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Published: Mon, 5 Dec 2016
Dharavi has become a centre of attraction after the success of Slumdog Millionaire. There are groups of tourists thronging the slums to enjoy the so-called Slum Tourism. But what is interesting to note is that behind these closed doors lie some of the most aspiring minds pursuing small scale businesses. In other words, it represents “enterprise” personified which is neither regulated nor restricted by the State or Law.
The estimates of the total turnover generated out of Dharavi are all guesses as there is no official record to confirm this figure. As most of the production is illegal and quoting such figures could actually interest the tax authorities, no figures really tell the truth. A rough back-of-the-envelope calculation by Dharavi residents added up to between Rs 1,500 crore and Rs 2,000 crore per year. This accounts for Rs. 11 crores per hectare per year.
A 1986 survey of Dharavi by the National Slum Dwellers’ Federation (NSDF) confirmed what one can see as one wanders through Dharavi’s lanes. At that time, there were 1,044 manufacturing units of all kinds, big and small. A later survey by the Society for Human and Environmental Development (SHED) noted 1,700 units. The actual number is likely to be larger as many smaller units, which work out of homes and lofts, would have fallen outside the scope of the surveys.
Defining Informal Sector
As per SNA (1993), the informal sector consists of units engaged in the production of goods or services with the primary objective of generating employment and income to the persons concerned. These units operate at low level of organization, with little division between labor and capital as factors of production on a small scale. Labour relations are based on casual employment, kinship or personal and social relations rather than contractual arrangements with formal guarantees. The informal sector forms part of the household sector as household enterprises or, equivalently, unincorporated enterprises owned by households.
This sector is broadly characterized as consisting of units engaged in the production of goods and services, with the primary objectives of generating employment and incomes to the employees’ concerned. These units typically operate at low level of organization, with little or no division between labor and capital as factors of production and on a small scale. Labor relations are mostly on casual employment, kinship or personal or social relations rather than contractual arrangements with formal guarantees. The production units in this sector are not constituted as separate legal entities independently of the household or house hold members that own them and for which no complete sets of accounts are available which would permit a clear distinction of the production activities of the enterprises from the other activities of their owners. The owners of their production units have to raise the finance at their own risk and are personally liable, without limit, for any debts or obligations incurred in the production process. Expenditure for production is often merged as household expenditure. For statistical purpose, the informal sector is regarded as a group of production units, which form part of the household sector as household enterprises or equivalently, unincorporated enterprises owned by households.
In India, the term informal sector has neither been used in the official statistics nor in the National Accounts Statistics (NAS). The terms used in the Indian NAS are ‘organized’ and ‘unorganized’ sectors. The organized sector comprises enterprises for which the statistics are available from the budget documents or reports etc. On the other hand the unorganized sector refers to those enterprises whose activities or collection of data is not regulated under any legal provision or do not maintain any regular accounts. In the unorganized sector, in addition to the unincorporated proprieties or partnership enterprises or partnership enterprises, enterprises run by cooperative societies, trust, private and limited companies are also covered.
The informal sector can therefore, be considered as a sub-set of the unorganized sector.
Employees are considered in informal employment when their employment relationship, in law or practice, is not subject to
- National labor legislation
- Income taxation
- Social protection or
- Entitlement of employment benefits like paid annual leave, sick leave, etc.
The National Sample Survey Organisation (NSSO) sample survey in 1999-2000 showed that out of total workforce of 397 million, only 28 million workers are employed in the organized sector and remaining in the unorganized sector. It reveals that over a decade, the employment in the organized sector has been stagnant or has slightly declined.
In the light of definition of informal sector encompassing private unincorporated enterprises as mentioned above, NSS 55th round, 1999-2000 also covered non-agricultural enterprises in the informal sector in India. As per the survey, there were 44.35 million enterprises and 79.71 million workers employed in the non-agricultural informal sector of the economy. Of these 25.01 million enterprises employed 39.74 million workers in rural areas whereas 19.34 million enterprises with 39.97 million workers in the urban area. Among the workers engaged in the informal sector, 70.21 million are full time and 9.5 million are part time. The percentage of female workers to the total workers is 20.2 percent.
As the above figures indicate, a large proportion of the employed population derive their livelihood from this sector. The implementation of legislation and regulatory instruments may disturb the existing balance leading to market imperfections in such a market led economy. With such challenging and staggering number of enterprises in the informal sector it might become impossible for the Government to support the huge infrastructural and institutional arrangements including its financial implications. It is imperative for the Government to provide support to this sector and the 92% of the total labor it employs so that the labor is provided with safe and conducive environment to realize their full capabilities which would in turn improve their socio – economic status in the society. Indian Ministry of Labour set up from time to time Welfare Funds for five specific categories of unorganized workers. These workers include Building Workers, Beedi workers, Cine workers and certain categories of non-coal mine workers.
Contributions to the National Domestic Product (NDP)
The Sub – Committee constituted by the National Commission for Enterprises in the Unorganized Sector (NCEUS) is working on a white paper to accurately estimate the contribution of the Informal sector to the GDP. The methodology adopted by NCEUS is as per the suggestions given by Organization for Economic Cooperation and Development (OECD), the estimation procedures followed by Central Statistical Organization (CSO) and a paper presented by Shri Ramesh Kolli and Shri Suvendu Hazra in the Eighth meeting of the Delhi Group on Informal sector held in February, 2005. The contribution of the informal sector is summarized in the table below, as per the NCEUS report:
The Informal sector represents a major chunk of the NDP as shown above. It is in best interest to our nation to support this sector which would be instrumental in the social well being and upliftment of 92% of our labor force.
- “Informal Sector in India Approaches for Social Security”.
- “Beyond Slumdog Millionaire: India’s Biggest Slum”, News Article: Business Week, February 20, 2009.
- Informal Sector and Informal Workers in India by Ajaya Kumar Naik, Jawaharlal Nehru University, New Delhi, Paper Prepared for the Special IARIW-SAIM Conference on “Measuring the Informal Economy in Developing Countries”.
- Trade liberalization, production organization and informal sector of the developing countries by Dibyendu Maitia and Sugata Marjitb.
- Delhi Group on Informal Sector Statistics Report (12 December 2007, Economic and Social Council, United Nations.
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