Informal workers make up 90% of India’s Workforce

By: Abheek Barman – originally written for Economic Times

 

In a room of a jhuggi colony in Delhi, women sit around, painstakingly snipping extra threads off newly-minted denims, made by a large multinational. The company making these jeans has outsourced the cleaning up work to contractors, who, in turn, have farmed out the job to these women. The women do not earn a fixed salary. Instead, they are paid a few rupees for every piece of garment that they clean up.

 

If they, or their kids, fall ill and they take the day off, they earn nothing. They get no medical benefits, insurance, pension or Diwali bonus. They are India’s informal sector: a vast workforce that powers the economy, but flies under the radar of each and every political party. The courier who rings your doorbell with the books you ordered online is an informal sector worker, likely hired on a contract and liable to be fired at a moment’s notice.

 

Construction workers, among the most hazardous jobs anywhere in the world, fall in this category, as do private security guards, household help, drivers of cabs, dabbawalas, presswalas, shoe shines and the chhotuswho scurry around teashops serving tea and cleaning up the bartans.

 

The informal worker is so ubiquitous that we’ve stopped noticing her. Just how large is India’s informal economy? This year, Neelkanth Mishra, chief strategist at brokerage Credit Suisse (CS), and his team tried to answer this question.

 

Their report, published in July, offers a stunning conclusion: half of India’s $1.85-trillion economy is informal. With 55%, only sub-Saharan Africa has a larger unorganised economy than India’s.

 

And it is possible that much of sub-Saharan Africa doesn’t have much of an organised sector anyway. The average of most transition economies, or emerging markets, is a little over 20%. This below-radar economy is mostly urban: concentrated in the big cities, but widespread in smaller towns and mohallas as well. CS reckons that as much as 84% of the non-farm workforce in India is informal.

 

No Sweat over Sweatshops

Once you think about it, this seems obvious. Formal workers work for companies or governments, the vast majority of Indians don’t. India’s businesses, like the sweatshop cutting loose threads from jeans, are also largely informal.

 

According to the CS study, only 13% of industrial companies and 12% of materials businesses are listed. That’s a quarter of all enterprises. So, 75% of all businesses in India fall in the unlisted and informal category. Mishra and his team also say that over time, Indian companies have started hiring fewer and fewer formal workers, even though the number of companies has been shooting up. Based on the periodic Economic Censuses of the government, they show that in 1980, India had 19 million enterprises, with each employing around three people.

 

By 2005, the number of companies had increased to more than 40 million, but by now, each employed only 2.4 people. So, informal workers perform the additional new tasks on hand. Given all this, Mishra and his team believe that India’s GDP is badly underestimated, perhaps by as much as 15%. Hence, they believe that there are big investment opportunities in companies with exposure to the informal economy.

 

There are large political possibilities to be tapped here as well. Workplace safety is unheard of: for example, women working in brick kilns have unusually high levels of urinary tract infections, possibly the result of working long hours in intense heat, with little downtime and scarce drinking water. There are no welfare measures, or holidays. Informal workers have no bargaining power with their employers.

 

Onsite accidents or deaths go largely unreported, with meagre compensations paid out to family. Even in organised manufacturing, workers get only a few minutes off per shift to go to toilets or eat.

 

Always in Sight, Out of Mind

All this can change for the better with sustained political campaigns. But parties have to first take note of the vast informal sector as a vote bank within their reach. Narendra Modi campaigns only in cities and towns. With his burqas and skullcaps, his is a broad-brush communal rant. Rahul Gandhi campaigns only in villages. He speaks in terms of broad-brush welfarism.

 

No Account in Vote Bank

Mayawati speaks to her Dalit and downtrodden brethren. The DMK and AIDMK talk of Tamil pride. Akhilesh Yadav broke with his father’s socialism, spoke of laptops and bicycles, and has turned out a dud. Mamata Banerjee rouses her Trinamool hordes to frenzy with talk of Ma, Mati, Manush. Nitish Kumar says he deserves special treatment from the Centre. Naveen Patnaik does not speak.

 

Nobody has bothered to address something right under their noses: the largely urban, informal economy and its denizens. So, where does that leave nearly 90% of the Indian workforce that produces half its economy? It leaves them leaderless and abandoned. It’s as if informal equals invisible. Yet, they will also vote on polling day. It’s time our leaders noticed them.

 

While the campaigning for elections continue, the National Skills Development Corporation and [email protected] have launched the third edition of the Power to Empower 2013 Challenge.  

 

P2E 2013 has been designed to identify and reward the best solutions – ideas as well as operations – providing access to training, jobs and new skills to improve lives of such informat sector workers. This year, the winners of P2E2013 receive cash rewards of up to 3.5 lakh, capacity building support and national visibility for the winners. Read more about the challenge here

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