Skip to main content

What policy makers need to do to make the informal sector vibrant


Ranjula Bali Swain, Arup Mitra*
Many components within the informal sector share close linkages with the formal sector. In such a situation if the formal sector is growing rapidly it is natural that the informal sector would benefit from the percolation effects. However, in reality the informal sector is characterized in terms of low productivity and meagre earnings, explaining considerable overlaps with poverty and slum-dwelling in cities.
Agglomeration economies work and they contribute to productivity growth as a result of which the real wages in the cities tend to be higher compared to the rural areas. Yet, urban poverty exists which warrant an explanation. Some of the reasons of course can be envisaged in terms of a high degree of heterogeneity this sector possesses. There are residual activities with almost no entry barriers and they often involve excess supplies of labour relative to demand. Similarly, there are self-employed households both in manufacturing and services, operating with inadequate resources, low level of technology, poor market information and with almost no product or process innovation. Envisaging upward mobility in such segments is rather difficult.
Information asymmetry pertaining to the urban labour market is also a cause of poverty among many. The informal networks through which the urban job market information is accessed, are often seen as the cause of mismatches between labour demand and supply. Labour market segmentation and the lack of upward mobility occur because of the perusal of similar networks or the absence of network diversification.
Why the components which share a close tie with the formal sector firms still lack progress? The business outsourcing activities are carried out through intermediaries who deny a variety of benefits to the informal sector workers. With a contract to supply to the formal sector firms one would expect the informal sector enterprises to have the income security. Though in reality the fluctuations in consignments have not been substantial, prospects for improved wages have been ruled out by the intermediaries. Neither in terms of employment nor productivity and wages the units with a linkage with the formal sector are better-off in comparison to those who function independently. Similarly, the labour contractors who facilitate the informal employment in the formal sector stand out as the sole culprits.
After the recent pandemic and the lockdown hit the urban sector drastically the informal sector workers obviously suffered the most. Now, in the context of reviving the economy the urban informal sector must receive a great deal of planning and intervention. Given the heterogeneity, the recommendation of a uniform set of policy does not appear meaningful. However, a couple of strategies sound logical. The role of the intermediaries will have to be regulated; else, in the name of flexibility the informal sector workers will remain deprived of the minimum benefits.
There are irregularities and harassments regarding space on which the informal sector functions. Reservation of space will have to be provisioned as a public good and the rent seeking behaviour of the local government employees will have to be controlled. Product innovation and process innovation will have to be encouraged with greater disbursement of loans and dissemination of information about the market. Workers who experienced time independent mobility in the past unfold their success in generating savings and converting them into investible resources. Such willingness to pursue productive investment will have to be nurtured significantly for better outcomes to emerge.

*Professor Ranjula Bali Swain is Research Director, Center for Sustainable Research (CSR), Stockholm School of Economics & Professor of Economics, Södertörn University, Sweden; Arup Mitra is Professor, Institute of Economic Growth, Delhi

Comments

TRENDING

देशव्यापी ग्रामीण भारत बंध में उतरे मध्य प्रदेश के आदिवासी, किया केंद्र सरकार का विरोध

- हरसिंग जमरे, भिखला सोलंकी, रतन अलावे*  15 और 16 फरवरी को निमाड के बड़वानी, खरगोन और बुरहानपुर में जागृत आदिवासी दलित संगठन के नेतृत्व में आदिवासी महिला-पुरुषों ग्रामीण भारत बंद में रैली एवं विरोध प्रदर्शन किया । प्रधान मंत्री द्वारा 2014 में फसलों की लागत का डेढ़ गुना भाव देने का वादा किया गया था, 2016 में किसानों की आय दुगना करने का वादा किया गया था । आज, फसलों का दाम नहीं बढ़ रहा है, लेकिन खेती में खर्च बढ़ता जा रहा है! खाद, बीज और दवाइयों का दाम, तीन-चार गुना बढ़ चुका है! किसानों को लागत का डेढ़ गुना भाव देने के बजाए, खेती को कंपनियों के हवाले करने के लिए 3 काले कृषि कानून लाए गए । 3 काले कानून वापस लेते समय प्रधान मंत्री ने फिर वादा किया था कि फसलों की लागत का डेढ़ गुना भाव की कानूनी गारंटी के लिए कानून बनाएँगे, लेकिन वो भी झूठ निकला! आज जब देश के किसान दिल्ली में आपको अपना वादा याद दिलाने आए है, तब आप उनका रास्ता रोक रहें है, उनके साथ मारपीट कर उन पर आँसू गैस फेंक रहें हैं, उन पर छर्रों से फायरिंग कर रहें है! देश को खिलाने वाला किसान खुद भूखा रहे, क्या यही विकास है?

Only 15% businesses provide employees real-time sustainability dashboards: Study

Kyndryl in collaboration with Microsoft has released the findings of The Global Sustainability Barometer study. The study, conducted by Ecosystm, finds that while 85% of organizations place a high strategic level of importance on achieving their sustainability goals, only 16% have integrated sustainability into their strategies and data. A Kyndryl note: *** Kyndryl (NYSE: KD), the world’s largest IT infrastructure services provider, in collaboration with Microsoft , today released the findings of The Global Sustainability Barometer study. The study, conducted by Ecosystm , finds that while 85% of organizations place a high strategic level of importance on achieving their sustainability goals, only 16% have integrated sustainability into their strategies and data.

Tamil Nadu brahmins are at cross roads, their future scenario remains uncertain

By NS Venkataraman*  For over 70 years now, brahmin community in Tamil Nadu have been abused, insulted and even physically attacked on some occasions by those who claimed that they were part of the so called dravidian movement. However, brahmin community silently and helplessly ducked under pressure and showed no signs of resistance or fight back.

How the slogan Jai Bhim gained momentum as movement of popularity and revolution

By Dr Kapilendra Das*  India is an incomprehensible plural country loaded with diversities of religions, castes, cultures, languages, dialects, tribes, societies, costumes, etc. The Indians have good manners/etiquette (decent social conduct, gesture, courtesy, politeness) that build healthy relationships and take them ahead to life. In many parts of India, in many situations, and on formal occasions, it is common for people of India to express and exchange respect, greetings, and salutation for which we people usually use words and phrases like- Namaskar, Namaste, Pranam, Ram Ram, Jai Ram ji, Jai Sriram, Good morning, shubha sakal, Radhe Radhe, Jai Bajarangabali, Jai Gopal, Jai Jai, Supravat, Good night, Shuvaratri, Jai Bhole, Salaam walekam, Walekam salaam, Radhaswami, Namo Buddhaya, Jai Bhim, Hello, and so on.

Violent incidents in Haldwani: CPDRS on dubious role of Uttarakhand government

By DN Rath  Center for Democratic Rights and Secularism (CPDRS) unequivocally condemns the dubious role of Uttarakhand Government and its administration in the incidents that happened in Haldwani of Nanital district of the state.

नफरती बातें: मुसलमानों में असुरक्षा का भाव बढ़ रहा है, वे अपने मोहल्लों में सिमट रहे हैं

- राम पुनियानी*  भारत पर पिछले 10 सालों से हिन्दू राष्ट्रवादी भारतीय जनता पार्टी (भाजपा) राज कर रही है. भाजपा आरएसएस परिवार की सदस्य है और आरएसएस का लक्ष्य है हिन्दू राष्ट्र का निर्माण. आरएसएस से जुड़ी सैंकड़ों संस्थाएँ हैं. उसके लाखों, बल्कि शायद, करोड़ों स्वयंसेवक हैं. इसके अलावा कई हजार वरिष्ठ कार्यकर्ता हैं जिन्हें प्रचारक कहा जाता है. भाजपा के सत्ता में आने के बाद से आरएसएस दुगनी गति से हिन्दू राष्ट्र के निर्माण के अपने एजेण्डे को पूरा करने में जुट गया है. यदि भाजपा को चुनावों में लगातार सफलता हासिल हो रही है तो उसका कारण है देश में साम्प्रदायिकता और साम्प्रदायिक मुद्दों का बढ़ता बोलबाला. इनमें से कुछ हैं राम मंदिर, गौमांस और गोवध एवं लव जिहाद. 

Birth of New Communist Party ushers in new epoch in Canada's Left history

By Harsh Thakor  On January 31, 2024, history was made with the formation of the (New) Communist Party of Canada (the (N)CPC), the successful completion of its Founding Congress, and the public release of its Political Program. A most sporadic development in turning course of Communist movement locally, and worldwide. It also pits a challenge to dogmatism or mechanical approach and stagnation. taps the revolutionary creativity of the masses and is major re-orientation towards shaping revolutionary class struggles and  the massline.

Ethiopian ruling classes, political masters in West have their hands soaked in blood

By Harsh Thakor  Over two hundred were killed in recent weeks in Ethiopia’s Oromia and Amhara region. After peace-talks between the Oromo Liberation Army and the Ethiopian government did not materialise tensions are escalating in the Oromia region. Earlier, on November 22, least 25 civilians were massacred in a government aerial drone strike, in Chawaka districts of the Buno Bedelle zone. This incident took place only two days after a fierce battle arose between the OLA and governmental troops in the Sulula Fincha district of the Horro Guduru Wollega zone.

Landlords' armed bandits launched merciless attack in Brazil but face resistance

By Harsh Thakor  Armed bandits called the “zero invasion movement” comprising of landowners, gunmen and police marched into   Bahia with support from the PM [Military Police]. On January 21st, indigenous Maria de Fátima Muniz, known as Nega Pataxó, shaman of the Pataxó Hã-Hã-Hãe people, was shot dead in the Caramuru Catarina Paraguassu Indigenous Land and chief Nailton Muniz was seriously injured by gunshots, as were others indigenous people during an attack by the notorious  paramilitary group.

Landslide early warning system: Odisha Govt, Amrita Vishwa Vidyapeetham collaborate

By Divya Saini  In a strategic move to mitigate the impact of landslides during storms, the Odisha government in collaboration with Amrita Vishwa Vidyapeetham is gearing up to establish a user-friendly Landslide Early Warning System (EWS) in Gajapati district. This initiative aims to provide advanced information, especially regarding landslides caused by disturbances in the natural stability of a slope.