Proceedings of ISSME Round Table Discussion on Empowering Informal Sector Enterprises for Global ...

8/13/2019 Proceedings of ISSME Round Table Discussion on Empowering Informal Sector Enterprises for Global Market Outre

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International Society for Small and Medium Enterprises (ISSME)

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International Society for Small and Medium EnterprisesPO Box 4354, Kalkaji HPO,New Delhi 110019, IndiaSwitchboard: +91-11-29993844Central Fax: +91-11-29993845Email:[email protected]

Website:www.issme.org

Published by Sunil D Sharma on behalf of International Society for Small andMedium Enterprises, New Delhi.

ISBN : 978-81-922628-2-6

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Proceedings - Round Table Discussion onEmpowering Informal Sector Enterprises for Globa

Market Outreach: Challenges and Way ForwardYWCA Conference Hall-1, Ashoka Road, Connaught Place

New Delhi-01: November12, 201

Organised by:

I t ti l S i t f S ll d M di E t i (ISSME)

ISSME Round Table Discussion onEmpowering Informal Sector Enterprises for Global

Market Outreach: Challenges and Way forwardPROCEEDINGS

Informal Sector Enterprise

sector has got the presence of

highly talented entrepreneurs.

But they need a helping hand at

various stages of their growth,

so that many of them could

graduate into micro, small and

medium sized enterprises and

grow further, contributing

much more to the economic

growth and development, asformal enterprises in the

economy. However, an

economic and enterprise

focused approach is needed, as

that only would augment their

competiveness and enhance

their employment and wealth

generation capacity. Further,

there is a need to address issues

such as packaging, marketing,

product quality and better,

appropriate & green

technologies. Also, training and

capacity building requirements

of informal sector needs to be

addressed along with creating

an institutional mechanism that

provide various services to them


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such as hand holding,

mentoring, technology &

finance facilitation and

providing information to

informal sector at each of the

community bloc level.

These were some of the

recommendations emerged out

of a round table discussion

organized by International

Society for Small and Medium

Enterprises (ISSME), on

November 12, 2012 at YWCA,

New Delhi. ISSME is an

international organization

working for the promotion of

SMEs and informal sector

entrepreneurs globally.

The round table discussion

on informal sector

The discussion which was held

on February 12, 2013 at YWCA

conference room, Ashoka Road,

New Delhi, was attended by

representatives from various

industry and informal sector

enterprise associations &

forums, micro finance agencies,

NGOs, government and many

grassroots organizations and

informal sector entrepreneurs.

There were more than 12

presentations from different

sectors by experts and

representatives from

associations and chambers. Mr.


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P. K Padhy, Principal Labor and

Employment Advisor, Ministry

of Labor, Government of India,

delivered the keynote address.

The discussion was chaired and

moderated by Dr. P. Koshy.

Understanding informal

sector enterprises

Informal enterprises could be

broadly defined as units engaged

in the production of goods or

services for the primary purpose

of generating employment and

income to entrepreneurs

themselves. The size of the unit

might be below a specified level

of employment as well as non-

registration of the enterprises or

its employees are the aspects

common to informal sector

enterprises. Adoption of

technology, finance sources,

marketing tools used and

markets, employment are all

indicators while defining an

informal sector enterprise. As

per the National Commission for

Enterprise in the Unorganized

Sector, the unorganized 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.

Based on a standard definition,

for the purpose of someestimation, if we consider


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informal sector as consisting of

all enterprises outside the public

and private corporate sectors

which employed five or less

workers, based on that

definition, as per NSSO 67th

round survey, 84.7 per cent of

jobs in the economy were in the

informal sector, 4.5 per cent in

the public sector, 2.5 per cent in

the private corporate sector and

only 8.4 per cent in the formal

household sector, consisting of

enterprises employing more

than five workers. Own account

enterprises (OAEs) or those that

employ no hired labour on a

regular basis account for an

overwhelming 84-86 per cent of

all enterprises. (For more details

on definition and data on

informal sector please refer

Annexure A).

Livelihood,

entrepreneurship

development and

empowering informal

enterprises

They need support to address

challenges such as finance,

better technology, marketing

support and linkages. They need

training in accounting,

marketing skills, technology

adoption/use, skill up-gradation

and development. Many of these

entrepreneurs, given such

support could grow and

contribute much to the economy

in terms of employment

generation and most


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importantly, making a better life

for themselves and their

families.

Importance of informal

enterprises in the economy from

the point of view of sustaining

the livelihood and well-being of

a very large section of

population was the focus of

round table discussion,

therefore, the discussion

addressed aspects like better

marketing tools for them,

meeting the information needs

of them and role of ICT in that

both in marketing as well in

market & business intelligence

for informal sector, and other

aspects such as finance,

appropriate technology for

them, as well as some relevant

models and role of NGOs,

industry associations &

chambers & civil society

organizations and the

government.

Enterprise oriented

approach

Mr. P. K Padhy, Principal Labor

and Employment Advisor,

Ministry of Labor, Government

of India, delivered the keynote

address. In his address, Mr.

Padhy highlighted the need for

an economic approach rather


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than sociological approach while

dealing with informal sector

enterprises, as that would be

crucial, in order to enable and

empower them to reach out to

the global market. Dr. P. Koshy,

in his introductory remarks also

raised the need for an enterprise

focused approach with regard to

informal sector. He said,

challenges faced by informal

sector enterprises need to be

viewed as a matter of industrial

policy and enterprise

development strategy, rather

than limiting to labor market

and related issues.

Training, education and

awareness

Issues that they face are

innumerable. They need skilldevelopment & specific training

assistance. Mr. Padhy

highlighted the importance of

training programs and talked

about government initiatives

and schemes. He specifically

mentioned about the need for

tailor-made programs for

informal sector enterprises.

They need training in different

areas. It is important to provide

them need based skill

development.

Mr. Satayender Chaudhary,


training for informal sector

entrepreneurs in the use andadoption of ICT. He said, basic


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ICT tools & technology are

available free, but what is

needed is training opportunities

in usage. Training is also

required in tax related matters,

accounting, marketing skills,

and awareness creation

programmes about probable

impact resulting from policy

changes.

Mr. Vighnesh Jha raised the

need for training and awareness

for Electronic Waste Pickers and

Hazardous Waste management

entrepreneurs. These are

emerging segments, where a

large number of entrepreneurs

are finding their livelihood.

Providing needed training and

capacity building would help

them perform their businesses

in a safe manner. Further, by

adding value to the waste that

they collect, there would be

considerable improvement in

the income levels. Value

addition is an often neglected

area and training is needed in

value addition techniques as well

as in the area of safety.

Koshy said with regard to street

food sellers, with some training,

awareness and some sessions on

better industry practices that

they could adopt, their

businesses can be improved, as


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well as the quality of the

products that make. He also

referred to the PURE project by

Chandigarh Business School.

CBS undertook an educational

outreach program called PURE.

The program PURE targets

Dhabba managers and workers!

PURE attempts to improve the

conditions and management

practices at Dhabbas, common

mans eating place, which are

found across Northern India.

Financing informal sector

ventures

Banking institutions often shyaway from dealing with informal

sector enterprises. Informal

sector players do not have any

kind of identity, registration and

other needed documents and

business plans that bankers

needed to evaluate project

feasibility. In this context, micro

finance institutions have

emerged as bankers of informal

sector. Mr. Anoop Kaul,

National Head Financial

Inclusion, BASIX, referred to

some of the initiatives that

BASIX has taken up in this

regard. BASIX is present in

micro finance and helping

informal entrepreneurs

considerably. Ms. Anubha

Prasad, DGM of SIDBI,

explained about SIDBI

initiatives in reaching out to

informal sector and financial

inclusion strategies. Shementioned about the works of


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SIDBI Foundation for Micro

Finance and other such steps

taken by SIDBI.

Marketing, brand-building,

packaging and quality

Mr. Charles Dhinakaran, Project

Officer at CASA, apart from

giving a macro overview of the

informal sector, addressed some

of the challenges such as

marketing, brand-building,

better packaging, quality etc.

Ms. Anubha Prasad also


enhancing the competiveness

and quality, as they determinethe viability of any project

whether in the formal or

informal sector.

Informal sector as part of

global value chain: success

stories and strategies

In the era of global market, it is

important for enterprises to get

equipped to be part of global

value chains. In this context they

need to address issues like better

designs, quality of the products,

packaging as well as IT based

marketing tools as well. Mr.

Charles referred about some of

the models, such as FABINDIA.

How FAB India procures frominformal sector ventures and


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ensures good prices for their

products was narrated. Also, he

narrated some of the initiatives

by NGOs.

Mr. K. S. Ahluwalia, talked

about how Earthen Creations, a

venture initiated by his wife, Ms.

Harpreet Ahluwalia. Earthern

Creations is an organization

working among pottery

entrepreneurs in 20 clusters in

India. He explained how they

could empower and help them in

marketing and how could they

contribute towards welfare and

enhanced income levels of these

entrepreneurs. Handicrafts is avast sector, Primarily a rural,

disorganized market its

market size is estimated to be

around Rs. 5,000 crores out of

which terracotta pots account

for Rs. 50 crores. Since the

potters are spread across in god

forsaken locations, and their

produce mostly gets consumed

at the village weekly haats level.

Though a sector dominated by

handicrafts men, potters etc,

they dont get good price.

Handicrafts have now become

an industry of capitalists rather

than that of commoners. In this

context, Earthern Creations have

worked with over 1 lakh

entrepreneurs in pottery sector

in 20 clusters across the country.

Since bulks of these products fail

to reach the cities, the export

market is largely untapped.Most exports are being done at


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Mr. Ashish Porwal of Srathak

Advocates and Solicitors talked

about the need for reforms and

legal framework impacting

informal sector enterprises.

There is a need for further

simplification of procedures and

process. Though, a lot reforms

had taken place nothing much

had reached to the lowest level

at DICs, said Mr. Vijaya Seth,

General Secretary, Indian Micro,

Small Industry and HandicraftsAssociation.

Informal sector moving into

formal business space:

success story of HRA E-

Waste Pvt Ltd

E-Waste Handling and

Management Rules-2011 have

become effective from 1st May

2012. Rules would be applicable

to every producer, consumer and

bulk consumer involved in

manufacture, sales, purchase

and processing of electronic

equipment or components.

Under these rules the producers

and the bulk consumers have to

recycle the E-waste or help in

channelizing the e-waste to only

the authorized entities to do so.

They have realized that this new

rule would have serious impact

on informal sector waste

workers and kabadiwalas. As ofnow 95 percent or more of the e-


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waste collection, segregation and

even refurbish or recycling is

being done by those in the

informal sector. With the new

rule, they feared that their

members would be thrown out

of this field. As such kabadi or

waste gathering communities

are reluctant to join the

mainstream and formalize their

businesses. All India Kabadi

Mazdoor Mahasangh (AIKMM)

took initiative to protect the

livelihood of those involved in

this informal business

traditionally in the context of

new policies and regulation.

Here emerged HRA e-Waste Pvt.

Ltd, said Mr. Vighnesh Jha who

spoke on behalf of All India

Kabadi Mazdoor Mahasangh.

Members of this informal sector

entrepreneurs association calledAIKMM would now legally

authorize its members for e-

garbage collection from any

private or public sector

companies.

Role of modernization and

technology adoption: Case

of Urban Cycle Rickshaw

Entrepreneurs

Mr. Vighnesh Jha, Federation of

Rickshaw Pullers of India,

presented the case of

modernization attempt by

informal urban transport

providers like cycle rickshaw

workers and others. He

explained the initiatives likesolar rickshaws and innovations


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that are happening in the sector.

He called for introducing

minimum charges per kilometer

and metered rickshaws. Some of

the finance related issues also

came up during discussion and

Ms. Anubha Prasad promised to

look in to the problems of

finance availability for

modernization through the

Federation. And Mr. P. K Padhy

also agreed to look into some of

the demands made by Mr. Jha.

Policy contradictions

affecting enterprise health

& security

Mr. M. L. Dhawan of LaghuUdyog Bharati highlighted

various challenges faced by the

sector such as labor shortage. He

also said how employment

guarantee schemes by the

government is affecting the

sector and acting

counterproductive to production

process and entrepreneurship

and SMEs in the country,

including informal

manufacturing in the rural as

well as urban India.

Institutional mechanism

needed

Dr. Koshy called for introducing

a support system, aninstitutional mechanism for


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providing needed support to

informal sector. He said an

Enterprise Resource Centre is

what is needed for strengthening

informal ventures. Such a

mechanism has to be created for

enabling & facilitating their

upwardly growth in the

enterprise pyramid so that they

could contribute much more to

the economic development,

employment generation and

poverty alleviation. Institutional

mechanism that would be

created can facilitate the

formation of new start-ups and

work to empower and assist

informal sector enterprises as

well as micro & small enterprises

in their growth and expansion.

This mechanism should have the

capacity to address some of the

issues that the enterprises facesuch as credit related issues, lack

of information, marketing

support, technological and

technical assistance etc.

A possible solution for this may

be instituting a country wide

network of Enterprise Resource

Centres (ERCs) at Community

Development Block (CDBs)

level. Providing appropriate

support system to enterprises

are very crucial for their survival

in the competitive global

market. The support system is

required to provide assistance to

firms in terms of identifiying

new markets, appropriate

technology, smooth flow of

institutional credit, smooth


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dealing with the regulatory

system and in any other such

matters that enterprises need

support.

Other presentations

Also, those who talked and

participated in the discussions

are Mr. Anoop Kaul, National

Head, Financial Inclusion,

Basix; Dr. S. K Surana, All India

Plastics Industries Association;Mr. Vijay Seth, Indian Micro,

Small Industry and Handicrafts

Association; and Mr. Bhupesh

Sharma, Technical Officer

Shriram Institute, New Delhi.

To conclude:

Earlier on the day, Mr. Sunil D

Sharma, Secretary General of

ISSME welcomed the audience

and talked about the focus of

ISSME. In his message Secretary

General mentioned about

initiatives and technology

package offers and technology

support provided by ISSME to

informal sector enterprises and

MSMEs. Mr. Siddhartha Mishra,

introduced ISSME to the


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ElegantKurtis

participants. Mr. Mishra

presented objectives, vision and

mission of ISSME as well

activities and a brief report.

Deliberations at this round table

workshop, as expected, helped

develop a deeper understanding,

knowledge and consensus with

regard to way forward and

strategies to be adopted in

empowering informal sector

enterprises, as they move aheadwith global market realities.

Informal sector enterprise

associations, NGOs, Industry

associations decided to work

together in achieving the goals

and in empowering informal

sector. They promised to share

information, resources and work

together in achieving the goals.

ISSME is thankful to the

Supporters of the event: Mystic

Mountain Camps Pvt. Ltd.,

Elegant Kurtis, Store Next Door

and Keramic Inc.


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Annexure A

Note on Informal Sector Enterprises:

Definitions and Some Information

The organised sector comprises enterprises for which thestatistics are available from the budget documents or reportsetc.(Ministry of Labour, GOI) On the other hand the informal

sector or unorganised sector refersto 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. (NCEUS, 2007).

The Central Statistical Organisation uses the term organisedenterprise as small units with ten or more workers with power or

20 or more workers without power for the manufacturing sector.

(NCEUS, 2007)

An enterprise is unregistered when it is not registered underspecific forms of national legislation (e.g. factories' or

commercial acts, tax or social security laws, professional groups'

regulatory acts). ( ILO, 2012)


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Issuing of a trade license or business permit under localregulations does not qualify as registration.

An enterprise is considered small when its size in terms ofemployment is below a specific threshold (e.g. five persons

engaged) to be determined according to national circumstances.

( ILO 2012)

Most of the informal sector enterprises do not maintain businessaccounts. And they do not pay taxes; has limited access to

formal credit.

In 1972, the term informal sector was first used by theInternational Labour Organisation (ILO) to denote a wide range

of small and unregistered economic activities. Since then, the

term has been debated much for want of a universally acceptable

definition. In the Fifteenth International Conference of Labour

Statisticians (15th ICLS) held in 1993 at Geneva, the Labour

Statisticians discussed various issues relating to the concept and

definition of informal sector and took a resolution concerning

statistics of employment in the informal sector. Later, the

System of National Accounts (SNA 1993) recommended by the

United Nations also endorsed this resolution with regard to the

concept of informal sector.( ILO, 2012)


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Operational definitions: For statistical purposes, theinformal sector is regarded as a group of production units which,

according to the definitions and classifications provided in the

United Nations System of National Accounts (Rev. 4), form part

of the household sector as household enterprises or,

equivalently, unincorporated enterprises owned by households.

(NSC 2012)Definition as per National Commission for Enterprises in

the Unorganized Sector (NCEUS)

Informal Sector: The unorganized sector consists of allunincorporated 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. ( NCEUS, 2007)

Informal worker/employment: Unorganized workers consist

of those working in the unorganized sector or households,

excluding regular workers with social security benefits provided by

the employers and the workers in the formal sector without any

employment and social security benefits provided by the

employers. ( NCEUS, 2012)


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Informal economy: The informal sector and its workers plus the

informal workers in the formal sector constitute the informal

economy(NCEUS, 2012)

Data and information on Informal Sector Enterprises

The registered factory sector in India representing the organizedmanufacturing sector is covered annually through the Annual

Survey of Industries (ASI)

The ASI covers all enterprises in the manufacturing sectorregistered under Sections 2m (i) and 2m (ii) of the Factories Act1948, i.e., enterprises employing 10 or more workers using

power, and those employing 20 or more workers without using

power. The units not covered under the ASI are treated as part of

the unorganized sector with respect to manufacturing activities

Surveys of unorganized manufacturing enterprises areconducted once in 5 years to meet the data gaps from this sector

especially for national accounts purposes to estimate their

contribution to GDP through indirect methods, using the

benchmark-indicator procedure.


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The share of unorganized manufacturing sector in the netdomestic product (NDP) of the manufacturing sector was 37.5%

in 19992000, which came down to 32.6% in 20072008 (CSO

2009)

The NSSO classifies informal enterprises into three types:

(i) own-account manufacturing enterprises (OAME) areenterprises run by household labor, i.e., with no hired

labor;

(ii) nondirectory manufacturing enterprises (NDME) have lessthan six workers with at least one hired worker; and

(iii) directory manufacturing enterprises (DME) are enterpriseswith six or more workers and at least one hired worker.

Household enterprise, where a single family owns and managesthe firm, as well as provides the labour, is the predominant type

of firm in the informal manufacturing sector, and make products

as diverse as coir mats, fireworks, furniture and garments

There has been new dynamism of the informal economy interms of output, employment and earnings. Faster and inclusive

growth needs special attention to informal economy. Sustaining

high levels of growth are also intertwined with improving


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domestic demand of those engaged in informal economy, and

addressing the needs of the sector in terms of credit, skills,

technology, marketing and infrastructure.

The terms unorganized and informal sectors are often usedinterchangeably. The informal sector may be broadly

characterized as consisting of units engaged in the production of

goods or services with the primary objective of generating

employment and incomes to the persons concerned (15 ICLS,

ILO, 1993). These units typically operate at a low level of

organization, with little or no division between labour and

capital as factors of production and on a small scale. Labourrelations - where they exist - are based mostly on casual

employment, kinship or personal and social relations rather than

contractual arrangements with formal guarantees.


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References

1. ILO (2012)Statistical update on employment in the informal economy , ILO -Department of Statistics, June 2012

2. NCEUS. (2007). Report on Conditions of Work and Promotion of Livelihoods in theUnorganised Sector. New Delhi: National Commission for Enterprises in the

Unorganized Sector.3. NSC (2012)Report of the Committee on Unorganised Sector Statistics, National

Statistical Commission Government of India, February 2012

4. NSSO, National Sample Survey Organisation (2001, 2009): Results of 55th and 61stround surveys on employment and unemployment

5. NSSO 67thRound:6. Papola, T.S. (1981), Urban informal sector in a developing economy, Vikas

Publishing House, New Delhi.

7. Unni, Jeemol and Murthy, S.V.R. (2005), Review of Current Definitions of theUnorganised and Informal Sector in India: Suggestions for Consistent Definition,

NCEUS.

8. UN (1993), System of National Accounts, United Nations.9. Central Statistical Organisation/India: Expert Group on Informal Sector Statistics

(Delhi Group), Reports of various meetings

10.Resolution concerning statistics of employment in the informal sector, adopted by theFifteenth International Conference of Labour Statisticians (January 1993)
http://www.ilo.org/wcmsp5/groups/public/---dgreports/--%20stat/documents/normativeinstrument/wcms_087484.pdfhttp://www.ilo.org/wcmsp5/groups/public/---dgreports/--%20stat/documents/normativeinstrument/wcms_087484.pdfhttp://www.ilo.org/wcmsp5/groups/public/---dgreports/--%20stat/documents/normativeinstrument/wcms_087484.pdfhttp://www.ilo.org/wcmsp5/groups/public/---dgreports/--%20stat/documents/normativeinstrument/wcms_087484.pdf


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Linking SMEs Worldwide...

The International Society for Small and Medium Enterprises (ISSME) - an ISO 9001 certified International Non-

Government Organisation, with its headquarters at New Delhi - has been working for the cause and development of

Micro, Small and Medium Enterprises (MSMEs) world over since its inception in 2010. It is always on the lookout for

avenues for enterprises and entrepreneurs so as to enable people participate in the market process. It works with its

members, affiliates and partners across the world for the promotion of MSMEs. ISSME brings together policy

makers, facilitators, experts, educators, researchers and small business enterprises from around the world. They use

this platform to share their experience, knowledge and expertise in their respective fields.

International Society for Small and Medium Enterprises

Postal Address

P O Box No. 4354, Kalkaji HPO,

New Delhi 110019, India

INTERNATIONAL SOCIETY FOR

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