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Hidden reality

Print edition : Oct 19, 2007 T+T-

An NCEUS report exposes some of the shameful aspects of the Indian situation hidden by the excitement over the economys growth performance.

ECONOMICS is admittedly the most quantitative among the social sciences, and the ability to interpret numbers and draw inferences from them is a highly commended skill among its practitioners. Of the numbers that economists deal with, the growth rate, which indicates the overall performance of the economy, is the most widely known even among those who are not specialists. During the past decade or so, the Indian growth rate has received a great deal of attention and even c elebration.

Numbers, of course, speak; but they also hide. The choice of numbers and the way they are used, then, are matters of perspectives and priorities. The report of the National Commission for Enterprises in the Unorganised Sector discussed here brings to light some of the significant and shameful aspects of the Indian reality hidden by the excitement over the economys recent growth performance.

The report recognises Indias growth achievements of the recent past, which have brought the country among the fastest-growing ones in the world, and the perceptible improvements in the savings and investment rates that can sustain that growth. It goes on to say: Such a buoyancy in the economy did lead to a sense of euphoria by the turn of the last century. However, a majority of the people who did not have even Rs.20 a day for consumption were not touched by this euphoria. At the end of 2004-2005, about 836 million or 77 per cent of the population, were living below Rs.20 per day. Mass penury hidden by euphoric growth that is the reality of India.

The task assigned to the National Commission, however, was not to profile penury or poverty in the country as such but to study the conditions of work of those in what is commonly referred to as the unorganised sector.

Much of the statistical material contained in the report is drawn from the 61st Round (2004-05) of the National Sample Survey, which estimated the countrys workforce early in 2005 to be 458 million (out of a total population of close to 1.1 billion). Of this total workforce, as high as 92 per cent is considered to be made up by informal workers defined as those who do not have employment security, work security or social security. A further binary classification of workers is as the organised and unorganised sectors. The unorganised sector consists of all unincorporated private enterprises owned by individuals or households engaged in the sale and production of goods and services operated on a proprietary or partnership basis and with less than ten total workers. All those who are engaged in agricultural activities other than in plantations and in corporate and cooperative farming; the bulk of small retail traders (including the many forms of street vendors); those who work in much of the household, cottage and village industrial units; and the vast array of those engaged in personal services these are the main constituents of the unorganised sector. All of them can be classified as informal workers also.

Even among those employed in the organised sector (consisting of those in governmental agencies at all levels, and in public and private sector enterprises that are legal bodies) some have to be treated as informal workers. These are people who do not enjoy employment security, work security and/or social security though they work in the organised sector. Since these informal workers in the organised sector have most of the characteristics of the workers in the unorganised sector, the treatment of the latter will, for all practical purposes, cover the former also. However, the distinction assumes significance because in recent years, the entire increase of employment in the organised sector has been informal in nature, that is, without any job or social security, implying the growing informalisation of the organised sector. The following discussion concentrates on the unorganised sector which accounts for the bulk of the countrys workforce.

The unorganised sector is a heterogeneous collection. The variety of activities within the sector has already been noted. Further, within agriculture, the workers consist of farmers who cultivate land on their own with the help of family members and, in many instances, with hired labour as well. There are also the agricultural labourers who work on someone elses land for wages. This distinction holds in other activities as well, with the two categories noted as self-employed and labourers respectively. The self-employed constitute the larger segment, 64 per cent of those in the unorganised sector. They are also a miscellaneous category that includes well-to-do farmers who employ many agricultural labourers; independent professionals such as doctors and lawyers; large numbers in the household industries; traders, vendors and many more. The self-employed show wide variation in earnings, but by and large they are people who work long hours of day and night to eke out a living. They may be considered own-account workers, but many of them, within the household industrial segment particularly, are involved in the putting out system, receiving their raw materials from traders or bigger manufacturers, to whom they are also bound to sell what they produce. One does not have to enquire specifically who will be setting the terms in these transactions. Through such arrangements the unorganised sector gets closely linked to the organised sector, but retaining most of its special characteristics. The beedi industry provides a clear example of this arrangement.

With reference to the beedi industry (and ones similar to it) it can also be seen that those described as self-employed usually include a special category that can be designated as homeworkers. The homeworkers constitute about 7.4 per cent of the unorganised non-agricultural workers, of whom close to 60 per cent are women.

Wage workers in the unorganised sector are persons employed for remuneration directly by their employers or through contractors. Agricultural labourers are the largest in this category, construction workers constituting one of the largest segments outside agriculture. In both these categories women constitute a high proportion.

Undefined or ill-defined working conditions, unreliable and absurdly low earnings and the almost total absence of social security are the chief characteristics of workers in the unorganised sector. The report brings out these aspects by a six-fold classification of monthly consumption expenditure using the official poverty line as reference. The official poverty level in 2004-05 was a consumption expenditure of Rs.8.9 a day per capita. Those with an expenditure of up to three-fourths of this figure are considered Extremely Poor. Those between the Extremely Poor and the official poverty figure are treated as Poor. Those with a consumer expenditure of 1.25 times the poverty figure are designated as Marginally Poor. The fourth group classified as Vulnerable have per capita consumer expenditure of twice the official poverty line.

If those who have consumer expenditure of between twice and four times the poverty line figure are considered Middle Income and the rest (that is, those with more than four times the poverty line) are treated as High Income, the six-fold classification is completed.

Using this classification as the basis, the report provides a profile of the economic condition of the workers with informal work status along with that of the total population for comparison. The information is given in the table. A shocking revelation that the table makes is that in our shining country almost 77 per cent of the total population (as already noted) and 79 per cent of the workers in the unorganised sector come in the category Poor & Vulnerable, which means they have a consumer expenditure of less than Rs.20 a day per capita at todays prices. The close correspondence between workers and the general population at the lower levels (clearly up to row 3) is explained by the fact that at these levels consumer expenditure is determined substantially by earnings, and earnings by work, hard work indeed. That such may not be the case at higher levels can be seen from row 6, which also implies that the inequalities revealed with reference to consumer expenditure may be more glaring in terms of income and assets which together is a more adequate representation of economic conditions.

The report also highlights some of the close correlates of the depressing conditions of living of workers in the unorganised sector. Asset distribution is, in fact, one of them. This is best illustrated with reference to the agricultural segment. Those classified as agricultural labourers are totally landless or have only tiny plots of land, and their economic condition is most pitiable. Among those who cultivate land, too, the availability of land makes a significant difference to living conditions, and the distribution of land is highly skewed.

A second factor affecting the capacity to earn a living is education. In general, the Extremely Poor also have the lowest level of education; most often they are illiterates: 8.1 per cent of illiterates are Extremely Poor and 19.0 per cent are Poor.

Thirdly, social conditions are also closely related to living conditions. The Scheduled Tribes and Scheduled Classes, Other Backward Classes and Muslims, in general, tend to constitute high proportions in the lowest rungs of the ladder and of the Poor and the Vulnerable in the aggregate.

Putting these together, it may be noted that workers in the unorganised sector are a disadvantaged group because they belong to the socially depressed communities; they are illiterates or are of very low educational standards; and they have very little by way of physical assets. It is the cumulative effect of these three that leave the members of the unorganised sector the vast majority of those who labour in the clutches of continuing penury.

The report makes a slew of recommendations to improve the conditions of work and for the promotion of livelihood of these workers. These cannot be easily summarised. I would suggest that the report be made mandatory reading for all who are in any way involved with the formulation of economic policies in the country, and would strongly recommend it to those concerned with the conditions of living of the people. A general comment is in order, too. Under our socio-economic conditions, it is a mere illusion to presume that growth in the abstract will benefit all sections of society, even a very high rate of growth. Growth, of course, is a necessary condition. But, if we are serious in the resolve to improve the living conditions of the vast majority of people in our land, conditions for them to earn a living must be provided and sustained. Unfortunately, there is no magic formula for it. But it is possible to design economic policies to achieve that end. Markets can play a major role in that process precisely because of the heavy market dependence of the bulk of the people as buyers and sellers. But the markets will have to be used, not let loose.

The words of Adam Smith, the patron saint of market believers, are worth recalling. He said: No society can surely be flourishing and happy of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, clothe, and lodge the whole body of people should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed and lodged. (The Wealth of Nations, Book I, Chapter viii, Of the Wages of Labour.)