[Urbanstudy] India's Informal sector: The vilified-glorified 'other' side of the Formal

Vinay Baindur yanivbin at gmail.com
Thu Jun 15 02:26:47 CDT 2017


India's Informal sector: The vilified-glorified 'other' side of the Formal

The formal and the informal sectors are not binary. They often co-exist and
feed into one-another; the drive towards formalisation might paradoxically
end up increasing the space of the informal

PUBLISHED: Jun 15, 2017




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[image: mg_97095_weaver_280x210.jpg]
*Image: Shutterstock*

In India, it is difficult to get past the Informal sector. In the grand
narrative of its growth story, of the 6.4 million new employment
opportunities recorded during 2000 - 2010, about 76 percent were in the
informal sector. Of the 24 percent newly employed in the formal sector, 81
percent were informally employed. It transgresses all the archetypical
dichotomies: Urban-Rural, Organised-Unorganised, Modern-Traditional,
IT-Agriculture, English-Vernacular and of course India-Bharat. A category
defined by the Fifteenth International Conference of Labour Statisticians,
it has been used by the National Commision for Enterprises in the
Unorganised Sector (NCEUS), as “all unincorporated private enterprises
owned by individuals and households engaged in the sale and production of
goods and services operated on a proprietary or partnership basis and with
less than 10 total workers.” It is better understood as the petty shops,
peddlers, home-run establishments, hawkers, domestic workers that dot our
urban cityscape and most of the farm and non-farm activity in our villages,
in contrast to the formal - picturised by the BSE and NSE tickers, Business
Schools, IT boom or even the Bureaucracy.

This informal sector growth plays out in two diametrically opposite tropes
vis-a-vis the formal. It is seen as the un-taxed, un-legislated,
un-regulated, un-banked “rogue” of the formal that needs to be curbed or
even choked. The recent demonetisation drive, the tax reforms aiming at
creating tax-trails (GST being a prime example), the drive towards
digitisation and bankification (Aadhar and Jan-dhan) vilify the informal.
It is the sector seen responsible for cash-driven transactions, even
illegal transactions, for keeping majority of India’s population as the
working poor. The formal sector being the norm, all informal should thereby
move towards the formal. At best, the informal is a mere “parking space”
for migrant labour, which should eventually find itself in the formal.

On the other hand, there is also a strange fascination for the phenomenal
growth registered in the informal sector that is somehow escaping the
formal. The reason is often attributed to the shackles of labour
legislations that fetter the formal. The informal being free of them, is
seen to be able to expand in situations where the formal sector is mired in
complex labour laws. Thus, the clarion call to push for labour reforms in
the formal sector if the problem of jobless growth in this sector is to be
tackled. This is glorification of the informal - where the formal should be
made as dynamic, resilient and supple as the informal.

It is not very difficult to see how this entire debate is over-simplified
because there is rarely an attempt to see the informal sector from its own
perspective. It is always analysed from the perch of the formal, in
‘negation’ of it or an ‘other’ to it. The reasons are fairly obvious.
Partly, it is not easy. The informal sector is very heterogenous,
disparately spread-out, with very few data-sources. Unlike the formal
sector, where data can be collected from workplaces and labour bureaus, the
household still remains the unit of data collection for the informal

Scholarship in this sector can only come from painstaking field studies and
ethnographic accounts, from researchers willing to spend the time and
resources outside of their Academies and Universities in conditions far
from salubrious. However, for those willing to do so, the gains are ample.
Unlike the formal sector in today’s world, where globalisation implies that
there is very little to choose from - the McDonald’s in Turkey providing
the same menu as that in Indonesia, with some minor changes; the informal
still retains the idiosyncrasies and peculiarities of the local social,
cultural and political economy. Moreover, being deeply embedded in the
local, it provides a unique window to understanding all the attendant
economic and social complexities. For example, we have been spending time
the past few years understanding the silk reeling (filature) units around
Ramanagaram, the silk-capital of the country. Not only has this enhanced
our understanding about informal businesses, but also problems of poverty,
debt, migration, urbanisation, agricultural distress and several issues
that plague India’s industrial trajectory.

We realise that the informal sector, far from being “un-legislated” is very
heavily regulated by social structures - caste, class, gender, religion all
have a key role to play in how economic activity gets organised here. It is
therefore essential to go beyond the “economy” into the social structures
that are at the basis of production, consumption and distribution in this
sector. Public policies towards with gender, child-labour, credit, use of
technology, financial access - all play out very differently from the

The formal and the informal are also not binary. They often co-exist and
feed into one-another; the drive towards formalisation might paradoxically
end up increasing the space of the informal. Four types of silk-reeling
technologies co-exist in Ramanagaram, spanning from the hand-spun (raate)
of the 18th century to the Automated Reeling Machines (ARMs) of the 21st.
Despite the push towards ARMs by the State, the shift from one to the other
is not uni-directional. The politics surrounding seri-culture and silk -
this region sent a Prime Minister to the country some decades back - also
becomes crucial. Unequal access to political networks and its influence
plays out starkly.

We also have to face strange conundrums. Max Weber, one of the astute
observers of modern industrial societies has written that this march
towards formalisation (rationalisation) was spearheaded by separation of
home from work-place and book-keeping, among other things. When we talk to
our reelers, it is often at their homes - since there is no separation of
work-place and domestic space. Despite our insistence that water is OK,
they insist on welcoming us warmly with Pepsi or Mangola. One thought that
crosses our mind is whether they realise the expense on these soft-drinks
is a legitimate expense that can be deducted as a business expense from
their Profit and Loss Account. We have never broached this with them.
Despite what Weber says, that would be irrational.

*- Rajalaxmi Kamath is an Associate Professor at the Centre for Public
Policy, IIM Bangalore. This piece is based on her work with Nithya Joseph
at Ramanagaram. Views expressed are personal.*
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