Informal Labour in Urban India

Tom Barnes

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781317571001
• Edition: 1
• Topic: Scienze sociali
• Subtopic: Studi sull'etnia

During the last two decades, rapid economic growth and development in India has been based upon the mass employment of informal labour. Using case studies from three urban regions, this book examines this growth in modern India's cities and towns. It argues that India has undergone a process of uneven and combined development during its integration with the world economy, leading to a distorted form of urban development.

This book is about work and resistance in India's massive 'informal economy'. It looks at the growth of informal labour in Bangalore, Mumbai and New Delhi during an era of neoliberal economic policymaking. Going beyond mainstream accounts, it argues that India's rapid economic development has been based upon the mass employment of workers on low wages who lack basic social protection and rights at work. It discusses how urban development in India is characterised by a combination of industrialisation, industrial relocation, restructuring and informalisation. Departing from some existing studies of de-industrialisation, it re-frames informalisation as a process that complements, rather than contradicts, contemporary industrialisation in rapidly-emerging economies. The book adopts a 'classes of labour' approach, classifying each case of informal labour as a specific 'form of exploitation': as a different way for employers to lower production costs, control workers and increase enterprise flexibility.

Offering a critique of existing data on the measurement and monitoring of informal labour and employment, the book is relevant to students and scholars of Development Studies, International Political Economy and South Asian Studies.

1
India’s informal economy

In recent years, mainstream accounts of India’s economy have wavered between puffed-up optimism and weary disappointment. Near the beginning of the century, India was lumped into the group of ‘BRIC’ economies (Brazil, Russia, India and China), each with the potential to challenge the United States, Japan and Europe as global economic powers (Wilson and Purushothaman, 2003). Excited business academics even argued that India, with its huge domestic market, youthful demographic and democratic political institutions, could eventually overtake China to lead the pack of emerging economies (Khanna and Huang, 2003). India’s prosperous new economy was supposedly spearheaded by dynamic new industries like IT and business services (Friedman, 2006). There is no doubt, India has shifted from a comparatively low-growth to a high-growth economy since the 1970s. Rising growth has clearly been influenced by the gradual ‘liberalisation’ of trade and investment during this period, including ‘neoliberal’ economic reforms implemented in 1991.¹ Between 2000 and 2010, the yearly average for economic growth per capita was 6 per cent, up from 3.7 per cent in the 1990s and 3 per cent in the 1980s. By comparison, average growth was 2 per cent in the 1950s, 1.5 per cent in the 1960s and 0.9 per cent in the 1970s.² In the four years to 2007–08, India was the second-fastest growing major economy in the world.

But since the Great Recession began in the West in 2007–08, Indian economic growth has declined significantly, even though it remains high by historical standards. Neoliberal scholars have been quick to point to ongoing barriers to prosperity like inadequate transport infrastructure, poor school education and ‘inflexible’ labour laws (Ahluwalia, 2011). Price inflation has been on the rise. The Wholesale Price Index, which gives a useful indication of price changes in agriculture and food, rose to 9.6 and 8.9 per cent in 2010–11 and 2011–12 respectively. This compares to a yearly average of 5.9 per cent between 1994 and 2005.³ Higher food and fuel prices have made life much harder in a country where millions remain in poverty. Most recently, India’s exposure to the stagnating world economy led to balance-of-payments instability, with the value of Rupee dipping sharply in mid-2013, pushing living costs even higher (Ghosh, 2013). Despite a number of new policies, the failure of government to ameliorate these problems has influenced major changes in the political landscape.

For example, the Unorganised Workers’ Social Security Act 2008 was supposed to provide social security for ‘informal workers’. The Right to Education Act 2009 stipulated compulsory free education for all children below 14 years of age. The National Food Security Act 2013 is supposed to ration basic foods like rice and wheat. Perhaps most well-known is the Mahatma Gandhi National Rural Employment Guarantee Act 2005 (NREGA), which was passed to provide 100 days of voluntary manual work per year at the minimum wage for one member of each rural household. Despite passing these and other supposedly protective laws, the coalition government led by the Indian National Congress was routed at the 2014 general election. The new government is dominated by the right-wing Hindu nationalist Bharatiya Janata Party (BJP), led by Prime Minister Narendra Modi. Modi is also a lifelong member of a far-right group, Rashtriya Swayamsevak Sangh (RSS), which has been implicated in many violent attacks targeted, especially, at Muslims. One of the ironies of Modi’s victory in 2014 is that the BJP itself was unceremoniously, and unexpectedly, dumped from office 10 years earlier, having championed the virtues of India’s high growth economy while in office between 1998 and 2004.

This book takes a critical, longer-term view of India’s economic transition. It focuses on employment and livelihoods in India’s massive ‘informal economy’. Most people in contemporary India scrape a living in small enterprises based in trade, manufacturing, construction or agriculture. But, alongside this ongoing reality, India has also experienced an industrial transformation that has been profoundly influenced by the country’s integration with the world economy as well as government efforts to lift restrictions on trade and investment. After lagging economic growth for decades, employment in large firms – the so-called ‘organised’ or ‘formal’ sector – has recovered since the mid-2000s. In some parts of the country, domestic and foreign firms have been adopting technologically-advanced ‘world’s best practice’ production. International trade and foreign investment have played a role in influencing this formal sector employment growth.

However, many scholars have rightly resisted the conclusion that India is undergoing a transition to a Western-style industrial and consumer society. India has many distinctive historical, institutional and cultural characteristics that have conditioned the process of capitalist development. Furthermore, the very process of industrial development in the 1990s and 2000s, in India and globally, has been different from what occurred decades ago in the West or even northeast Asian countries like Japan or South Korea. Specifically, rapid economic growth and development in India has been based upon the mass employment of informal labour. As this book demonstrates, this has been based upon a major shift towards the employment of wage workers in informal enterprises and, in several key urban regions, the concentration of informal wage workers in large, formal sector enterprises. The book argues that this contradictory process has been driven by uneven and combined development: on the ‘combination’ of existing social structures of accumulation with the advanced features of global capitalism.

The growth of informal labour has been a complex, multi-faceted process. In part, it comes from myriad enterprises, many of which are linked to global markets, taking advantage of labour practices embedded in regional social structures of accumulation. These structures are based upon production in agriculture and in non-agricultural informal enterprises. India’s agrarian economy has experienced a process of growing economic inequality and social class differentiation over many decades, gradually exposing a divide between groups of prosperous commercial farmers, on the one hand, and marginal farmers and landless rural labourers, on the other. For rural households with marginal or very small landholdings, the balance of household income has shifted towards wages earned in ‘non-farm’ employment. For landless labourers, income is often scraped together from an assortment of precarious jobs in agriculture, trade or manufacturing. While most people are still based in rural areas, the agrarian economy can no longer provide stable livelihoods and income for the majority. This paradox has generated huge surpluses of rural labour. Many workers are on the move in search of wage work in various sectors like trade and construction. Some have found ongoing employment in manufacturing enterprises in new industrial zones or as self-employed traders and street vendors. Others remain as home-based workers, relying upon orders generated by large firms, vendors and merchants. In most cases, wages are very low and there is little social protection or income security. As I hope to show, emerging industries in the new India have taken full advantage of these surpluses of rural, migrant and home-based labour.

Many of these things are well known and well established in India today. But this book is distinctive in its attempt to show how rapid economic development has encompassed the expansion of informal wage labour in formal sector enterprises alongside the expansion of wage labour in small, informal enterprises. As we shall see, these claims are quite different from those which emphasise the centrality of self-employment and petty-commodity production in Indian labour markets. The book also shows how these trends are driven by a global process that links regional social structures of accumulation to international markets through trade and foreign investment. As part of this process, informal labour practices have been transplanted into India from the global economy as well as being drawn from the surpluses of precarious labour spread across India’s rural and peri-urban economies. The result has been an industrial development of sorts. India has industrialised in a geographically uneven way, with pockets of large-scale industry thriving in some regions, while traditional industries have withered in others. Urban development has been a conflict-ridden process. Emerging industries have been facilitated by subsidies, tax breaks, cheap power and land. This has opened up new vistas of capital accumulation, including real estate development, financial speculation and new havens of retail consumerism. Urban development has had an unequal and, sometimes, divisive impact on regional communities. In some regions, a minority of landowners and cultivators have benefited from inflated land prices. In others, marginal farmers and their families have been dispossessed without adequate compensation. Some traditional centres of industry have been ‘hollowed out’ while, in a few other regions, high-growth industrial zones have emerged within a single generation to dominate regional production and employment.

India has undergone a partial and uneven process of industrialisation during a period of economic liberalisation and global economic integration since the 1980s. I hope to show that, while this process has marked a new phase in India’s economic history, this is not something to be celebrated: rather, this new phase is based upon new forms of dispossession, exploitation and resistance. Focusing on industrial development and employment in key urban regions provides a way of observing, measuring and analysing changes to the structures of labour forces. It means that we can look, in a systematic way, at new forms of exploitation and inequality and make some assessment about the challenges that face civil society organisations, especially trade unions, labour NGOs and progressive political parties, that attempt to organise or represent these workers. The book studies labour market data and looks at case studies of industrial development and employment growth in three urban regions: Greater Mumbai, Bangalore and the National Capital Region surrounding New Delhi. While this book does not analyse every region of India, it does compare changes in these three regions with national-level trends in industry and employment in the 1990s and 2000s.

Urban development in these regions also occurs against the wider background of India’s predominantly rural society. While one could legitimately focus on changes in rural villages and towns, I argue that analysis of changes in major urban regions provides a useful way of understanding a crucial part of India’s development experience. It focuses on the geographical interface between national–regional development and the global economic integration which has underpinned so many of the recent changes in Indian society. Large urban regions also operate as conduits between villages, towns and cities for millions of people who migrate in search of employment. Migration and ongoing rural– urban ties have shaped the employment practices of industrialists. As we shall see, these ties have strongly influenced a systematic preference for informal employment arrangements that enable employers to keep wages low, maximise ‘hire-and-fire’ flexibility and combat attempts to collectively bargain through trade unions. This opening chapter introduces the themes and approach of this book by, first, looking at India’s record of industrial development since economic liberalisation began in the 1980s. The second part of the chapter frames this as a case of uneven and combined development. It explains the origins of this theory and how it can be applied to contemporary India to help explain the process of informalisation. Third, this chapter looks at the various factors that have contributed to rising informal employment. Finally, the chapter explains how these themes will be pursued throughout the book.

Industrial development in contemporary India

There is no question that informal labour dominates employment in India. By the early 2000s, over 93 per cent of employment was informal (ILO, 2002a). In fact, informal labour plays a dominant role in labour markets across the Global South. By the early 2000s, it accounted for about half of all employment in Latin America (Portes and Hoffman, 2003). Nearly half of China’s urban labour force was employed under informal arrangements by 2005 (Park and Cai, 2011). But what does ‘informal’ mean? The term is often used to refer to the absence of state regulations, tax avoidance or even criminal activities. Sometimes it is used to refer to the ‘black’ or ‘cash’ economy. In other cases, scholars have written of an ‘informal sector’ comprised or small or ‘micro-’ enterprises run by self-employed workers and their families. In fact, there is disagreement about exactly what ‘informal’ is supposed to mean. In this book, informality is defined as a category of disadvantage, as the absence, relaxation or systematic avoidance of state regulations and as a dynamic historical and geographical process that changes the relationship between different types of work and employment – or, following Banaji (2010), what I will call different ‘forms of exploitation’. Chapter 2 explains in detail how I have arrived at this definition. The intention, for now, is to introduce the concept of informalisation – the idea that labour has become more informal – as a process that has occurred in the context of India’s rapid economic development in recent decades.

To begin with, India’s informal economy has clearly intersected with its economic and industrial development. This is not just a story about micro-enterprises and self-employed workers. In fact, formal sector employment has grown since the mid-2000s, having lagged behind economic growth in previous decades. In India, this is known as the organised sector, which generally applies to non-agricultural firms with 10 or more workers.⁴ Most people work in the unorganised sector, or in firms that employ fewer than 10 workers. Scholars have pointed to a recovery in organised sector employment growth since the early 2000s. Organised sector employment grew by 7.2 per cent between 2004/05 and 2009–10 compared to 1.2 per cent between 1999–00 and 2004–05 (Ghose, 2012). During the earlier period, many scholars were worried that economic growth was relatively ‘jobless’: in other words, employment was growing much more slowly than output (P. Patnaik, 1997; Mathur, 2009; Naidu, 2009). So clearly there has been some sort of recovery in more recent times. Organised sector manufacturing grew at an average annual rate of 7.6 per cent between 2003–04 and 2008–09. It grew particularly quickly in some states, such as two we will analyse in this book: Haryana (13.8 per cent) and Karnataka (8.7 per cent) (Goldar, 2011).⁵

While this suggests that some kind of industrialisation has been underway, it does not mean that India’s economy is following a path similar to earlier phases of industrialisation in countries in North America, Western Europe or Northeast Asia. Many scholars have resisted the idea that rapid development in India means it is transforming into a ‘modern’ industrial society. One reason to be sceptical is that India’s path of economic development has been ‘services-intensive’ or even ‘services-led’. While the proportion of people employed in agriculture has been falling for decades – by 2011–12, the proportion of people employed in the primary sector had dropped to 48.9 per cent (Government of India, 2013) – this has not carried over into a significant rise in the manufacturing share of employment. Manufacturing steadied at roughly 16 per cent of national output from 1980 to 2002, while services increased from 37 to 49 per cent (Singh, 2008: 235). For urban areas, the proportion of people employed in ‘tertiary’ activities increased from 55.9 in 1994–95 to 58.3 per cent in 2011–12. In 2011–12, the largest share of tertiary employment was represented by trade (33.6 per cent), followed by transport (12.7 per cent), education (9.4 per cent) and public administration (7.1 per cent). There was some growth in manufacturing in urban areas during this period. The number of people employed in ‘secondary’ activities increased from 33.2 to 35.0 per cent of total employment over this period. Manufacturing was the largest share of secondary employment in 2011–12 (69.0 per cent) followed by construction (27.2 per cent). However, most of this growth was represented by the construction sector, not manufacturing.⁶

Many scholars thus argue that there has not really been any transition to an ‘industrial society’ in India. Some characterise India as an economy based on small-scale or ‘petty’ commodity production, mostly located in small towns and villages where people struggle to find ongoing employment as sustainable livelihoods have gradually atrophied in agriculture (Basile, 2013). Some argue that land redistribution measures during in the postcolonial period were inadequate. They could not produce the transformation in agrarian production necessary to accumulate investable surpluses of a sufficient scale to stimulate growth and employment in manufacturing (Mazumdar, 2010). This helps to explain the services-intensive character of the Indian economy today. For others, this means that India has developed a peculiar variety of capitalism – a ‘post-agrarian’ rather than an ‘industrial’ capitalism:

The trajectory of capitalist development which has come to dominate the South Asian landscape seems to be significantly different, on the one hand, from the earlier factorised production characteristic for the process of industrialisation and urbanisation during the nineteenth century in the North Atlantic part of the world and, on the other hand, from the brand of industrial capitalism that has emerged more recently and so forcefully in parts of East Asia.

(Breman, 1996: 264)

Elsewhere, Breman has written that the:

history of industrialisation suggests an evolution that finds its climax when the great majority of the working population has become factorised. This is the classic path of economic development which structured western society. However, the capitalist route followed in India during the second half of the twentieth century has clearly not been in accordance with this dominant model. The importance of agriculture has certainly decreased, but the labour expelled from it has not been absorbed by urban factories.

(Breman, 1999a: 428)

These critical insights contrast sharply with excitable mainstream views about India’s transition to high growth, like those cited at the beginning of this chapter. But these mainstream arguments have not merely received an audience because of intellectual fashion. An important reason why they have currency is that parts of the Indian economy appear to have undergone an industrialisation process of sorts. Government measures to liberalise international trade and investment since the 1980s have influenced the expansion of powerful firms. Industries have taken advantage of foreign technologies, management practices and work organisation. Key examples include the IT and the automotive industries. The IT industry expanded from humble beginnings in the 1980s to become a world-leader in software services in the 2000s. The peak employers’ organisation for the industry, NASSCOM,⁷ claims that employment in the IT industry grew by eight times between 2000 and 2009, reaching about 2.2 million and generating indirect employment for around eight million people. While its impact on total employment is small relative to the Indian economy as a whole, IT firms have had a major impact on India’s macroeconomic stability during the 2000s by providing substantial export earnings (Barnes, 2012).

The industry’s rise has been driven by enormous support from governments, including cheap power and tax cuts for export-oriented firms and foreign investors based in ‘Special Economic Zones’ (SEZs) (Pinglé, 1999; Upadhya and Vasavi, 2006). It has also been driven by the rise of affluent and middle-income earners – the so-called ‘middle classes’ – who have provided IT firms with a large reservoir of well-educated young workers (Murphy, 2011). The largest and most successful firms represent a powerful set of corporate interests demanding ongoing assistance from government. This relationship has been characterised as a ‘New Delhi–Bangalore–Hyd...