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Chapter – 1

INTRODUCTION AND REVIEW OF LITERATURE

A major part of the workforce in India and other developing countries work in

informal sector. Informal sector has become an increasingly popular subject of study,

not just in economics, but also in sociology and anthropology. Keith Hart was the first

person to introduce the term ‗Informal Sector‘. In September 1971 soon after this,

International Labour Organisation (ILO) employment mission to Kenya came with its

report ‗Employment Incomes and Equality‘ (ILO, 1972). Hart distinguished formal

and informal (both legitimate and illegitimate) income opportunities on the basis of

whether the activity entailed wage or self-employment (Hart, 1973).Therefore, the

concept of informal sector used by Hart was limited to small self-employed individual

workers. Although Hart‘s concept of informal sector had some limitations, the

introduction of this concept made it possible to incorporate activities that were

previously ignored in theoretical models of development and in national economic

accounts (Swaminathan, 1991).

The term ‗informal sector‘ came in a broader sense in the academic literature

only after the visit of an International Labour Organisation (ILO) employment

mission to Kenya in 1972. The ILO then evolved a conceptual framework and

guidelines for the collection of statistics on informal sector and presented the same in

the Fifteenth International Conference of Labour Statisticians (ICLS) held in

February, 1993 in the form of a resolution. The resolution was then endorsed by the

United Nations Statistical Commission (UNSC) and made a part of the ‗System of

National Account (SNA) 1993‘ by the United Nations Economic and Social Council.

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Though the term ‗informal sector’ gained currency after ILO evolved a

conceptual framework and guidelines for the collection of statistics on informal

sector, there has not been any single definition of informal/unorganised sector in

India. Informal sector remained a matter of discussion among the academicians,

policy makers etc. from the beginning, as a large chunk of workforce is employed in

this sector. Different criteria were being used to identify the informal sector but none

of them was universally applicable in different empirical situations (Papola, 1981). A

study by Mitra (2001) based on Fourth Economic Census of India took the criteria of

own account enterprises and employment establishments employing one to nine

workers to identify the informal sector. The different organisations of India like

National Sample Survey Organisation (NSSO), Directorate General of Employment

and Training (DGET) etc used varying definitions of informal/unorganised sector

depending on the specific requirements of each organisation. Keeping in view the

absence of a uniform definition of informal/unorganised sector in India, the National

Commission for Enterprises in the Unorganised Sector (NCEUS) set-up a Task Force

to review the existing definitions and formulated harmonised definitions of

informal/unorganised sector employment and informal/unorganised employment.

Existing Definitions of Informal Sector

As per System of National Accounts (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 typically

operate at a low level of organisation, with little or no division between labour and

capital as factors of production and on a small scale. Labour relations - where they

3

exist - are based mostly 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.

The First Indian National Commission on Labour (1966-69) defined

‗unorganised sector workforce‘ as –―those workers who have not been able to

organise themselves in pursuit of their common interest due to certain constraints like

casual nature of employment, ignorance and illiteracy, small and scattered size of

establishments‖.

The National Sample Survey Organisation (NSSO), which has been

conducting surveys of unorganised enterprises at periodical intervals, generally

adopted the following criteria for the identification of unorganised sector:

i. In the case of manufacturing industries, the enterprises not covered under the

Annual Survey of Industries (ASI) are taken to constitute the unorganised sector.

ii. In the case of service industries, all enterprises, except those run by the

Government (Central, State and Local Body) and in the corporate sector were

regarded as unorganised.

The NSSO also conducted a separate informal sector survey in 1999-2000 and

all non-agricultural enterprises, excluding those covered under the ASI, with type of

ownership as either proprietary or partnership were treated as informal non-

agricultural enterprises for the purpose of the survey.

In the compilation of National Accounts, the term unorganised sector is used

to represent the residual enterprises, which are not included in the ‗organised sector‘.

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The coverage under ‗organised sector‘, however, differed across different segments of

the economy depending on regular data availability from various administrative

sources. The Directorate General of Employment and Training (DGET) considers all

establishments employing ten workers or more as organised sector, though

Employment Exchange (Compulsory Notification of Vacancies) Act, 1959, makes it

mandatory to submit employment returns only for those units ordinarily employing

twenty five or more persons.

Alternative Concepts and Definitions of Formal and Informal Sector in India

The National Sample Survey Organisation (Government of India, 2001: pp. 3-

4) defines the informal sector in terms of all unincorporated proprietary enterprises

and partnership enterprises.

An enterprise is an undertaking, which is engaged in the production and/or

distribution of some goods and/or services meant for the purpose of sale,

whether fully or partly.

An enterprise may be owned or operated by a single household or by several

households jointly, or by an institutional body. The proprietary enterprises are

those where an individual is the sole owner of the enterprise. Partnership

enterprises are those where partners (from the same household or different

households) agree to share the profits of a business carried on by all or any

one of them acting for all.

Alternatively, an enterprise is distinguished between an own account

enterprise (OAE) and an establishment. An OAE is run by household labour,

usually without any hired worker employed on a fairly regular basis. An

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establishment has less than 10 workers with at least one hired labourer on a

fairly regular basis. An establishment is further distinguished between

directory establishment (DE) and Non-Directory establishment (NDE). A DE

(or NDE) employs more than 5 workers (or less than 6 workers) with at least

one hired labourer.

Official statistics (e.g. National Accounts Statistics) in India distinguish

between organised and unorganised sectors in different contexts.

The organised sector comprises of enterprises, and information (e.g. statistical

data) on their activities is available or collected regularly (e.g. registered

manufacturing units). The unorganised sector comprises of enterprises and

information on their activities is not regulated under any legal provision or

regular account on their activities is not maintained by enterprises themselves.

Manufacturing units (e.g. all manufacturing, processing, repair and

maintenance service units) registered (or not registered) under the Factory Act

1948; belong to the organised (or unorganised) sector. That is, factories

employing 10 or more (or less than 10) workers and using power or employing

20 or more (or less than 20) workers without using power, in the reference

year, belong to the registered (or unregistered) manufacturing sector.

Enterprises covered (or not covered) by the Annual Survey of Industries (ASI)

fall under the purview of the organised (or unorganised) sector.

Unorganised and informal sectors also differ in their compositions. In fact, the

unorganised sector includes unincorporated proprietary or partnership enterprises,

enterprises run by co-operative societies, trusts, private and public limited companies

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(non ASI). Thus, informal sector is a part of unorganised sector in India. In essence,

the alternative concepts and definitions imply that the unorganised sector is wider in

scope to include unregistered, unregulated and informal enterprises and

establishments in manufacturing and service sectors.

In India, the term ‗informal sector‘ per se has never been used either in official

statistics or in National Accounts Statistics (NAS) until 1999-2000. The Indian

National Accounts Statistics from the very beginning used the terms 'organised'

and 'unorganised' sector from the point of view of collection of statistics. But

researchers often used the term ‗unorganised‘ and ‗informal‘ interchangeably. In

reality, though the terms are quite similar to each other, they are not truly identical

(Kulshrestha, 1999). The organised sector constitutes those enterprises for which

statistics are available regularly either through published government sources, budget

documents or through the Annual Survey of Industries (for registered manufacturing

industries). On the other hand, the unorganised sector includes those enterprises

whose activities or collection of data is not regulated under any legal provisions and

those who do not maintain any regular accounts (Kulshrestha, 1999). According to the

Central Statistical Organisation (CSO, 1980), the unorganised sector comprises ―all

unincorporated enterprises and household industries — other than organised ones —

and which are not regulated by any of the acts and which do not maintain annual

accounts and balance sheets‖. Non-availability of regular information has been the main

criterion for differentiating the unorganised sector from the organised. Broadly, the

unorganised sector covers the entire agricultural sector except plantation crops,

operation of the government irrigation system, minor minerals, unregistered

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manufacturing units and all units of non-manufacturing activities except those

in public, private corporate and co-operative sector. Further, to survey the

unorganised sector the CSO used to conduct the old-fashioned establishment/

enterprise censuses (and follow-up sample surveys). But these enterprise censuses

failed to capture the diversities of unorganised sector, as they do not take households

as unit of analysis.

In recent years, taking lead from the adoption of new international definition

of the informal sector (ILO, 1993; SNA, 1993), the Department of Statistics in India

constituted an expert group in 1998 to reconcile various concepts and definitions

pertaining to the informal sector. The main purpose behind this exercise was to

develop a uniform and harmonised definition and survey methods on the informal

sector so as to make it internationally comparable and also to count workers and

their contribution to output in a more exhaustive manner. The group after long

deliberations felt that the ‗informal own account enterprises‘ and ‗enterprises of the

informal employers‘ as mentioned in the International Conference of Labour

Statisticians (ICLS), 1993 resolutions are conceptually close to two terms used in

Indian Statistical System, i.e., ‗own account enterprises‘ and ‗establishments‘

(enterprises with at least one hired worker employed on a fairly regular basis).

Therefore, the group recommended implementing, to the extent feasible, the

recommendations of the ICLS (1993) and SNA (1993). The expert group also felt

that this type of enterprise-based definition of the informal sector would provide a

good coverage of enterprises to work out the value addition by industry groups

necessary for NAS.

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The above-mentioned enterprise-based definition of measuring the size and

contribution of the informal sector is definitely a change for better but it was subjected

to a lot of criticisms. The criticisms were mainly from users of informal statistics and

increasingly from activists working with the informal workers. According to them,

though the enterprise-based definition is useful to identify the size of the informal

sector and for national accounts, they fail to count new and emerging categories of

workers and their contribution to output. This is because it is difficult to identify such

workers as enterprises, as they are mostly single person own-account enterprises and

work either-from home or do not have fixed location of workplace. Mostly these

workers consist of home-based workers, home workers, street workers and street

vendors, domestic and other informal wageworkers. All this leads to underestimation

of both workers and output generated in the informal sector. To better capture the new

and emerging type of workers it was suggested to define informal sector in terms of

characteristics of the persons involved or of their jobs (labour force approach) apart

from segmenting them in terms of characteristics of the enterprise. This new formulation

for defining the informal sector was intended to be operationalised by classifying

workers into formal and informal ones by their status in employment in accordance

with the International Classification of Status in Employment.

In the light of the above suggestions, it is necessary that any survey to estimate

the size and output of the informal sector should be a linked one and detail questions

may be put in the questionnaire to identify separately first such unaccounted workers

and subsequently their contribution to output. In this regard, it is suggested to net all

types of above workers first through household survey and then assess their

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contribution to output (in terms of value added) through follow-up enterprise survey.

Thus, it underscores the need to link worker approach with enterprise approach of survey

so as to arrive at a better estimate of both size in terms of employment and contribution

in terms of value added in the informal sector. Accepting the criticisms and loopholes,

the NSSO field-tested the new international definition of the informal sector by

conducting first nation wide survey of informal non-agricultural enterprises along with

the 55th round labour force survey (1999-2000) with certain modification in the

survey methodologies. The survey methodologies were modified to link households with

that of enterprises (linked Household-Cum-Enterprise or Mixed Method). For the

purpose of the survey, the NSSO defined all unincorporated proprietary and partnership

enterprises as informal sector enterprises (as per the SNA definition). This new

definition differs widely from the traditional concept of unorganised sector used in

India. In the unorganised sector, in addition to proprietary and partnership enterprises,

other types of enterprises run by co-operative societies, trusts, private and public limited

companies not covered by Annual Survey of Industries are also covered (Kundu et. al.

2001). Thus, the informal sector is conceptually considered as a sub-set of the

unorganised sector (NSSO, 2001).

In Indian context, the latest version and the most acceptable definition of

‗unorganised sector‘ and ‗unorganised employment‘ has been recently given by the

National Commission for Enterprises in the Unorganised Sector (NCEUS) which has

combined all the definitions as below:

"The unorganised sector consists of all unincorporated private enterprises

owned by individuals or households engaged in the sale and production of goods and

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services operated on a proprietary or partnership basis and with less than ten total

workers".

And

"Unorganised workers consist of those working in the unorganised enterprises

or households, excluding regular workers with social security benefits, and the

workers in the formal sector without any employment/social security benefits provided

by the employers" (NCEUS, 2007, p 3).

In NCEUS definition the terms ‗organised‘ and ‗unorganised‘ are used

interchangeably with formal and informal.

The Contribution of Unorganised Sector

An important feature of labour market situation in India is the predominance

of unorganised employment. The dominance is such that since early 80's and

even before that more than 90 per cent of the total work force has been engaged

in the unorganised sector to earn their income and livelihood. The analysis of

trend and pattern of growth in employment shows that, over the years, formal

employment growth has always been less than that of total employment, indicating

a faster growth of informal employment. Further a broad segment consisting of

agriculture (both organised and unorganised) and organised non-farm sector,

which currently absorbs nearly 70 per cent of total workforce, is showing the

signs of negative growth rate and it is being predicted that these sectors will

cease to absorb more and more labour force (Bhalla & Hazell, 2003). In this

context, informal employment, especially its non farm segment, is being

assigned a dominant role in official committees meant for future additional

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employment generation. For instance the Special Group on ―Targeting Ten Million

Employment Opportunities per year over the Tenth Plan Period (2002-2007) set

up by planning commission was of the view that – exclusively for generating

the desirable high level of employment in the country, one has to target the

unorganised sector, including small and medium enterprises‖ (GOI,2002).

Another contribution of the unorganised sector is its relationship with the

organised sector. Some economists are of the view that there exists a downward linkage

between the organised and unorganised sector implying that the latter lives or dies with the

former (Stark,1982). It is often considered that an exploitative relationship exists between

the two sectors which is the basis of the existence of unorganised sector. This

relationship enables the organised sector to procure cheap semi-finished goods and

services from the unorganised sector and keep its own cost of production low. The

unorganised sector provides cheap consumer products and services such as processed

foods, readymade garments, handicrafts, transport, petty trading etc. to the urban

population. This sector also plays an important role in recycling the waste materials and

producing the goods and services which satisfy the needs of poor people having very low

income.

Thus, in view of its tremendous importance there is a need to focus efforts and

attention to develop a comprehensive understanding about the problems, needs, issues,

and changes that are taking place in this sector. It has been recognised by all sections

of researchers and writers that the working and the labour conditions in the

unorganised sector are deplorable and in fact, the unorganised sector is at a

disadvantageous position deserving supportive policy measures. This, however, in no

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way reduces its significance in populous country like ours. Unorganised sector has

become a perennial source of employment generation. It is surprising to note that this

sector absorbs more than 90 per cent of the total work force in our country. The size

of the unorganised sector has been substantial although it shows a declining trend.

The majority of Indian workers being employed in the unorganised sector also

produce useful products and many organised sector industries depend on informal

sector for the supply of raw materials. Thus, the unorganised sector not only provides

income earning opportunity to the poorer group of population but also feeds the

industries of the country. Unorganised sector has established itself to be the only

source of survival of a large segment of female work force in particular. An

increasingly large portion of women has been absorbed by this sector and importance

of unorganised sector for its role in absorbing the women workers is undeniable.

Furthermore, due to the availability of cheap labour in this sector, there is chance of

more and more activities directed to this sector. Thus, it can be concluded, that the

unorganised sector has a place of its own and plays a significant role in the process of

economic development. It provides substantial employment opportunities to those

who otherwise would have been openly unemployed. Its products and services are

low priced and so they help to keep the cost of production of formal units and cost of

living of the urban population low. If properly nurtured it can expand and develop

optimally and can play an important role in the process of economic development.

Due to the important role of unorganised manufacturing sector, various studies have

been conducted on unorganised sector in general and manufacturing sector in

particular. A few of these studies are highlighted below.

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Review of Studies

Right from early seventies a lot of research has been undertaken in the field of

unorganised sector in general and unorganised manufacturing sector in particular. The

available literature shows that the researchers have chosen three fields in particular

i.e. theoretical studies, micro level case studies and macro level empirical studies. In

order to understand its nitty-gritty we shall have to comprehend the available

literature. In the case of unorganised sector, sufficient literature is available regarding

the scope, concept, usefulness and applicability of this sector. Some of these studies

are given here in chronological order:-

Weeks (1975) used an input-output framework method to analyse the

determinants of growth of output and employment in the informal sector particularly

with reference to the less developed countries. In order to simplify he divided the

economy into informal, agricultural, private formal and government sectors. During

his research he came to the conclusion that the changes in the aggregate demand,

technical changes and changes in consumer tastes are largely responsible for affecting

output and employment in the informal sector. According to him informal sector is a

dynamic and a low wage sector whose development requires concrete development

policies ending special privilege to the formal sector and greater emphasis on

development of agricultural field and encouraging the formal units to grant sub-

contracting to informal sector units. This would lead to strengthening the informal

sector.

Banerjee (1983) conducted a sample survey during 1975-1976 to test whether

informal sector employment is a temporary staying post for the new migrants.

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Evidence showed that fifty per cent of the migrants to Delhi had been attracted by the

opportunities in this sector itself and they had moved to Delhi after pre arranging their

jobs. Earnings were lower in informal sector than in formal but returns in terms of

education and experience were same in both the sectors.

Dhesi and Wadhwa (1983) attempted to analyse the characteristics of the

participants and enterprises in the informal sector and their linkage with the formal

sector in Nangal (Punjab, India). In their study they found that the average

employment per enterprise was only 1.6. The study further pointed out that most of

the entrepreneurs started with little amount of initial capital and the source of

investment for majority of them was their own saving or that of relatives and friends.

Most of the informal enterprises were in the trade sector. It was followed by services

and transport.

Gangrade and Gathia (1983) attempted to study the women and children in

unorganised sector. They aim at examining what is work and what is unorganised?

Why are certain workers excluded in the census measurement and certain others not.

What is the employment structure in this sector? What kind of projects and

programmes will help working women in informal sector to move towards a self

reliant spirit and increase their confidence? How are working women in the informal

sector to be formulated? They classify the working women into three categories on

socio-economic basis-(1) Agricultural worker and those engaged in traditional menial

services. This group is the largest and very poor. Their counterparts in urban areas are

construction labour, migrant workers, domestic servants and self employed women in

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the informal sector. (2) The second category mostly comprises of women who work in

offices or are professionals. They can be called blue-collar women workers. (3) The

third group includes those women who are better educated and enjoy economic

security but they are small in number. Women from this category work for improving

their living standard and for self actualisation. The author concluded that women in

the informal sector face many problems- low wages, long hours of work, insecurity

regarding job and sexual harassment etc. but most of these women work for economic

reasons. In some cases women take up jobs to support the family income. In few

cases, jobs are taken up for leading a life of independence of self actualisation or of

escaping boredom. Some unmarried women have to take up jobs to help save money

for their dowry.

Manohar (1983) discussed the exploitation of women in unorganised sector

with reference to male dominance. He stated that women were dependent and

subservient, which forced them to live under miserable social and economic

conditions. Poverty and other economic difficulties forced them to take up menial

jobs where education is not essential e.g. maximum women workers were employed

in bidi industry, cotton textiles, domestic servants and weaving etc.

Romatet (1983) conducted a survey of Kolkata‘s informal sector to have an in

depth study of its characteristics. He focused mainly on tailoring industry, tanneries

and the plastic processing units situated on the outskirts of eastern Kolkata. He found

that the slums are not only densely populated but are the hubs of intense informal

economic activities. According to him the immediate needs were bank credit at very

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nominal rate, redirecting government demands towards the units directly, removing

the middle man, supply of raw material at reasonable rate and prevention of

exploitation of the informal units at the hands of organised economic agents.

House (1984) conducted a survey of informal sector enterprises in Nairobi. He

found out that the most of the proprietors in the informal sector were urban residents

of long standing and not recent migrants. Though, the initial capital requirements

were low, yet most of the entrepreneurs had cited the capital shortage as their major

problem.

Ahluwalia (1985, 1991) studied for the period 1959 to 1985 to examine total

factor productivity. The studies show that during the two decades of the sixties and

the seventies, total factor productivity in the manufacturing sector declined. However,

there is also a finding that in the first half of eighties productivity growth improved.

The dominant source of the acceleration in total factor productivity has been the

growth of value added.

Bandyopadhyay and Hillary (1985) observed an increase in the participation

of women in the Kolkata labour force, due to a combination of high male

unemployment, falling urban living standards and some increase in employment of a

semi or unskilled kind for which women workers are positively preferred. He opines

that precise effects of women‘s participation in wage work on the family based

household have received little detailed attention until recently. This is particularly the

case in many third world urban contexts where female labour force participation rates

have been traditionally low until the recent emergence of opportunities for women in

new gender-segregated industries, such as electronics assembly.

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Anand (1988) had a deep insight into the conditions of the lower caste Tamil

migrants in Delhi. It was pointed out that women migrants are found to be more

adaptable to their surroundings even though they do not know the language. They get

work easily as compared to their male counterparts. The occupations they enter are

mostly informal in character.

Datta Chaudhary (1989) tried to analyse whether theoretical analysis supports

the assertion that informal sector is dependent on formal sector. Using fixed co-

efficient of production and full utilisation of the available resources, he proved that

the general equilibrium framework of the economy permits expansion of the informal

sector along with shrinking of the formal sector employment and output. It was also

inferred that cheap credit to informal sector would force the formal to fan out its

requirement of intermediate goods to the informal sector. So the informal sector can

expand in the face of contracting formal sector. But when the formal sector

completely specialises in the production of final goods with the informal sector

meeting the total demand for intermediary goods, a stage would arrive where the

informal sector will live or die with the formal sector.

Saran and Sandhwar (1990) studied the problems of the women workers

engaged in unorganised sector of brick kilns, quarries and mines of Bihar and West

Bengal. It was revealed that the women working there were exploited, low paid,

worked for long hours i.e. 14-16 hours in case of migrants and around 10 hours in

case of local workers. Majority of them were illiterate and belonged to scheduled

castes, scheduled tribes and backward classes. Indebtedness was also commonly

found among them. Further, rebuking, cheating, threatening, beating and sexual

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abuses were very common features reported by women working in unorganised

sector.

Shaw (1990) analysed the interactions and linkages between informal sector

and large scale sectors in Thana-Belapur region based on field survey during

September to December 1980. It was found during the study that large units have

important forward linkages with informal sector units but unfortunately the informal

sector workers faced health related risks and labourers were by and large women folk.

Banerjee (1991) attempted to analyse the impact of new export oriented

industries on women workers in India. She had covered main industries viz. leather,

garment, silk spinning etc. The focus was on the relationship between technologies,

market conditions and service conditions of women workers. The conclusions drawn

are that these women did unskilled works, worked for long erratic hours and under

miserable working conditions and terms of work.

Kundu (1993) discussed in detail the problem of comparability of secondary

data relating to unorganised activities in India. Using different sources he tried to

access the macro dimension of the urban informal sector both at the national as well

as state level. In spite of certain limitations accepted by him his study shows that the

informal sector in urban areas has grown at a faster rate as compared to the organised

industries or the rural unorganised industries. During 1961 to 1985 in states like West

Bengal, Maharashtra and Gujarat growth has been largely impressive. Kundu is of the

opinion that the growth of informal sector in the developed areas is primarily because

of the complimentary relationships between formal and informal activities where the

jobs are sub contracted by the former to the latter. The growth of informal sector in

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less developed areas is because of the survival strategy and taking up the traditional

and low productive activities by the poor residents.

Balakrishanan and Pushpangandan (1994) studied total factor productivity

growth for Indian manufacturing from 1970-71 to 1988-89. The statistical analysis

confirms a turnaround if total factor productivity estimates are derived from the value

added single-deflation series. The point however is that if total factor productivity

index is derived by double-deflation there is an absence of an increase in the growth

rate of total factor productivity.

Guhan (1994) has emphasized the importance of protective type programmes

(old age pension, maternity leave etc.) for the unorganised workers. Most of the new

employment in future will take place in unorganised sector which is characterised by

poor condition of work, low earning and lack of any social security. Ensuring basic

minimum measures of social security in unorganised sector should be an important

concern of a public policy. Some of the targeted anti-poverty programmes have

remained unsuccessful because of the problems of centralised approach and review

system. On the other hand the protective type programmes such as old age pensions,

widow pensions, survivor benefits etc, provide a certain degree of financial help to

poor persons. The other benefits of protective measures are their simplicity and

relatively low administrative cost.

Mitra (1994) conducted an empirical study to estimate the nature of

relationship between formal and informal sector employment for various urban

centres in India. The research was based on the secondary data for 1971. He found

that the percentage of informal sector employment in the total work force differed

20

from as low as 21.3 per cent in Chandigarh and 39.4 per cent in Howrah to as high as

96.85 in Shahjahanpur and 92 per cent in Dumdum. This percentage was found to be

significantly negatively correlated with the size of the city in terms of population. A

significant negative relationship was found between percentage of informal

employment and percentage of organised industrial employment. However the

relation between the absolute employment in the informal sector and that of in the

formal sector was found to be positive.

Shaw (1994) emphasized in his research to look into the manufacturing

activities in the informal sector in India particularly with reference to the growth of

these activities during 1971 to 1991. According to the data collected by her, the share

of informal sector in the total manufacturing employment reduced from 82.5 per cent

in 1961 to 69.3 per cent in 1981 but after that the trend reversed and the modern

dynamic part of the informal sector expanded slowly. On the other hand, there was a

sharp decline in the traditional home based industries. She found that the states like

Maharashtra, Tamil Nadu, Karnataka, Andhra Pradesh and Madhya Pradesh

accounted for nearly 58 per cent of the net value added from the registered small scale

industries. Maharashtra, Tamil Nadu, Uttar Pradesh, Andhra Pradesh, Gujarat, Punjab,

West Bengal and Karnataka were the major contributors. In terms of the employment,

states like Tamil Nadu, Maharashtra, Uttar Pradesh, West Bengal and Gujarat

accounted for the 54 per cent of the total. Maharashtra, Uttar Pradesh, Gujarat and

Karnataka came out to be the leading states in terms of the fixed assets. The main

industries were chemicals and chemical products, basic metal industry, metal

products, electric machinery and its parts, rubber and plastic products and the food

21

products. She concluded that the informal sector can develop more with the active

government support both in terms of encouraging investments and providing

infrastructure facilities.

Sultania (1994) conducted a study at micro-level in the major parts of Jaipur

city on the women workers engaged as contract labourers. The main analyses were

based on the causes of inequality of women as contract labourers and its impact. The

characteristics, profile and recruitment were also dealt with. The women workers in

the unorganised sector generally experience sexual and socio-economic exploitation.

They are illiterate, earning fewer wages, experience male dominance, work for 10-12

hours daily, have no medical or leave facilities and so are under pitiable state of

affairs.

Chandola (1995) studied the nature of garment manufacturing units and

women workers in unorganised segment of these units situated in Lucknow, Kanpur,

Varanasi and Delhi. The emphasis was that the industry practised wage exploitations,

the production process was fragmented and decentralised. The decentralisation of

unorganised sector was done with a view to have cheap labour and escape

government regulations. The women worked as piece rate workers; there was easy

entry into the labour market which forces them to seek employment as unorganised

labour leading to exploitation.

Bhagwat (1996) studied analytically the process of gender construction in the

context of urban growth which differs for caste, class and religious backgrounds. This

study mainly focuses on work sphere. The size of sample for the study was 254, with

70 per cent from unorganised sector, invisible labour and housewives. The majority of

22

women in unorganised sector were generally migrants from rural areas. They worked

for 10-12 hours daily, earned low wages, experience sexual harassment and physical

exhaustion.

David (1996) discussed the structure and composition of urban unorganised

sector. It was found that the unorganised sector faced two major problems. Firstly,

this study found that increasingly a large segment of this sector employs work

population which is forced to live at margin of survival. Secondly, given the

availability of cheap labour in urban unorganised sector, employers are likely to divert

activities to the organised sector. The non-institutionalised unorganised sector

comprises workers doing casual work like the domestic servants, sweepers,

scavengers, vendors, hawkers and those who are self employed. The urban women

working here face insecurity, no legal protection, long working hours and are paid

very less.

Funkhouser (1996) tried to examine the patterns of employment and structure

of earning in the urban informal sector. His study was largely based on five Central

American countries like Guatemala, El-Salvador, Honduras, Nicaragua and Costa

Rica. He found that the size of informal employment was between 60-75 per cent of

labour force in the first three countries while in Costa Rica it was about 30-33 per

cent. In Nicaragua it varied from 45 to 63 per cent. There were substantial returns to

human capital and experience in the informal sector in each country. Other significant

findings were negative relationship between level of education and informal sector

employment and higher probability for poor family to get employed in the informal

sectors.

23

Sundaram (1996) drew almost same conclusions with respect to other authors

in this field. He projected that, women workers in unorganised sector were generally

illiterate, had high unemployment rate as compared to men in this sector and worked

under exploitative working conditions. It was also brought forward that these women

were sliding down to low paying or unpaid work, which worsened their conditions.

The factors responsible for the prevailing conditions of women of unorganised sector

were poverty, unequal distribution of income, illiteracy, disparity and male dominance.

Loayza (1997) opines that the increase in the size of the informal sector

undermines growth by reducing the availability of public services for all and one in

the economy and by increasing the number of activities that use existing public

services inefficiently.

Gajalakshmi (1998) empirically analysed women workers employed in

unregistered shoe factories in Tamil Nadu. The women working here are from

backward classes and scheduled castes. They earned low income, have low

educational level, live in poverty and work for long hours. These women mainly work

to supplement the low family income in order to make two ends meet.

Jhabvala, Renana (1998) in her study at macro level, emphasized on the need

for social security for women workers and explored the mechanism for social security

provisions, insurance, social security funds for women in unorganised sector. The

employment based programmes should have social and financial security for women

in the unorganised sector.

Kundu and Lalitha (1998) studied the decline in the share of informal sector in

general and urban informal sector in manufacturing sector employment in particular,

24

in late eighties and early nineties. Using NSSO data and considering OAMEs and

NDMEs as the two components of the informal manufacturing sector, they showed

that the growth profile in the informal manufacturing sector has shown two opposite

trends. While during 1978-84 there was a significant rise in both employment and

number of enterprises whereas the period of 1984-89 saw a complete reversal of the

trend. It is argued that the growth of the units or employment for that matter does not

show any correspondence with improvement in their productivity. Most of the units

have no other alternative because being in business is a survival strategy for them.

Only a very small segment of this sector reacts and responds to the market forces and

is linked to the organised sector and its growth is linked to its productivity. Its

productivity is affected by the varied factors like registration with public agencies and

access to land and credit etc.

Mahadevia (1998) studied the declining importance of Ahmadabad city in the

context of industrial development process of Gujarat. She also analysed the impacts of

informalisation of employment on urban poverty in the context of privatisation,

liberalisation and increase in the urban cost of living etc. According to her the

industrial decline in Ahmadabad is not because of overall industrial deceleration in

the state but because of changing character and pattern of industrial development and

nature of industry. The decline in the growth rate of organised sector can also be

explained by vested interests to make the big cities the residential cities for the elite.

Mitra (1998) tried to estimate informal sector employment. He used several

alternative data sources for this estimation i.e., direct method using economic census

data and residual approach using Census and DGET- EMI data. These states were

25

then ranked according to the relative size of informal sector expressed as a percentage

of total employment in the non-agricultural sector, using these alternative measures. A

close correspondence between the rankings of the states using these alternative

sources was obtained. The association between the incidence of informal employment

and factors like urbanisation and industrialisation were found to be negative, while

that with incidence of poverty was found to be positive. Developing linkage between

formal and informal sector, integrating the informal sector with the main stream of the

economy so that it can take the advantage of globalisation, come out as important

points in their research.

Pandey (1998) examined the nature and types of migrant workers, temporary

(seasonal) and permanent in the light of socio-economic order and analysed the

strategies and employment patterns of the female migrants from Maharashtra. It was

brought forward that in the temporary type of migration in unorganised sector, the

migrants worked for long working hours with low wages and without any legal

protection of job security. The factors aggravating their pitiable conditions are lack of

sanitary facility, unsafe conditions and gender discriminations. These women mainly

worked in unorganised sector to supplement the family income and face all other

hardships of life. These seasonal migrants generally come to workforce through the

contractors as a whole family or at least as a couple.

Rao (1998) studied the general profile of the women workers in beedi industry

at macro-level in India. The production of beedi is at corporate industrial level on the

line of cottage industry. These women‘s earnings are meagre. They work on piece rate

basis and earn as low as 40 rupees for 1,000 beedies rolled. The leading states in case

26

of beedi manufacturing are West Bengal, Kerala and Tamil Nadu. The beedi workers

are exposed to dust and nicotine, causing respiratory diseases and infertility in young

women.

Shah (1998) in her study attempted to examine the growth linkages between

small and large scale sectors and the pattern of small industries cluster and the

implications of such linkages for productivity and employment in the various

segments of the small scale sector. Her research showed that the states of high

incidence of factory sector also have high incidence of unorganised sector

(comprising of three scale based categories of OAMEs, NDMEs and DMEs) which

may be due to the size effect. The study suggests that there is a clear pattern of

upward shift within the scalar hierarchy. The growth of DMEs and the SSI at the cost

of lower categories is considered as a welcome trend, since value added and

emoluments per employee increases as we move upward along the scale category.

The author has emphasized the modern character of the DMEs and its emergence as a

dynamic segment of the unorganised sector.

Sharma (1998) analysed the issue of linkages between the formal-informal

sector and different modes of production. The informal sector is not an independent

exclusive circuit. A variety of linkages help to nurture the growth of this sector. This

depends on the nature and type of linkages. These linkages may be direct in terms of

resource inputs, technology or market. Indirect linkages refer to the demand for goods

and services generated in the informal sector by a clientele whose income is drawn

from the formal sector. The informal sector, therefore, becomes a ‗safety net‘ not only

for the ‗poor‘ but also for others thrown out of jobs especially during periods of

prolonged recession and during structural adjustment programmes.

27

Swarooparani and Galab (1998) conducted a primary survey of sandal making

activities in the slums of Hyderabad city. This study breaks the common belief that

assured market solves the problem of low productivity and low income of the

informal sector. The study was based on sample units which were divided into two

categories. The first group comprises of those operating as untied units and carrying

out independent production. The second group includes those who are operating as

tied production units and carrying out contract production.

Unni, (1998) reviewed the concept of work, production boundary, unorganised

sector, and certain categories of workers. She also analysed various methodologies for

estimation of labour force and contribution to gross domestic product. It has been

stated that the unorganised sector and other hidden economic activities have gained

prominence in the context of structural adjustments, globalisation and other problems.

But emphasis is laid to recognise the work of unorganised sector workers specially the

women workers since their employment in this sector is significant and bear the

maximum brunt.

Chadha (1999) studied the growth dynamics of different segments of informal

manufacturing sector in India between 1984-85 and 1994-95 separately for rural and

urban areas. It was found that OAMEs in order to economise their available capital

and to take full advantage of cheap labour move towards a labour intensive

technology and hence its capital labour ratio is declining. Labour productivity is

higher in the urban manufacturing sector than that of its rural counterparts. His study

also showed that the units having high productivity are not necessarily the units that

have registered high growth in employment or enterprise.

28

Goldar and Mitra (1999) in their study attempted to measure the total factor

productivity growth (TFPG) in informal manufacturing sector in India. The solow

index of TFPG, which is measured as difference between growth rate in value added

and weighted sum of growth rate of capital and labour, is used.

Papola and Sharma (1999) conducted a study that there is marginal increase in

labour force participation of women in unorganised sector. The gender discrimination

for work is more prevalent in unorganised sector labour market. They suggested that

the interventions of non- government organisations, governmental organisations and

women activists for increasing opportunities and strengthening capabilities will

reduce imbalances and bring gender equity in employment.

Ramaswamy (1999) is of the opinion that the lack of strong complementary

relationship between the large and small firms is regarded as one of the major

limitations of the development of small manufacturing sector in India. Of late, sub

contracting and outsourcing are emerging as important developments that connect

small and micro units with larger units to the benefit of the both. He pointed out that

the increased growth of the unorganised sector in recent years was a result of

substantial increase in outsourcing by the organised sector.

Srinivasan (2000) looked into conceptual issues of the unorganised sector

along with profile of women‘s employment and its trends. It was observed that

women workers move to the sectors where they have no legal protection and so have

little bargaining strength. Non-farm employment hailed as the panacea for surplus-

labour in agricultural sector.

29

Bhalla (2001) computed the total factor productivity growth for two periods,

1984-85 to 1989-1990 and 1989-1990 to 1994-1995 in unorganised manufacturing

sector. In the first period she observed a high positive growth in NDMEs in rural areas

and a high negative growth in DMEs in urban areas. Total factor productivity growth

in the second period was negative in both types of enterprises in urban and rural areas.

Juan (2001) has pointed towards the need to provide essential social security

to the work force in the unorganised sector as it has become urgent in the context of

the consequences of economic reforms. There is a need for a new algebra of

efficiency and productivity, which views social policy not as a cost but as a sound

reason: which can quantify, for example, the economic benefits of good industrial

relations, social security and safety measures at work. Basically his emphasis is on the

need to develop the concept of ‗Social Efficiency‘ or in other words, on ‗Marginalised

Economic units and workers who are characterised by decent work deficits: labour

standard deficits, worker productivity deficits, job quality deficits, social protection

deficits and organisational cum-representational deficits‘.

Unni and Rani (2001) presented a broad definition of social protection to

include basic securities, such as income, food, health, shelter and economic securities

including income generating productive work. A conceptual framework was

developed to analyse the causes of insecurities of informal workers, identify the core

needs of social protection, develop instruments and visualise the institutional

mechanism to address these needs. Using evidence from a micro survey of household,

they stressed that the insecurities of informal workers arise not only from random

shocks but also from the structural features of the household and their nature of work.

30

They further discussed the institutional mechanisms for delivering social protection

and underlined the need for innovative methods involving the government, private

sector, NGOs, and civil society.

Azuma and Grossman (2002) showed that a lot of tax burden and red tapism in

the working of the bueareucratic set up discourages the formal sector. On the other

hand, these are not always according to the endowment of the producers because of

ignorance and inaptitude of the state. Resultantly the producers find it convenient and

suitable to work in the informal sector. Thus, informal sector would be bigger in size

if the state tries to maximise its revenue compared to the hypothetical situation when

the state is benevolent and doles out huge subsidies.

Chadha and Sahu (2002) using the data from the NSSO/NAS, reported a

marginal decline in the growth of manufacturing sector employment from 2.2 per cent

in 1983-1994 to 1.8 per cent in 1994-2000. This was accompanied by an increase in

the growth of fixed capital from 5.7 per cent in 1983-1994 to 7.3 per cent in 1994-

2000. There was also a corresponding growth in value added from 6.1 per cent in

1983-1994 to 7.4 per cent in 1994-2000. The trends convey that the growth in the

latter half of 1990s was marked for capital infusion.

Dev and Mooiji (2002) have overviewed the growth-led and support-led social

security arrangement for the unorganised sector in India. For the support led

programmer, the emphasis is laid on the preventive and protective schemes for the

unorganised sector. It has tried to cover the areas like the issues in social security for

unorganised sector, helpfulness of the growth promoting policies to the unorganised

workers, support-led social security arrangements for the unorganised sector at the

31

national and state level and strengthening the effectiveness of the existing

programmes. In the context of marketisation, there is a major section of society which

does not have the resources to enter the market operation and thus the government and

those who are already in the market have the responsibility in providing social

security to the unorganised sector. The need for public-private partnership in

providing social or economic security for unorganised workers is emphasized.

Unni and Rani (2002) studied people‘s social security concerns at the

household level. It was reported that nearly half the workers felt that the nature of

their work had an adverse effect on their health. While this finding may be based on

the perceptions of the individual workers, their poor working environment and low

income status, along with a high proportion of chronic addiction and illness, leads to

insecurity among the households working in the informal sector. The vulnerability of

the poor informal workers increases when they have to pay fully on their own for their

medical care with no subsidy or support. The study found that about 79 percent of the

workers paid for the entire cost of medical care without any support. The precarious

existence of these workers is quite evident. The workers not only suffered a loss of

income due to sickness or ill health but also had to bear the entire cost burden of

healthcare. Further, less than 5 per cent of the workers had some form of medical

insurance. Even this was mainly because the sample consisted of some SEWA

members, a trade union providing some medical insurance cover to its members.

Anand (2003) outlines the policy framework necessary for informal sector

development and the common characteristics of informal sector in general and in

India in particular.

32

Bhalla, (2003) has analysed the traditional & modern segments of unorganised

manufacturing sector of India. She has pointed out that though the productivity of the

modern sector is much higher than the traditional sector and is growing at an even

faster pace, yet the traditional sector has an unmatching contribution to employment

in this sector.

Oldimeji and Ajisafe (2003) analysed the role of micro-credit delivery

organisations in encouraging informal sector in Nigeria. They found out that though

the organisations have been quite successful in expanding credit availability to the

informal sector yet the cost of credit has been observed to be on the higher side,

which pointed towards the need to bring down this cost.

Sinha (2003) is of the opinion that the chances of maternal mortality would be

higher among poor women facing the additional burden of economic activity in the

informal sector where the conditions of work are strenuous. Another concern of the

poor informal women workers is the loss of income during the advanced period of

maternity and immediately after child birth when they are not able to work for some

time. Maternity and child birth also result into a lot of risks and expenses. It leads to

financial crisis among the poor household due to borrowing and high interest

expenditure. This would inevitably result in reduction in income of the poor

household.

Unel (2003) observed that total factor productivity (TFP) growth in aggregate

manufacturing and many sub-sectors accelerated after 1991 reforms. Unel‘s estimate

of average annual growth rate in TFP in aggregate manufacturing is 1.8 per cent per

annum for the period 1979-80 to 1990-91 and 2.5 per cent per annum for the period

33

1991-92 to 1997-98. The estimate is based on value added functional framework,

taking value added as output, and labour and capital as inputs. The income share of

labour and capital are used as weights for computing the growth rate of TFP. Unel has

presented a second estimate of TFP growth, made by assuming the elasticity of output

(value added) with respect to labour to be 0.6 rather than taking elasticity to be equal

to the income share of labour. According to this estimate, the average annual growth

rate in the total factor productivity in Indian manufacturing was 3.2 per cent during

1979-80 to 1990-91 and 4.7 per cent during 1991-92 to 1997-98. Both estimates

indicate acceleration in the total factor productivity growth rate in Indian

manufacturing in the post-reform period, as compared to the pre- reform period.

Gerxhani (2004) studied at length the theoretical literature on informal sector

with a special focus on the public choice approach. The writer provides a comparative

analysis of these writings across developed and developing countries. Interestingly,

not too many theoretical models are available on the informal sector and it has largely

been seen as a complex sector. Recent models have tried to look into the

environmental aspects particularly the damage being caused to the environment by the

informal establishments.

Pushpagandan and Shanta (2004) tried to analyse the growth of informal

sector in India during 1993 to 2000. They concluded that the recent growth has

occurred independent of efficiency gains and therefore its competitiveness is

questionable, especially in reference to the impact of globalisation.

Marjit and Kar (2005) examined whether the informalisation has been

accompanied by an increase in real informal wage, capital investment and value

34

added in manufacturing at the all India level. The study found that as compared to the

pre-reform period (1984-85 to 1989-90), the post-reform period (1989-90 to 1999-

2000) witnessed an increase in informal wage (in manufacturing) accompanied by a

real increase in fixed assets (proxy for capital investment) and value added. These

results hold good for most of the states and union territories. The study pointed out

that in order to understand the impact of reforms on labour market; one has to assess

the working of the capital market as well.

Rajasekhar, et. al. (2005) conducted study in Karnataka and used a

participatory method to derive the perceived social security needs of unorganised

sector workers. Among the workers surveyed, 92.3 percent felt that benefits towards

old age, unemployment, death, sickness and employment injury were relevant for

them. Women in the reproductive age groups also felt that maternity benefits were

important. Each respondent was shown various pictures of these six types of needs

and asked to assign priority to these needs. Workers in the informal sector were not

homogenous and various segments among them had different priorities. Among the

informal workers, agricultural labourers felt that old age was a major concern

followed by unemployment. Among construction workers, unemployment followed

by old age and employment injury was assigned priority. Among domestic workers,

too, old age security was the major concern followed by unemployment and sickness.

An interesting aspect of this study was that about 7.7 percent of the sample workers

were unwilling to rank their priorities for security. It was found that these included the

highly vulnerable category of households for whom all these insecurities were

obviously not important enough since their basic entitlement had not been met.

35

Garg and Karan (2006) have emphasised the need to categorise the risk of

health security requirement on the basis of kinds of illness i.e. minor illness which can

be treated at home and major illness requiring hospitalisation. The latter can be

termed as a catastrophic risk. These risks have been further classified as those wherein

the household health expenditure exceeds either a certain fraction of total household

expenditures or their ability to pay.

Henley, et. al. (2006) discusses in detail the various definitions of informal

sector and its appropriateness (aptness). They are of the opinion that the most

common feature of the informality is absence of social security.

Kannan and Srivastava (2006) overviewed a comprehensive social security

scheme for the unorganised sector which had been proposed for the first time in India.

The proposal by the National Commission for Enterprises in the Unorganised Sector

(NCEUS) sought to develop a healthy workforce that in turn would have a positive

impact on national income and economic growth. The scheme was aimed to cover

sickness, maternity, old age and death and proposed a participatory system with some

contribution from the workers.

Mitra (2006) focused on the reasons of low wages prevailing in the informal

sector. He argued for state support for improving the quality of employment in this

sector, which provides sources of livelihood to a sizeable proportion of the work

force. One important consideration was to raise the wage levels in the informal sector

by improving the productivity. Skill formation and up-gradation, micro-credit and

marketing assistance were some of the ways of enhancing productivity. Other than

this, the role of information dissemination was important for improving the wages

36

within the informal sector. Interventions, which were compatible with the individual

initiatives, could improve the living standards of the workers in the informal sector

without affecting adversely its potential to absorb labour on a large scale.

Prakash and Meher (2006) analysed the data from the four NSSO Surveys and

examined the structural change and productivity trends in the unorganised

manufacturing sector during the period 1985-2001. He noted that in the period after

mid-nineties (i.e. 1995-2001), employment in unorganised manufacturing sector has

grown faster than in the decade before (i.e. 1985-1995). Further, by rural-urban

distinction of units, urban units had registered higher growth in employment than that

of the rural units. This had contributed to a relative higher growth of labour

productivity for rural units.

Sakthivel and Joddar (2006) analysed that the coverage of social security

schemes had been largely against economically and socially vulnerable sections while

regular workers were largely covered by the provident fund regime. The ever

increasing army of casual and contract workers, even in the organised sector appeared

too had been discriminated against, not to speak of the entire self-employed, which

accounted for a significant proportion of India‘s workforce. Although the statutory

provisions of provident fund were supposed to be applicable universally among

industries specified in schedule I, the evidence clearly pointed to a dismal state of

affairs. So there was a crying need to enforce the same in the industries covered apart

from revising the list of industries continuously.

Harris-white and Sinha (2007) noted that in the context of India, it is important

to realise that the informal sector can be far more dynamic than the organised sector,

37

provided, they have the right opportunities to flourish. They were of the view that

contrary to the general wisdom, the informal sector is not synonymous with an entity

that necessarily stagnates in a low level equilibrium trap. Infect, both informal

manufacturing units and self employed units accumulate fixed assets, invest and

prosper and they do so even at a time when their formal counterparts are often mired

in complex regulations and not successful in protecting their self interests in

transition. No doubt, outcomes facing informal units are more likely to be mixed than

uniform, but there are situations when market delivers clear benefits to workers

engaged in the sector. It is however, contingent not only on the degree of the capital

mobility as the pre deployed capital needs to be reallocated from non-viable sectors to

those offering higher returns, but also on institutional capabilities to reformulate

existing regulations.

Mehrotra (2008) analysed the conditions of work (for example, hours of work,

hazardous nature of work, safety conditions and wages rates) in the prevailing labour

market conditions, where there is excess supply of labour. The unorganised sector

workers themselves are fragmented and almost always not organised into unions,

where they suffer from access to imperfect information and are not fully aware of

their limited rights. To make it even more difficult, they are mostly illiterate or barely

literate. If the pre-requisites for improving their conditions of work do not exist, he

suggested that the state should focus its attention on improving the social protection

for such workers, that is, social assistance and social insurance. This implies that the

state should focus on doing the ‗do able‘.

38

Kathuria, et. al. (2010) have analysed the productivity performance of the

organised and unorganised units of the Indian manufacturing sector at the state level

for the period 1994-95 to 2004-05 and have examined the impact of reforms on their

performance. For calculating the productivity levels and growth rates, both partial and

total factor productivity methods are considered. After analysing the production

function they showed that the capital rather than labour played a significant role in the

production process in the organised and unorganised manufacturing sector. The

comparative role of labour in the production processes is less in the unorganised

sector and this has remained a major concern as this sector is a significantly larger

employment provider. The TFP has grown steadily in the organised manufacturing

sector while the same has declined in the unorganised manufacturing sector. The

growth in GVA is driven mostly by productivity and not by inputs in both the sectors.

So it can be seen that most of the studies discussed above highlight the

contribution of the unorganised sector in total employment, productivity trends,

employment inequalities and social security needs of unorganised manufacturing

sector of India. Most of these studies are either region-specific or sector-specific.

Some of the macro level studies have analysed the informal sector in general. The

studies which have focussed on the unorganised manufacturing sector analysed its

performance up to 2000-01 only. So, the present study would not only update the

analysis of the performance of unorganised manufacturing sector in recent times as

compared to the early liberalisation period but also explore a range of aspects viz,

change in employment, wages, productivity, composition and the need of social

security. This study will have the following objectives.

39

Objectives

This study is based upon the following objectives:-

1. To study the growth and determinants of employment and wages in

unorganised manufacturing sector in India since 1991.

2. To examine the composition of unorganised manufacturing sector in India and

the changes in it during the post-liberalisation period.

3. To analyse the determinants of productivity of unorganised manufacturing

sector in India.

4. To examine inter-sectoral, inter-regional and gender inequalities in the

unorganised manufacturing sector in India.

5. To examine the need of policy attention towards unorganised manufacturing

sector

Methodology

This study is based upon secondary data. Source of the study is NSSO

(National Sample Survey Organisation) surveys which provide extensive data on

unorganised manufacturing sector. NSSO provides data for about 23 sub-sectors as

per National Industrial Classification. All classification has been adjusted according

to National Industrial Classification, 98 as per the concordance table provided by

NSSO. This data is further disaggregated into various states and rural-urban segments.

The data provided by NSSO is classified into three types of enterprises namely, Own

Account Manufacturing Enterprises (OAMEs), Non-directory Manufacturing

Enterprises (NDMEs), Directory Manufacturing Enterprises (DMEs). NSSO defines

OAMEs as those enterprises which operate with no hired worker on a fairly regular

40

basis. NDMEs are those enterprises which employ less than six workers including

household workers and DMEs employ six or more workers with at least one hired

worker but not registered under the Factory Act 1948 (NSSO, 2002).For analysing the

data, simple averages, annual compound growth rates and correlation coefficients

have been used.

Chapter Scheme

This study has been divided into the following chapters:-

1. First chapter gives the introduction and review of the relevant literature.

2. Second chapter analyses growth and determinants of employment in

unorganised manufacturing sector in India.

3. The third chapter examines the growth and determinants of productivity in this

sector.

4. The fourth chapter throws light on inequalities in employment in unorganised

manufacturing sector which covers inter-sectoral, inter-regional and gender

inequalities.

5. Fifth chapter discusses about the need of the policy attention towards

unorganised manufacturing sector in India.

6. Finally, the last chapter gives summary, conclusions and suggestions on the

basis of study.

41

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