workers, autermechanics, domestic workers, etc. A greater recognition and patronage by government is desirable to improve the q11ality of products and services of the informal sector and to provide facilities, including training, as required by the informal sector. Informal sector workers often acquire skills at considerable private cost under private apprenticeship arrangements, foregoing income in the process. Also, availing any training opportunity provided by public sources comes at the cost of paid work. Furthermore, a large majority is too poor to bear the full cost of the training they might need for improving their productivity and income. Accordingly, as a matter of policy, government should share a large part of the cost of informal sector training. This would yield dividends in tenns of overall improvement in employment and an increased informal sector contribution to GDP. Government should also put more children in primary schools so that literacy and numerical skills in the informal sector can be enhanced. As a result, government will need to spend less on training for the informal sector in the future. Since formal training is basically geared to cater to the needs of the formal sector, it was not seen as relevant by informal sector enterprises. Also, managers of informal enterprises might be hesitant to employ well-trained persons since it is felt that such persons would sooner or later seek better jobs. Training in the formal training institutions, therefore, needs to be made more flexible and of short duration, geared exclusively to the needs of individual micro enterprises. Government support should come in the form of finance, specialised training in management, and trade and assistance in sourcing and assessing of potential markets in a big way. The main strength of informal sector training is its non-structured and improvised character which makes it flexible and adaptable to immediate employer needs. For the purposes of skill upgradation of the informal sector, it would be best to concentrate on the formal training institutions and on promoting easy transfers from the formal to informal sector training. As regards the agencies which should be involved, NGOs and private foundations who have established contacts with the informal sector workers and enterprises are perhaps in the best position to intervene in the process of transfer. Training institutions can use NGOs as intermediaries to transfer technology and skills and assist them in the task by making available suitably adopted training material, and training their workers. VII. CONCLUSION

The recent economic changes have resulted in a more precarious job market specially for the unskilled and semi-skilled labour force. Training of workers is increasingly being visualised as a strategy for enhancing the productivity and income of workers iri the informal sector, which is a major employer of the workforce. As the majority of informal sector employment consists of selfemployed workers, the most pressing issue is to enable them to have access to social security systems including technology and training. The effectiveness of Digitized by

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any training strategy would ultimately lie in its effective delivery mechanism. Since the informal sector has heterogeneous training needs and poor affordability for the training, it would require a policy support in a more integrated manner. As a policy measure, the existing formal education and training infrastructure needs to be reoriented to cater to the training needs of the informal sector. NGOs could play a crucial role in the delivery of training and technology inputs and, thus should be promoted in this area. The experience of community polytechnics has been quite encouraging, and needs to be widened. Finally, a package of measures should be evolved to mobilise resources for informal sector training by tapping various sources and encouraging contributions through appropriate tax incentives. Government, however, should take up the primary responsibility of providing resources to the infonnal sector through budgetary provisions. (The authors art thllnlcftd to Prof.

T.S. PllpOla and Prof. AJakh N. Sharma for their useful comments and suggestions in preparing this paper.)

References Amin, A.T.M. Nurul (1989), Technology Adllptatum in Bangkok's Informal Sector, WEP Working Paper, ILO, Geneva. AR'l'EP (1988), Urbon Self-mrployrnent in Thailand, ILO, New Delhi. Bhatia, A .K. (1998), "Innovative Technology Options for Urban Informal Sector", in Employment Promotion in the Urbon Informal Sector, Institute of Applied Manpower Research and New Age International, New Delhi. Census (1991), General Economic Tables, Registrar General of India, New Delhi. Chandra, Ashoka (1999), "Retraining for Redeployment: NRF Initiative and Challenge in Training", The Indian Journal of lAbour Economics, Vol. 42, No. 1, January-March. ILO (1998), World Employment Report, International Labour Organisation, Geneva. IAMR (1994), Employment in the Infomwl Sector: A Study of Selected Towns, Institute of Applied Manpower Research, Agricole Publishing Academy, New Delhi. - - (1997), Training Needs of KJuuli and Village Industries, New Delhi. - - (2000), Evaluation of Prime Ministers Rozgar Yojana, New Delhi. Khundker, N . (1989), Technology Adaptation and Innovation in the Informal Sedor of Dhllka, WEP Working Paper, ILO, Geneva. Mamgain, Rajendra P. and Vandana Parashar (2000), "Enhancing Employability of Youth through Education and Training", The Indian Journal of lAl!our Economics, Vol. 43, No. 4. Sankaran, T.S. and V.R. Rao (1995), The Urban Informal Sector in India: A Study ofGovindpuri (DtlhiJ, Friedrich Ebert Stiftung, New Delhi . .,...... l"I... 'I (1999), Appraisal of Community Polytechnic Scheme, Technical Teachers, Training Institute, Chandigarh. World Bank (1991), Vocational and Technical Education and Training, World Bank Policy Paper, World Bank, Washington, D.C.

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21 Meeting the Credit Needs of the Micro Enterprise Sector: Issues in Focus Tara Nair I. INTRODUCTION

In many developing countries of Asia, Africa and Latin America a significant movement has gathered momentum over the past two decades. Intermediary developmental institutions extending financial services exclusively to the economic endeavours.of .the poor have originated and has proven their viability and come to stay in many of these countries. 1 The perception of the formal financial system 'banking with the poor' is potentially risky and economically non-viable, and, hence, it has to encounter issues of 'costs, risks and sustainability' if it chooses to service them2 , and has been effectively negated by some such successful interventions in the informal, non-governmental sector. They also have questioned the rationale of heavily subsidised and welfare-oriented financial programmes for the poor, the inefficacy of which, apparently, has led to draining out of resource and reinforcement of the notion that 'poor are unbankable'. The success stories of most of the newly developed financial institutions, though unique, have certain common features like emphasis on borrower's education, strict monitoring of operations through a system of incentives, penalties and/ or rebates, (social) intermediation through self-help or solidarity groups (so that financing is cost-effective and peer monitoring acts as intangible security), near-market interest rates, and mobilisation of savings as a loan insurance, screening device and a method of risk reduction. Small self-help groups form the primary organisational mechanism of almost all these institutions through which loans are disbursed and savings mobilised. The groups are either spontaneous developments or organised at the behest of non.governmental organisations. II. MICRO ENTERPRISE FINANCE: SOME DEFINITIONAL ISSUES

The terms micro credit, micro finance and micro enterprise finance are used these days almost interchangeably. Though they appear as connoting largely similar meanings, the theoretical perspectives underlying each one of these terms can be interpreted to be distinct. 3 The expression 'micro credit' evidently

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suggests the predominance of 'debt' or lending, while 'micro finance' points to a context wherein both micro credit and micro savings are involved. Micro finance initiatives cover a large spectrum of economic and non-activities of wdividuals and groups in both farm and non-farm sectors (Kaladhar, 1997). In other words, 'micro finance' signifies a more comprehensive set of financial • servtces. The expression 'micro enterprise finance', is more specific and relates to financing of a discrete subset of economic activities that are carried out often at the margins of the economy, the bulk of which is done in the informal sector. It generally targets poor people with enterprises of their own including those who are self-employed. This definition encompasses very small start-up enterprises as also seasonal or part-time income generating activities. Small farmers and households not linked to enterprises are excluded from this specification. The enterprises that fall under the purview of this definition may be better described as 'pre-enterprises' that cater to the basic needs of low income consumers and are characterised by simple products, low prices, local markets, simple marketing channels, low barriers to entry, traditional technology and dependence on informal credit. Thus, micro enterprise finance programmes can be seen as being in the middle of a continuum between poverty lending (mainly for consumption smoothening and debt redemption) and micro finance. On the one extreme, there are programmes mostly directed credit programmes-which help the very poor, generally without any experience in carrying out economic activities, and have very less access to credit. They involve heavy doses of subsidy and are conceptualised exclusively within the poverty alleviation framework. At the other end, there are highly diversified financial programmes with clients across a wide spectrum like small farmers, micro and small producers. These programmes recognise the possibility of having different approaches within the micro enterprise finance function to address the different stages of evolution of an enterprise. For instance, starting up of enterprise and expansion of enterprise demand distinct patterns of financing. There could also be a third stage, viz., enterprise transformation (Reed and Befus, 1994), whereby micro enterprises are transformed into small enterprises. The financial requirement at this stage would be for both creation of fixed assets and meeting working capital needs. Moreover, training and other extension services would be of paramount importance to enterprises in transformation. The needs of such units that operate in the 'grey area' between pre-enterprise and small enterprise cannot obviously be met by minimalist credit programmes, since they still do not qualify as potential clients of commercial banks. Special transformation lending programmes become highly relevant in this scenario. 4 Such programmes may provide a mix of credit and services, with a view to assist micro enterprises increase their assets and productivity and become small businesses, thereby increasing their sales, income, and number of employees. III. MICRO FINANCE IN FORMAL SECTOR: INDIAN EXPERIENCE In India, the cooperatives, commercial banks with their extended branch network, and regional rural banks (which were specially created to cater to the rural sector) are the main official agencies in the organised sector that provide

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micro finance services. The objective of enhancing credit flow to the poorer households, especially in rural areas, was incorporated as an integral part of the nationalisation of commercial banks in 1969 and 1980. Policy and institutional frameworks were so designed to ensure credit access to relatively weaker sections of the population and to relieve them of the burden of usurious debt. The most important measure on the policy front is the Reserve Bank of India (RBI) stipulation that at least 40 per cent of the advances of commercial banks should target the priority sectors. Of this 18 per cent should be set aside for agriculture and 10 per cent for weaker sections. Credit delivery through a wide network of credit agencies like commercial banks, cooperatives (primary agricultural credit societies and land development banks) and regional rural banks was deemed as an institutional mechanism to reach out to poor borrowers in rural and sub-urban areas. In addition, the Integrated Rural Development Programme (IRDP) launched during the Sixth Plan period, the largest anti-poverty programme ever implemented in any country, offers direct assistance to those below the official poverty line by way of a combination of credit and subsidy, through the formal banking channels. It is pertinent to point out that the formal banking operations in India have a sizeable micro finance component. In the commercial banking sector alone, the amount outstanding against Small Borrowal Accounts (SBA) with credit limit of Rs. 25,000 or less increased from Rs. 24,147 crores in 1990 to Rs. 36,253 crores in 1996 (RBI, 1999a). At thP same time, the data on SBAs show that, overall, their proportion.in all accounts declined from 95 per cent to 92 per cent (Table 1). In terms of amount outstanding, SBAs accounted for 23 per cent of the total in 1990, which came down to 14 per cent in 1996. Further, between 1993 and 1997 there was a clear shift in SBAs both in number and amount of loan outstanding towards size classes above Rs. 7,:,(X)S, signifying a fall in formal banking sector's contribution to the lower income segments of the population (Table 2). Tablel Trends in Number and Amount Outstanding of Small Borrowal Accounts (Percentage)

Year

Number of accounts

Amount outstanding

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996

95.5 95.6 95.8 95.8 95.6 95.4 95.0 94.9 95.0 94.2 93.6 92.8 91 .6

20.5 20.1 22.5 24.2 25.2 25.4 23.1 22.0 21 .9 19.8 18.3 16.2 14.2

Outstanding per account (Rs.) 3154 3124 3400 3713 3912 4493 4716 4647 4791 5486 5768 6319 6985

Source: RBI (1999a).

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1able2 Percentage Distribution of SBAs by Size of Outstanding Credit Category (Rs.)

1993

1997

7500 Up to 7500

14.7 22.7 28.0 15.1 19.5 80.5

8.3 14.7 24.0 17.1 35.9

64.1

Source: Same as for Table 1.

In fact, the rural outreach of commercial ban.ks improved dramatically between 1969 (the year of the first phase of nationalisation) and 1981 (RBI, 1999b). The pace of increase in this outreach has declin~ considerably in the 1980s (Table 3). The decline in the importance of non-institutional sources experienced the same trend in the 1970s, and it was at an extremely slow pace in the 1980s. Table3 Distribution of Cash Debt of Rural Households by Credit Agendes, 1971-91 (percentage)

Credit agency

1971

1981

1991

Institutional Coops CBs Others Non-institutional Money lender

29.2 20.1 2.2 6.9 70.8 36.9 (13.8) 8.7 13.8 11.4

61.2 28.6 28.0 4.6 38.8 16.9

Trader Relatives/friends Others Unspecified All

•

-

64.0 21 .6 33.7 8.7 32.7 17.6 (10.5) 2.5 5.5 7.2 3.3

100

100

100

(8.3)

3.4 9.0 9.5

Source: RBI (1999b).

The inherent institutional rigidities of the formal banking sector gave rise to a vicious circle. The disinclination of banks to augment staff strength in view of the higher costs, has led to increasing per capita workload on the existing field-staff who are forced to handle a large number of small accounts. This in turn resulted in high transaction costs of dispensing small credit, and affected supervisory work and recovery of loans. The rural credit delivery system was further weakened by political intervention in the form of frequent loan waivers/ write-offs. As far as credit-linked state-sponsored schemes like the IRDP are concerned, numerous evaluation studies have shown that there have been significant gaps between the objectives and achievements of the programmes in many parts of the country (Dantwala, 1985; Hirway, 1985; Copestake, 1992). These resulted partly from the faulty assumptions about entrepreneurial capacity of the poor and partly from defective implementation. Digitized by

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rv.

MICRO FINANCE: INNOVATIONS IN DESIGN AND DELIVERY

This is the context in which initiatives to link credit with people's organisationsself-help groups (SHGs) or NGOs- emerged as a logical solution to many of the ills that pervade the formal system of financial intermediation.6 The National Bank for Agriculture and Rural Development (NABARD) piloted a novel alternative in Karnataka that used NGOs and community groups (known as selfhelp groups) as conduits of credit delivery. Strictly speaking this cannot be seen as an 'innovative approach' developed in India. Since the mid-seventies, the time when the World Bank seriously started questioning government- owned financial intermediaries on grounds of contamination of portfolios due to political interference and use of cheap credit (subsidised credit), a strong movement has been taking root that emphasises the relative advantage of informal financial institutions (like money lenders, ROSCAs, suppliers, traders etc.) in meeting the emergent credit needs of the poor in developing countries. A good number of models have emerged over the years suggesting various ways to get over the triple problems of access, screening and repayment that have traditionally constrained the formal banking system for long. During the pilot phase NABARD linked about SOO self-help groups with formal banks. By 1996 the SHG linkage programme had become institutionalised within Reserve Bank of India (RBI) guidelines as a normal lending activity of banks under priority sector lending and Service Area Approach. As of March 1998, 291 NGOs and 150 banks were participating in the linkage programme through more than 8,500 branches covering about 2.5 lakh families (Table 4). Of the SHGs 18 per cent were directly linked with banks, 46 per cent were linked with banks through NGOs and 36 per cent were indirectly linked with NGOs as financial intermediaries. Thus in more than 80 per cent of the transactions NGOs had some role to play. Table4 Deployment of Loans under SHG Unkage Scheme Cumulative

Year

No. of groups

1992-93 1993-94 1994-95 1995-96 1996-97 1997-98

Volume of loan (Rs. million)

2.89 6.53

255 620 2122 4757 8598 14317

24.45 60.58

118.36 237.59

Source: NABARD, SHG-Bank Linkage Programme: Status as on 31 March, 1998, undated.

V. MICRO FINANCE IN INFORMAL SECTOR It has been observed that by the early eighties the voluntary sector in the country was exposed to the successful experiments elsewhere in Asia (mainly, the Granieen Bank of Bangladesh) and Latin America, of extending credit to very poor, particularly women. They found in Grameen a replicable role model. But it took at least a decade more for even large non-governmental organisations to seriously get into the business of lending. Even when they started, there was

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no appropriate legal framework available to carry out their financial functions. This situation continues to be so even now. The point to be noted is that the NGO sector has come up as a major constituency in the micro-finance sector in India. Many of them do not even need toapproach the formal banking system for supply of loan funds, as they are in a position to access grants and soft loans directly from international sources. Unfortunately, no systematic efforts have been made so far to gauge the extent of financial intermediation carried out by the NGO sector.7 This forces one to look for evidences at the micro level. The discussion in this paper draws upon the field-level experiences of working with six large organisations in Tamil Nadu, Andhra Pradesh ~d 1 Kerala who are either exclusive micro-finance organisations or NGOs witlf a • predominant micro-finance component. 8 We would focus on one among these Activists of Social Alternatives (ASA) based in Trichy, Tamil Nadu _;.., whose approach towards micro finance is unique in the sense that it combined banking with community organisation. The pace of progress made by many large NGOs with substantial micro finance programmes reveals the increasing relevance of intermediary agencies in the financial services sector in rural areas. ASA is a typical case in point. An organisation with a decade-old history in community organisation and participatory development, located in a socially and economically depressed and chronically drought-prone belt in Tamil Nadu, ASA strategically decided to make credit the focus of its interventions in the early nineties. As in February 1998, its micro credit programme covered 850 groups and 4253 members. By this period, it had disbursed loans to the tune of Rs. 128 lakhs (with an average loan size of Rs. 4000) through its four rural branches. In the beginning ASA' s loan portfolio had a si:zeable component of essential loans. These are primarily consumption loans, borrowed for a variety of purposes ranging from education and hospitalisation to festivals and funerals. At this stage, such seemingly unproductive purposes and income generation activities had equal share in the portfolio - 40 per cent each.9 Agricultural loans constituted the rest 20 per cent. As the programme evolved over the years, this composition went in for drastic changes with income generation loans constituting 70 per cent, agricultural loans 25 per cent and essential loans only five per cent of the portfolio. The changes in the loan disbursement pattern of the best performing branch of ASA (Grama Vidyalaya 2) brings out this (Table 5). Table 5 ASA: Loan Disbursement by Purpose

Loan amount disbursed (Rs. '000)

Nature of purpose IGP Agriculture Essential Total

1995-%

1996-97

1997-98

347 (42.2) 232 (28.2)

1230 (51.7)

2219 (60.6) 1052 (28.7)

244 (29.6)

771 (32.7) 376 (15.8)

823 (100)

2377 (100)

389 (10.6) 3660 (100)

Note: The figures relate to a single branch; figures in parentheses are percentages. Source: ASA, organisational records.

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The experience so far of developmental micro enterprise finance organisations raises pertinent issues regarding their impact on poverty, and sustainability of enterprises run by the clientele. In the following discussion we would highlight some critical aspects of these issues which deserve to be the subject matter of ongoing debates on micro enterprise finance sector in the country. One can clearly see at least two distinct strands of thought in the literature on the impact of micro finance on the poor producers. One assumes almost a linear relationship between credit and economic welfare (credit ➔ productive investment ➔ self-employment opportunities ➔ reduced poverty), and the other emphasises that economic and quality of life dimensions are affected by a wide range of factors, of which finance is only one. The most academically intense and lucidly written arguments favouring the first stream can be found in Hulme and Mosley (1996). Offering a well-formulated critique of the position taken by the Ohio School that credit is just a facilitating factor in poverty reduction and economic development, this work strives to establish that "credit is potentially a prime weapon against rural and urban poverty" (p. 202). According to the proponents of later strand specific transactions have only a limited impact on the economic and social status of the clientele and a host of factors other than credit like market, competition, physical health and natural conditions would directly affect the borrowers' economic well-being (Rhyne, 1994). These observations urge one to look deeper into the dynamics of microenterprise financial institutions (MEFls). Driven by the principles of market perspectives and viability of services, they are constantly in search for upgrading their operations by reaching out to more and more poor clients. 10 The standard techniques to ensure that the services are really ~ccessed by the poor are fixing limits to the asset base of potential borrowers, disbursements of only small amount, charging market rate of interest, and social intermediation through small groups. These along with the insurance and risk coverage (through savings), and intensive loan supervision enable the institutions to avoid the problems of 'wrong targeting' and default. However, whether participation in a credit programme per ~ leads to a reduction in poverty and vulnerability of individuals is a difficult question to answer. In many countries, the very poor clients of MEFls generally have not been able to raise their living standards (Hulme and Mosely, 1996). Since their debt absorption capacity is low, it has been argued, most of them are unable to borrow sufficient amount to raise them above the established poverty line (Copestake, 1995). The incomes of the assisted poor are more likely to increase due to rise in profitability, if they are already above the poverty line. Most of the micro credit programmes are seen as an effective means to empower women by increasing their contribution to household consumption, expenditure, their hours devoted to production for the market and the value of their assets (Pitt and Khandker, 1996). Such 'unrestrained optimism' has been criticised by feminist scholars. For instance, Goetz and Sen Gupta (1996) question the naivety of the assumption that economic empowerment is a straightforward process_which eases women's access to credit and translates unproblematically into their control over its use. They argue that overemphasis Digitized by

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on enchancing women's productivity in home-based work by disbursing credit is bound to subvert the basic feminist concern for redistribution of gendered domestic responsibilities a structural feature of gendered power relationand thus undermine women's control over resources generated through loans and investment. At a large plane, their study questioned the framing of poverty as a temporary cash-flow problem which can easily be mediated through credit delivery. It is also to be seen how far micro•enterprise finance programmes have been instrumental in building/upgrading the asset base (including technology, skill, information etc.) of poor micro entrepreneurs. Hulme and Mosely (1996) summarise their analysis of 12 credit programmes in seven countries thus: " ... it was unusual for credit to trigger a continuous increase in technical sophistication, output or employment it was much more common for each of these variable to reach a plateau after one or two loans and then remain in a steady state. So long as household survival needs to be given priority over enterprise development, and acceM to training, new technologies and growing markets is restricted the capacity for dynamic entrepreneurial behaviour is bound to be restricted also" (pp. 103-4). 11 In other words, the inability of MEFis to address structural issues including imperfections in the factor and product markets tend to limit their efficacy in tackling the issue of deprivation. An integral part of the asset base of an individual is savings which can be leveraged for mobilisation of capital in the long run as his/her enterprise moves along the diversification/growth path. Unfortunately, the MEFis have not recognised this part adequately and savings are often defined narrowly as just an insurance against default. By way of illustration, in the case of ASA, between June 1995 and February 1998, the amount of loan outstanding increased at the rate of 17.7 per cent and loan disbursement, 22.4 per cent, while the per capita savings rose by 12.4 per cent (Nair, 1998). What is suggested here is that the programme has not been able to tap the community's savings potential at the same pace as the deployment of loan funds. Any programme that envisions to build a self-reliant community should view enhancing the savings of individuals as an act of creating community asset. The issue of 'sustainability' follows from the foregoing discussion. In the context of MEFI programmes the concept of sustainability is virtually exclusively explained as sustainability of the lending programme. As we explained earlier, for a micro finance programme to be financially viable and sustainable over the ·1ong run, it is essential that the scale of operations is expanded consistently. Given this focus, what the successful programmes can offer to their clients is only a 'one step-up' assistance. To put it differently, institutional and programme sustainability is often achieved at the cost of the sustainability activities promoted by the poor borrowers. This phenomenon can be seen as resulting in two depressing scenarios of (1) the poor clients getting trapped in perpetual indebtedness (to the institutions) without any significant rise in their income levels and (2) their loan financed micro enterprises becoming vulnerable to any marginal change in the immediate environment. This is only the one side of the problem. Of late, as we have seen in the case of ASA, many MEFis have restructured their lending policy to restrict lending only to productive activities as a step towards ensuring viability of Digitized by

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lt!nding programme. The rationale behind such restructuring is that consumption loans generally show poor repayment record. In the context of household enterprises where production and consumption expenditures are fungible, 12 such artificial cleansing of loan portfolio will accentuate the shift in focus away from the core poor to the better-off segments of the potential clientele and thus widen inequality. It is important that the lending policy of MEFls reflect the protective and promotional roles of micro credit. For the very poor clients, credit is a critical resource for sustaining the existing family routine and low returns. For the not-so-poor, credit has an essentially promotional role in capital increasing and enhancing return on investment. Added to this is the credit needs of micro enterprises, whom we referred earlier as operating in the 'grey area' between micro and small enterprises. Micro enterprise finance function is thus a diversified activity in itself, which calls for sufficient scope for product diversity. This aspect of flexibility seems to be Jacking in the existing IUCalSful 'replication models'. The much acclaimed innovations brought about by the intermediary developmental finance institutions in design and delivery of services hence do not snow-ball into creative alternatives to the ills of earlier approaches that ignored the versatility of social and economic phenomena. VIL CONCLUSION

It goes without saying that in the context of financial dualism, promotion of links between formal and informal sectors are essential to facilitate financial flows between the two sectors.13 The number of such intermediaries and their volume of transactions have significantly increased and many of them claim to have reduced poverty substantially in their areas of operation. Yet, they are groping in the dark to find an appropriate legal status of their business. Strictly speaking most of them are carrying out lending and deposit mobilisation activities outside the legal purview. Some states do have certain enabling provisions in this respect. In Andhra Pradesh, for instance, micro financial institutions can take recourse to the cooperative act to form mutually aided cooperative thrift societies. But, in the absence of enough alternatives in legal forms to choose from, this sector will cease to innovate even in these states. Such institutional pluralism is necessary to reach out to a wide range of poor micro entrepreneurs. The need of the hour is an appropriate legal framework to facilitate efficient functioning of the MEFls and systems to record and regulate their transactions as a separate financial entity. Along with this, there should be a review of performance of the formal institutions and greater fonnalinformal collaboration. Any delay in these respects would help mushrooming of "Organisations with dubious credentials to indulge in financial services activities, which eventually would undermine the very potential of a powerful alternative development movement. At the same time, it may be mentioned that the success of many "grameentype" micro credit institutions has given rise to certain stereotypes in the realm of development finance (for instance, the characterisation of 'poor women' as financially more prudent, more honest and trustworthy). Such successes have also led to a 'replication-spree' among development organisations, who never stop now to think originally or innovate. Even organisations with proven track record in community organisation and social struggle have been forced to make Digitized by

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dramatic changes in their strategy in recent years to focus exclusively on credit and savings in order to ensure better outreach and overall institutional viability. A more undesirable fallout, however is that the micro enterprise finance programmes are increasingly becoming standardised in terms of approaches and methodology, undermining the very spirit of pluralism which ought to be the hallmark of a system that is supposedly evolved for sustaining diverse rural livelihoods. outlror would like to thlmk tlu Frieruu o/ Women's World &mking, India for prwiding the opportunity to work with micro ftruma NGO,, t1nd tlu r,ario111 otlur organiMtion• for tluir tntJnaiMtic cooperation. Prr,f. Amitobh Kundu's amrmenta on an tllf'Jier draft wm t2lr'l!wwly useful in st,er1gthening the enq,iriau content ofthe pqer). ~

•

Notee 1.

2.

3.

4.

5.

6.

7.

8.

9.

Indonesia (&mk Rt,kyot lruumala), Bolivia (&nco Solidllrio and Bonano!), Bangladesh (GP'lffllffll BtznJc), Sri Lanka, Malawi and Kenya are IOD\e of the countries where microfinance movement could make visible strides in terms of both outreach and quality of aervices. In India, a number of NGOs, including SEWA (Gujarat), Women's Working Forum (Tamil Nadu), MYRADA (J(amataka, Tamil Nadu and Andhn Pradesh), Activists for Social Alternatives (ASA. Tamil Nadu), are able to ffllCh out to a ••;L1tantial number of poor borrowers. This perception. as is well known, tw beeli routed in factors like apparent lack of cn!dit worthiness of the poor as they lack :sem t., offer as oollalel'al, negative real rates of interest for lending to the poor, high cost of service, and poor recovery of disbursed loans. However, as Rhyne (1994) points out, the principles behind all these are the same: "market peisptdive ....; a recognition that savings can be as important as credit .....; and insistence that financially viable institutions provide only financial services" (p. 11). It must be noted that "transformation lending is the provision of transformation which does not equate with either graduation into the formal financial sector or legal incorporation". See Reed and Befus (1994, p. 186). One possible explanation for this decline could be that the increase in the limit of lRDP loans, which account for about one-thiid of all accounts and one-fourth of total amount outstanding has resulted in increased loan intake by small borrowers. This does not seem to be the fact. The average size of an IRDP loan was only about Rs. 5,600 in even 1997. One of the earliest initiatives in this direction was made by the National Banlc for Agriculture and Rural Development (NABARD) in the early eighties, when it made available funds to the Mysore Resettlement and Development Agency (MYRADA) as a grant to oor.stitute a revolving fund for supporting SHGs' called Credit Management

Groups. 11lel'e is some data available on cumulative disbursements and membership of NGOs who are members of the Grarnem Trust, Bangladesh. In the beginning of 1999 the cumulative disbursement of fourteen such NGOs with a total membership of about 44,000 women came to Rs. 22.56 crores. See, Gramm, Dialogue, April 1999. These are SHARE, Hyderabad; MJJhilll Vwzsa, Hyderabad (both in Andhra Pradesh); Activists for Social Alternatives, Trichy (Tamil Nadu); Dale View, Trivandrum; Nirm11l Grom, Kothamangalam; FREED, Alleppey (all in Kerala). Ille predominance of conswnption loans is evident in other similar lending programmes too. MAhila Vikosa of Andhra Pradesh reports disbursement of conswnption loans, including those for health and education purposes, amounting to Rs. 64.2 lakh as against

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10.

11. 12. 13.

agricultural loans of about 27.1 lakh and trade loans of Ra. 76 lalch. The experience of the Indian MEFI sector ii that an efficient itlstitution with adequate geographical spread can enrol around 2000 new clients per year and be both operationally and financially viable. See Hulme and Mosely (1996), Ch. 4, 'The Impact on Production and Technology'. See Ghate et al. (1992), pp. 105-111. Lower transaction costs (of both lenders and borrowers) and lower risk premia (implying saving of resources spent on intermediation and greater equity impact), increased competition within informal sector (meaning lesser monopoly profits within the sector) and greater choice for the productive uae of savings are the major reasons for promoting formal-informal linkages. See for dttails Ghate, et al (1992).

References Copestake, James G. (1992), "The Integrated Rural Development Programme Performance during the Sixth Plan: Policy Responses and Proposals for Reform", in Harriss, Barbara, S. Guhan and R.H. Cassen (eds.), Poverty ;n lndill: ~ e h 1111d Policy, Oxford University Press. -(1995), IRDP Revisited, Unpublished Paper. Oantwala, M.L. (1985), "Garibi Hatao: Strategy Options", Economic and Politiau Wttkly, March 16. Ghate, Prabhu et al (1992), lnfor,nlll Finmlcr. Some Findings from Asia, Oxford University Press, Hong Hong. Goetz, Anne Marie and Rina Sen Gupta (1996), ''Who likes the Credit? Gend~ Power and Control Over Loan-Use in Rural Credit Programmes in Bangladesh", World Dtoelopmmt, Vol. 24., No.I. Hirway, Indira (1995), "Garibi Hatao: C.an IRDP Do It?", Economic and Politiall Wtddy, March 30. . . Hulme, David and Paul Mosely (1996), Finance Aganist Poverty, Routledge, London. Kaladhar, K. (1997), "Micro Finance: Design, Structure and Governance", Economic and Political Weekly, Vol. 32, No. 42, October 18. Majumdar, N.A. (1995), "Overhauling the Somnolent Rural Credit System", Economic and Political Weekly, Vol. 32, No. 42, October 18. Nair, Tara (ed.) (1998), "ASA's Achievements, Policies and Strategic Direction", The Activists for Social Alternatives, Trichy (mimeo). Otero, Maria and Elisabeth Rhyne (eds.) (1994), The New World of Micro Enterprise Finance, Intermediate Technology, Publication, London. Pitt, Mark M. and Shahidur R. Khandker, (1996), Household and lntrahousehold Impact of the Gramem 811nk and Similar Targeted Credit Programmes in Bangladesh, World Bank Discussion Paper No.320, The World Bank, Washington D.C. Reed, Larry R. and David R. Befus (1994), "Transformation Lending: Helping Microenterprises Become Small Business", in Otero and Rhyne (eds.), (1994). RBI, (1999a) "Sailent Result of the Survey of Small Borrowal Accounts, March 1997", Monthly Bulletin, Reserve Bank of India, February. --(1999b), "All-India Debt and Investment Survey, 1991-92-5ailent Features," Monthly Bulletin, Reserve Bank of India, May. Rhyne, Elisabeth (1994), "A New View of Finance Programme Evaluation", in Otero and Rhyne (eds.).

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22 Moving Towards People-centred Economy Ela R.Bhatt I. THE CONTEXT: PUITING POOR PEOPLE FIRST Our global leaders often speak of eradicating poverty as well as promoting. national and international economic growth, but when their speeches are analysed, it becomes clear that they are talking about growth for a very small proportion at the most 5 per cent of the world's population. The remaining 95 per cent, the majority, are not included in these plans for growth. This excluded majority largely consists of the poor who have little or no access to the engines of growth: assets and credit. Amongst the poor, almost all work, particularly women. Otherwise they cannot survive. When we talk about the poor we need to know who they are, how many of them exist, where they live and work, what kind of work they do-we need to make them visible, give them a voice, listen to their woes and aspirations, and open the economy so as to give them their due. In many parts of the world the poor constitute the vast majority of the population. In India, about 30 per cent of them live below the poverty line, i.e., Rs: 1200 (US$ 400) per annum of which about 80 per cent live in rural areas and are usually illiterate, a majority of them being women. The poor are also economically very active; they contribute to the national economy each year, and grow, produce, transport, and sell most of the commodities which we all take for granted. It is difficult to specify the numbers of poor globally. According to a conservative estimate (1990), 2.5 billion people, or 65 per cent of the world's population, who consume less than 2$ per day (1990) are poor. A majority of them are from South and East Africa. In sub-Saharan Africa, poverty grew from 1985 to 1990 by 3 per cent, which is indicative of the magnitude of poverty. And, we must remember that women are the poorest among the poor. Despite their contribution to the development process the poor remain invisible in national statistics. They are unrepresented, unprotected, unorganised and unrecognised. The poor exist outside the planned economy, in what is known as the informal sector. The informal sector in many parts of the world comprises about 80 per cent of the economically active population, most of which is self-employed. The international economy as a whole will be unable to grow to its full potential unless it takes along the majority of the world's working population.

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Lack of growth of the informal sector will restrict growth as a whole. Is it not in our collective self-interest to open the world of finance and enterprise to the poor majority?

Self-employment: New Work Paradigm Historically, the world's decision makers have focused on industrialisation. The legal and financial regimes they have developed usually presupposed an industrial model, where there is a relationship between a clearly defined employer and employee, and a private and a public sector. This model is no longer applicable in many parts of the world. Today, an increasing proportion of the workforce is self-employed, and more and more of the self-employed are in low or very low income brackets. . The self-employed or people's sector has more members than any other sector in the economy. Self-employed workers are usually found among certain occupational categories: home-based producers, petty vendors and hawkers, and providers of services. These categories are not necessarily exclusive; for example, a family may raise poultry, and also produce small handicrafts that are sold in local markets. Many of the enterprises owned by self-employed wqrkers are family-based and include contributions from men, women and children, both the old and the young. In India, the statistics are revealing: 93 per cent of employment is generated by the unorganised sector of the economy where there is no specific employeremployee relationship. In effect, today the organised sector in India, in terms of its share in the workforce, is shrinking. In 1972, this sector absorbed 11 per cent of the workforce and in 1996, its share was 7 per cent only. Presently, out of the total workforce, 57.3 per cent are self-employed. In India and elsewhere, the private, the public and the people's sectors are interdependent. Much of the production is accounted for by the people's sector, while marketing is done in the private sector and regulation in the public sector. However, the terms of trade are weighted against the people's sector, and there is little government or private sector encouragement for growth within this sector, despite declining employment opportunities. Governments around the world have recently initiated steps towards increased liberalisation of trade, but these policies have benefited only the private sector, while the people's sector has experienced increased regulation. For example, while big corporations are receiving tax breaks, petty vendors are encountering more and more of zoning and licensing restrictions. Governments' economic policies tend to favour those business people who are rich in assets, and the people's sector tends to be asset-poor. The private sector can enjoy the benefits of the free-market economy since it has the assets which can be moved to places where profits can be made. The people's sector, however, is often tied to middle men and operates in a much more restricted market structure. They are unable to travel to sell goods in wholesale markets and therefore only realise a fraction of the profits on the final price of their goods. For example, small producers sell fruits and vegetables to larger traders at the village level and at village prices, but the trader then takes the goods to the city and sells them at a considerably high profit. Similarly, in the case of capital markets, the private sector can obtain capital at competitives rates, Digitized by

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whereas the people's sector is forced to borrow from moneylenders at exorbitant interest rates. The people's sector also needs favorable terms of trade so that ·its enterprises can grow and as a result standards of living can increase amongst the poorest members of the society. There are positive benefits to society as a whole in supporting the enterprises of the people's sector like increased productivity, income for consumption, greater savings, better health, higher education and smaller families. With increased assets, poor women invest in their own businesses and in buying better tools or seeds. They invest in their economies by buying more goods such as food, clothes and household products and in their families by using the services of teachers, doctors etc. The enterpriaes of the poor need to move beyond mere survival if national and global economies are to be transformed. II. STRUCTURE AND MECHANISM TO INCREASE LOW-INCOME WOMEN'S ASSETS AND ECONOMIC SECURITY

The poor, and the poor women in particular, are struggling to move beyond the stage of survival: U they have been successful, it is chiefly as a result of two key factors: acting collectively as a people's organisation and then forging linkages with the private and public sectors. In this way, the poor can build structure and mechanism that will increase their assets and economic security. People's organisations are best equipped to take up the cause of the people's sector. They are motivated to create workable solutions to the problems faced by the poor solutions which are geared towards promoting economic self-sufficiency, not dependency. People's organisations are also beginning to form linkages with the private and public sectors to ensure that their members have a voice in local, national and global economic decisionmaking.

1. Organising the Poor When individuals, who are among the poorest, least educated and most disenfranchised members of society, come together they experience dramatic changes in their lives. First, they gain knowledge, which includes information relating to (a) their rights and obligations as producers, traders or service providers; (b) the health and education of their families; (c) the possibility of better terms of credit; (d) the opportunities to save, and (e) political choices. Second, they gain self-esteem, i.e., they realise that they have the ability to improve their families' standard of living and gain respect when they do. Third, they develop a sense of community as they find that they are offered support from people with common values and gain the power of acting collectively. As members of the people's sector, who act collectively, they can ensure their own economic security by (a) setting up their own benefit schemes; (b) having a common voice which can be used to influence local economic decision making, and (c) exercising political power. In order to be effective, people's organisations must have a participative and democratic structure. The poor must be stakeholders in their own organisations because the organisations in which the poor do not have a

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sense of ownership and accountability usually do not progress fast. The organisations should also be free from political interference so that the interests of members are best served. Organising the poor usually has two aspects, both of which are crucial if the organisation is to succeed. The first is to identify a specific cause or an objective for the promotion of which some struggle is necessary. For example, street vendors may mobilise for raising the issue of increasing the number of available licenses, and petty vendors might do so in order to capture a part of the market where they can sell their items without police harassment. Since this aspect of organising is issue-based, it is usually short-lived irrespective of the success of the struggle. The second aspect is programme-based. This is more important because it ensures that organising efforts continue into the future and encompass a variety of projects that are geared towards building assets and achieving economic security for members. This developmentoriented aspect of organising the poor might include: (i) setting up of (a) a cooperative bank or other mechanisms to allow members to borrow and save, and (b) benefit schemes for members such as social security or maternity benefits; (ii) initiating insurance schemes in case of floods or other natural disasters; or (iii) introducing other economic security schemes.

2. Need to Build Assets The poor need to be able to build assests if they are to break the cycle of subsistence, deprivation and survival. With the help of assets, the poor can build more assets, enabling them to have better control over their enterprises, which helps them bring about a change in their lives. Poor women can invest in health, education and welfare of their families. They need to be able to borrow and save, and have bank accounts in their own names so as to be free from dependence on moneylenders and obtain loans to buy better tools, and for carrying out housing improvements and repairs. They also need assets not only as individuals, but also as collective such as group loans for village fish ponds or fodder farms. Most importantly, poor women need short-term loans from banks tailored to their needs. The SEWA Cooperative Bank caters exclusively to this clientele. It has a 96 per cent (in 1995) repayment rate, indicating that poor women are the most reliable clients a bank could have. An asset is safer in the hands of women than men. Also, those with even a few assets are able to fight poverty and exploitation better than those who are totally assetless. Provision of productive assets to women have led to qualitative improvement in their lives over a period of time, given other inputs such as knowledge, skill, organisation, and confidence. This has been so in the case of women working in rural areas with assets like land, trees, cattle-related equipment and machinery. Similarly, poor women working in urban areas with assets like tools, equipment, plant, sheds, land and market place hav~ been able to improve their standard of living. This shows that assets in the hands of women (ownership) are safer than in that of men.

3. Accessing Credit It is imperative to address the issue of poor people's lack of access to productive resources. They need credit facility for their small enterprises. Poor women's

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need for financial services is as important as of poor men. They need loans to extend their businesses and a safe place to put their savings. These women need recognition as economic agents who save, repay loans, use the loan productively, utilise the income for the benefit of the family and redeem loans from private sharks. The strengthening of credit supply to small producers must be an integral part of financial policy and development assistance at all levels. Ultimately, the process of capitalisation has to conclude at the formation of capital at the level of the poor individual's household and at their group level. That is where the real benefit of sustainability and growth lies.

4. Need for Economic Security While the quantitative contribution of poor women to their family income is highly significant, the qualitative contribution is also of immense value to their families. Unlike the males who spend an average of 50-55 per cent on themselves, the poor female workers hardly spend anything more than an average of 5 per cent on themselves (Shram Shakti Report Surveys, 1988). Their entire earnings are spent invariably on the upbringing of children and the settlement of the family members. Therefore, the quality of life of poor families improves at a faster pace. It is not enough to have access to credit. The selfemployed poor also need creative economic security schemes. In many parts of the world they are not covered by government benefits such as workman's compensation or social security schemes and do not have access to life insurance or maternity benefits. Yet they deserve access to the same • employment rights that full-time formal sector workers take for granted. We call access to these basic rights "full employment" . Despite past promises, neither the governments nor the private sector at the household level have provided the benefits of full employment. The only reliable source for providing economic security though full employment is people's organisations comprising the self.-employed themselves. Developing economic security schemes by and for the poor is already a reality in some parts of the world. At SEWA in India, we have set up a successful social security scheme built on members' contributions. The poor SEWA members are able and willing to pay the required premium. The initial lumpsum seed capital invested was repayable over 10 years. The income on this investment has been used to run the scheme (i.e., pay this premium for members) and regenerate the original capital. About, 15,000 SEWA members (1995) contribute a yearly premium of Rs. 45 (approx. US$ 1.50) for various benefits such as:

Rs.

Benefits

Life Accident-life Accident-widowhood Hospitalisation up to Damage to working tools, workspace Maternity benefits

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Despite some difficulties (such as lengthy processing periods, insufficient documentation and rejection of claims) the programme has been very successful. Women were so keen to have access to this type of security that they encouraged friends and·acquaintances to join SEWA in order to benefit from the scheme. The people's sector needs to be supported by organising efforts that build members' economic self-sufficiency, move them beyond survival, and give them something tangible to rely on, in the future. The poor cannot rely only on governments or the private sector; they need people's organisations to build the structures and mechanisms for themselves that will increase their economic security.

S. Establishing Unkages with Private and Public Agencies People's organisations also need to forge links with the private and public sector so as to enhance their members' interests. They need to develop a relationship with insurance companies to establish economic security schemes, and negotiate with banks to generate loans to finance these schemes. They also need to communicate with city planners to ensure that markets are developed in a way that meets the needs of petty vendors and hawkers. Above all, they need to have a voice in the Chambers of Commerce and the city government to set standards, liberalise licensing requirements, and establish fair zoning regulations. Needless to say without a say in the corridors of power, the poor selfemployed will not be heard. The self-employed need advocates who can explain to the decision makers that however tiny they may be, they are legitimate business people who bring considerable amounts of money into the national economy, both through paying increased indirect taxes as their income grows and by not being public charges as their businesses become selfsustaining. People's organisations can provide the necessary link for this purpose. Ill. STRUCTURE AND MECHANISMS FOR PROMOTING PAKllOPATION AND CHANGE: DEMOCRATISING ACCESS TO THE ECONOMY The challenge today is to design structures and mechanisms for promoting the participation of the people's sector in the broader economy, so that poor women can participate effectively in the process of economic change. We need decentralised structures where the people have access to economic decision making and resources in reality, not just in name. We also need better enforcement mechanisms that include representation from the informal sector.

1. Democratic Decision Making: Multipartite Mechanisms A sure way to enable the people's sector to participate in the broad economy is to include its representatives in the decision-making machinery. One way to accomplish this is through multipartite boards. A multipartite board implements programmes as well as irons out disputes and initiates policy interventions. Tripartite boards have worked well at the national and

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This was the background in which the Kerala Head-load Workers Act 1978 was enacted by the state government to regulate the employment of head-load workers. After the implementation of the Act, a systematic arrangement for organising work was evolved and under this scheme a local area was divided into various pools which corresponded to the work areas monopolised by a set of head-load workers. All these workers were issued work cards and they were permanently deployed in the same areas (Nambiar, 1997). It is evident that the Act only formalised and systematised the acts of unionised workers in the direction of monopolising the work of different work centres. Unionisation among Kerala head-load workers is an example of unionisation based on pecuniary logic playing at its extreme. By adopting this strategy of forcefully monopolising the work, this section of workers gained a lot but they forgot that they will have to pay for it in the later stages in terms of loss of class solidarity, in terms of decline in strength of union and finally in terms of decline in their bargaining capacity. After the implementation of the scheme, boards and local committees were vested with all powers for regulating the employment. Therefore, the hold of these unions on the workers considerably declined. Workers started denying the union membership and after leaving union, they worked without any union connection. The participation of workers in trade union and political activities sharply declined day by day. On the other hand, there is a growing tendency of shifting major part of activities by employers to nearby areas where the scheme is not in operation to safeguard worker's interests. Therefore, some pools of workers are already facing the problem of surplus labour. However, sorne other pools are also facing the problem of deficiency of Jabour because the number of workers has declined by way of retirement at the age of 60 and due to declining power of base unions, the workers are unable to force the government to accept their demand for enrolling one of their children in their pool after their retirement. Therefore, it seems that the operation of scheme itself is collapsing. This is the logical culmination of pecuniary logic of trade unionism. Strategy of forcefully monopolising the work was based on strong and radical trade unionism and when this strategy was legally formalised it ~veakened the base and reduced the militancy of trade unions itself.

4. WGNLI Perspective and Method of Organising VVGNU (V.V. Girl National Labour Institute) has developed and validated over the years a methodology of organising which takes off from Marx's Oeuvre and combines Marxist political economy wi eh Freireian Pedagogical techniques (Khandelwal and Chandra, 1990). All evaluatio11S so far have shown that it is a highly effective technique (Huitzer, 1977). Earlier it was used in rural context, but of late it has been effectively used in the urban informal sector as well. Procedurally, it requires that the organiser enters the moral community of the workers and comes at first hand to know their realities as participant observer. Then those exhibiting some capacity of articulation and assertion are brought to camp of normally four to five days to motivate them to reflect and deliberate collectively on their existential being. It is found that whatever their illiteracy, 'ignorance' and lack of articulation, they invariably start displaying the reality Digitized by

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of their profound knowledge of their problems after one day and they come to the realisation that their problems being common do not derive from their individual capacity or its lack but derive from the social and economic structure that makes them individually powerless. From here the transition to the realisation that they can solve their problems only collectively is but a step which they take easily. Quite often they form an organisation then and there and ask for the necessary requisites for its legalisation. It is to remember that it takes only four to five days. The uniqueness of this methodology is that it can be successfully used in organising the wage workers as well as petty commodity producers in the informal sector. If, however, one were not to fall into the trap of conflating the needs and aspirations of the two segments or consider them too disparate to have co-ordinated action, one will have to keep in mind both the distinctness and complementarity of the two segments and their organisation. VVGNU perspective and method of organising have been successfully practised recently in four development blocks of four states viz., Madhya Pradesh, Rajasthan, Tamil Nadu and Uttar Pradesh. One and half years of intensive work in these areas resulted in formation of block level rural labour unions, which is constituted by not only agricultural labourers but also various other types of rural workers. The unions emerging in almost all the four areas have raised diverse nature of issues ranging from the demand of implementing minimum wages, demand related to wages and welfare of beedi workers, demand for construction of roads, getting drinking water facilities, proper functioning of schools and anganwadi centres, benefit of government schemes, to issues related to social oppression (NU Report, 2000).

S. Organising Petty Commodity Producers So far the discussion was confined to the question of organising the proletarianised, howsoever incomplete, workers only. But as mentioned earlier, the informal sector labour market may contain a lot of petty commodity producers who functions as the latent reserve of labour. As commodity producers their problems do not coincide with those of waged workers. The source of their power does not lie in pure collectivity, but mainly in the control of production. They are not concerned with wages and employment but with supply of inputs and marketing of outputs. They have problems in acquiring capital and inputs at cheap rates and marketing the product. For such workers cooperative type organisation would be more relevant. The SEWA model comes to one's mind in this connection. Another relatively successful example is that of Working Women Federation in Tamil Nadu. We may not agree with the totality of their approach but the model remains valid and any one interested in organising the petty commodity producers or converting the heavily exploited waged workers into self-employed would not do better than learn from and develop on these two models. Most of those who advocate and work for the self-employment of workers appear to be convinced that cooperatives within capitalist society is a viable alternative to capitalism. Such an understanding arises from the ignorance of the experiences of cooperativisation all over the world and of the debates thereon in the 19th century when Europe was a continent of an ascending Digitized by

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bourgeois states. It is one thing to promote and sustain cooperatives of workers as a short employment-creation and employment-protection strategy as well as a means of training the working class into realising that capitalists are redundant to production; it is another thing to project it as a viable alternative to capitalist exploitation. Hence there is a need, as Marx, Lenin and Rosa Luxemburg showed, to promote cooperativisation without populist illusions. The very fact that a cooperative is a non-capitalist enterprise within capjtalism, it is bound to be inefficient from the point of view of capitalist rationality. It would, therefore, fail to 'compete' with capitalist enterprises. For its success, it would require a captive market. Such a mechanism may be created if a producer cooperative goes with a consumer cooperative of the former's product (Luxemburg, 1900, p. 61). It may also relatively succeed in a product line which does not face capitalist competition and only so long as capital does not invade this domain. Hence the cooperativisation as an organising tactic of the informal sector workers from a long-term view should proceed in close collaboration, rather extension, of trade union movement. This will provide the necessary flexibility of tactic and the solidarity of both the active and reserve armies of labour (Luxemburg, 1900). 6. SEWA

SEWA initially originated as the women wing of the Textile Labour Association (TI.A) in 1968. The main idea behind starting the women wing of the TLA has been to impart training and skills to poor women so that they could earn a livelihood. Oearly the emphasis was on organising the self-employed women workers. But imparting the training and skills was not enough to fulfil this objective, and therefore in 1972, the women wing of TI.A decided to convert itself into a full-fledged Self Employed Women's Association (SEWA) with fullfledged programme for organising self-employed workers (Bhowmik, 1997). Self-employed in the definition of SEWA can be divided into three basic categories: 1. 2.

3.

Home-based workers who produce products, goods and services either on their own as artisans or on a piece rate from contractor or a middle man. Small petty traders, vendors and hawkers who sell household goods or vegetables, fruits, eggs, fish and other foods in the market place or move with a head-load or a pushcart from village to village or in the streets. The providers of services and manual labour engaged in agriculture, construction, transportation, cleaning, laundering, health, catering or domestic help and the like (ibid). SEWA claims to be a union and it is registered under the Trade Union Act, but a close observation of activities of SEWA suggests that it is working more as an agency fostering and helping develop cooperatives of selfemployed workers. SEWA basically represents the class of petty producers and not the wage workers. Even if it goes to organise the home-based workers who are basically wage workers it does not organise them as wage workers, but it emphasise on their illusory apparent identity of being selfemployed and by organising them in cooperatives it converts them into

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real petty producers. This is very much evident in the activities of SEWA, since its very beginning. The women wing of TI.A, the forerunner of SEWA, organised home-based workers engaged in patchwork. But later, after SEWA was started, the union decided to promote cooperatives among these women (Bhowmik, 1997). Naturally, cooperatives increased their income manifold by transforming them from piece-rated wage workers to real petty producers producing quilts and bed sheets from waste doth and selling their produce themselves. Accordingly, SEWA provides a very successful model for organising petty producers and home-based workers in the cooperatives. SEWA model is also successful in organising the cooperatives of: 1. workers engaged in providing such services as health care, childcare, cleaning, etc.; 2. vegetable vend~rs, kerosene vendors and waste pickers; and 3. salt producers, forest-produce gatherers. SEWA now sponsors more than 70 cooperatives in urban and rural areas. It is often argued that SEWA model provides a strategy of integrating normal union activities with cooperatives (Bhatt, 1997). But, by applying one's common sense, any one can arrive at the conclusion that SEWA strategy can not be a general strategy for the trade unions. As far as the petty producers and the home-based workers are concerned, when they were organised in production cooperatives, they did not in any way remain as part of trade unions. So in this case there is no question of integrating union activities with cooperatives. The cooperatives in case of workers engaged in services such as health care and childcare and even in cleaning are not much different from the production cooperatives of petty producers. In case of workers' cooperative in childcare, the workers as a member of cooperative apparet'\tly become the owners of creches and they get a share of the income generated in creches and not the wages. The same thing happens in other such cooperatives also. Therefore, they are transformed mentally in the class of petty producers and by and large the scope of trade union activities is replaced by the cooperative activities. As far as factory sector is concerned, there is no scope of organising workers' production cooperatives. But there is a scope for organising consumer cooperatives and logically it seems that if trade unions can adopt the strategy of unionisation by integrating it with the formation of consumer cooperatives of union members, there can be a revival in the unionisation process of workers. However, factory sector is out of the scope of SEWA and, therefore, the SEWA strategy is basically based on formation of cooperatives of petty commodity producers or formation of cooperatives of certain kind of wage workers and converting them into petty producers. Of course, the cooperatives organised on SEWA strategy is successful. But, while celebrating its success, SEWA overlooked the historical reality that capitalism developed and develops logically from simple commodity production. Therefore, the success stories of these cooperatives can be only in the sectors, which are still not invaded by the capital, and these successes can be celebrated till these sectors are waiting for the invasion of capital. Digitized by

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7. KDBC Formation of cooperatives is seen as an alternative work organisation strategy for beedi workers also and Kerala Dinesh Beedi Cooperative (KDBC) provides a successful story quoted everywhere. KDBC was started by the Government of Kerala with the cooperation of trade unions in 1968 when after notification of the implementation of the provision of the Beedi and Cigar Workers Conditions and Employment, Act, the prominent beedi manufacturers in Cannanore district abruptly suspended their operations throwing nearly 12,000 workers unemployed. The scheme was formulated to organise 20 primary societies each with five to ten workcentres, dismantling the homeworking or 'ghar khata system'. One central society was organised at Cannanore and all primaries were made its members. The central society was responsible for mobilising finance, making bulk purchase of raw materials and advancing it to primaries. Primaries were responsible for collecting the beedis rolled by their members and selling it to the central society. Government of Kerala with the concurrence of trade unions nominated the board of directors of central and primary societies and regional joint director of industries and commerce was appointed as the chairman of the central society. From the structure of the cooperative society it is obvious that in this case the government played a major role in setting up and in smooth running of KDBC. It was the government which advanced the money even towards the share capital of workers (which was to be recovered out of weekly wages) and a loan for purchasing raw materials and for making payment of wages (Prasad and Prasad, 1997). KDBC, no doubt; provides a successful story. At present it is running 22 primaries with 350 work-centres and it is providing regular employment to 35,000 workers. But while celebrating the success of KDBC, it is wrongly regarded as a trendsetter in the area of workers, cooperatives, as the KDBC venture did not experience the pains and d.ifficulties faced by the workers in setting up and running a cooperative society without the whole-hearted support of government, that was provided in the case of KDBC. According to Prasad and Prasad (1997), the following three factors were responsible for success of KDBC: 1. whole hearted support of the left Government of Kerala, 2. powerful trade union movement, and 3. interest and determination of the government officials to make the cooperative a success. Therefore, KDBC model can be successfully replicated only when all the three or at least two out of three factors are favourable. Whenever and wherever the cooperatives were formed, in a situation when these factors were not so favourable, as in the case of Bhandara and Nagpur Beedi Cooperative, they had to face much difficulties in mobilising financial resources and they had to face intense competition with private manufactures in purchase of raw materials and for marketing their products and this proved fatal for their survival (Prasad and Prasad, 1997). There is yet another aspect of beedi workers' cooperative which makes it different from other types of cooperatives (i.e., dairy and sugar cooperatives,

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etc.) and which incl"f'ases the difficulties of b«di cooperatives manifold-the beedi workers by and large do not own any means of production, they are mainly dependent on wages and that the beedi does not have a captive market, unlike sugar and milk its market is extremely competitive. Therefore, in capitalist society with highly competitive market the workers' cooperatives can hope to survive only if they can build strong cooperatives not only on the production side but also on the consumption side. In the capitalist market the deg,ee of survival of workers' cooperatives depend on the extent to which the influence of laws of the free competition are removed either through a constant assumed market by the state or linkages with consumers' cooperatives (Luxemburg, 1900).

rv.

CONCLUSION The informal sector workers comprise the proletariat and petty commodity producers. Both are dispersed and hence difficult to organise. But realising the ubiquity of capital domination over workers as sellers of labour power, as producers, and as consumers, an effective strategy can be devised to organise them as examples in the working class history abound. The unionisation of the proletariat may be complimented by the cooperativisation in the petty commodity producing sector. If this dual strategy is effectively coordinated, the informal sector workers can be organised towards higher and pervasive class solidarity, so essential in these days of fascistic attack from the bourgeoisie and its state. The success of Kerala Dinesh Beedi Cooperative underlines the importance of state support in the supply of the raw materials and provision of large scale marketing mechanism. The state support in this case obviates the need for an integrated production, marketing, credit and consumers' cooperatives as posited by Luxemburg (1900) for the viability of cooperative movement. SEWA, on the other hand, is an example of an integrated, however limited, approach to cooperativisation. It is also an instance of how unionism and cooperativism may be integrated in the same organisation. . AICCTU'!? .innovative approach to the struggle of beedi workers for wages and working conditions on the one hand and for preventing closure on the other points to the possibility of a variegated approach depending on the specifically of a situation. There can be no recipe for organising the informal sector workers in all circumstances. All that the theory and practice so far can do is to help organisers understand the realities of their specific labour market and accordingly devise their tactics and strategies. References Aronowitz, Stanley (1973), False Promises, McGraw Hill, New York. Bhatt, Ela (1997), "SEWAas a Movement", in Datt (ed.). Braverman, Harry (1974), lAbour and Monopoly CApital, Monthly Review Press, New York. Bhowmik, Sant K. (1997), "Organising the Unorganised Labour th.rough Cooperatives", in Datt (ed.). Carchedi, Gugliebno (1987), Class Analysis and Social Research, Basil Blackwell. CMIE (1989), Basic Statistics, lndill, Vol. 1, Centre for Monitoring Indian Economy, Bombay.

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CSO (1980), Nlditmtd Aa:ounls Stlltistia: 5oanm lllltl Mtthoda, Central Statistical Organisation. Government of India, New Delhi. Datt, Ruddar (ed.) (1997), Orgtmising the U"""BrmiMI Wmb,s, Vtkas Publishing House for the Indian Society of Labour Economics, New Delhi. Foner, Philip S. (1974), Orpnisal Labour lllltl the BIid Worktr (1619-1973), InteinationaJ. New York. -(1982), Women""" Ammam Labour Momtlfflt, Freepn11, New York. Friedmann, Milton and Role Friedmann (1981), Fl"f!lt to Otoole, AVM, New York. Huitzer G. (1977), "Rural 1?aining Camps of NU", NU Bllllmn, VoL 3, No. 4. Ino,ny, VoL 6, No. 3 (Summer). Marx, Karl (1973), Ctq,iltll, VoL 1, Progress Publilhers, MOlscow. NU Report (2000), Report on Orpnising the Runl Labour, V.V. Giri National Labour Institute, NOIDA (m.imeo). Nambiar, A.C.IrtiJiM" Aalodation of India 55 follow-up surveys 55, 56, 57, 59, 60, 62, 64, 67, 68, 72, 73, 74 Poner. P.S. 421 fordism 161 forward and backward linkages 161 Frontline 321 G

Galab, S. 21

Ghosh. J. 27, 301, 331 Goetz, A.N. 390 Gothoslcar, S. 328, 330 Government Finance Statistics 49 Government of India 141, 163, 169 Government of Kamatalca 231, 236 government sector 360 Gronau, R. 359 growth dynamics 93 growth profile 97, 103, 104. 108 ofOAME 103 Gulati, M. 172, 174, 175, Gulati, L. 352 Gupta38

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handicrafts 277,283,284,286

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Eapen, M. 351 Economic Census 12, 14, 15, 55, 56, 59, 60, 62,64,65,67,68,72,73,86,87,88,90 economic crisis 335, 336 economic reforms 334, 335, 344, 345, 348 efficiency wages 166 EMI 10, 12, 15,33,36,38,39,40,41,71,89 Employees Assistance Centres 319 employment, insecurity of 337 employment, urban 367 Employment Assurance Scheme 373 Employment Exchanges 33, 39,351 Compulsory Notification of Vacancies Act71,90 ~mployment in informal manufacturing industries 94 informal sector 49, 65, 67, 68 infonnalisation of 142, 145, 150, 155 non-agricultural sector 43 organised sector 36, 38, 39, 40, 42, 89 own account enterprises 86, 88

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handlooms 229,233,236,238,239

Harris, N. 142 hazardous industries 308 head-load workers 422, 423 Heeks, R. 243, 295 hidden economy 53 Hindu rate of growth 142 Hirway,1. 147,158,324,325,386 Home Workers Convention 309 home-based production 215 subcontracting 308 work 309,332,339,340,343,344 workers 17, 124, 126, 134, 138, 139, 140, 141, 168 Homework Convention (No. 177) 126 Hoon, C.S. 246 household surveys 65, 67, 81 Huitzer 424 Hulme, D. 389,390 Human Rights 405,410 Original from

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1-Jouein, A. 229 HUIIIIINUUlS, H. 48 I IAMR 44,45,376,381 ICAR 368 ICLS 49,80 ICSE 51 IIT 368 ILO 37,54,58,124,125,126,139,141,365, 366,370,372

Convention on Minimum Wages (No. 26) 126 Recommendation 135 125 IMF 49 Indian Statistical System 32 industrial employment 240 industrial sector 12, 18, 19, 20 Industries Commissionerate 149 informal chit-funds, 64 informal sector and poverty 15 employment 36, 39, 40, 42, 151, 156 enterprises 65 labour market 276,414,419,425 information base on 31, 32, 36, 46 information technology services 241 infrastructural investment 86 intergenerational mobility 339 International Classification of Status in employment 51 International Conference of Labour Statisticians 49, 50 internet 295, 296 intra-labour markets 280 IT-enabled services 293,295,296,297

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Jain, L.C. 37, 229 Jayadevan, C.M. 312 Jhabvala, R. 141, 144, 150, 159 job market 233,344 John, J. 127, 128 Jose, A.V. 351

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