CHAPTER II GROWTH OF INFORMAL SECTOR IN URBAN ORISSA

Transcription

1 CHAPTER II GROWTH OF INFORMAL SECTOR IN URBAN ORISSA

2 42 Development of informal sector in India has reached ~ stage where it is not considered simply a source of some extra income and ad hoc employment generation but as a potential source of employment and income generation for the constantly increasing labour force (especially urban labour force) primarily because of limited work opportunities in the organised or formal sector of the urban economy. The explanation and examination of impact of labour absorption as well as labour use in urban informal sector is based on the assumption that informal sector would be providing additional employment opportunities in future given the slow growth of employment generation in the formal sector. The explanation of linkages between urban informai sector growth and employment growth are based on the following basic propositions: ( 1) The rate of growth of informal sector units as well as workers are relatively faster than the formal sector in the urban areas. (2) There exists strong positive correlation between the level of informal sector workers with the level of total manufacturing sector workers at district level on the one hand and, share of informal manufacturing sector workers to total manufacturing sector workers on the other, districts having higher share of its working population in the informal sector have a higher share of its work force in the formal and informal manufacturing activities. (3) Districts with larger industrial base are likely to have a higher growth rate of

3 43 units and employment in the informaf sector over a period of time. ( 4) Growth of informal sector is the result of the growth of urbanisation,. i.e. districts which have a higher share of urban population have a higher concentration of informal sector activities. II. 1 DATA BASE In most developing countries a complete list of all the establishments is not available: in particular the smaller enterprises are either not registered with any official body and hence not to be found in any statistical information, or they cannot be reached by the statistical authorities owing to absence of information on their whereabouts, or because of their itinerent character or because of their ill-defined status, or the authorities are not concerned about such data (Sethuraman; 1981; 26). In India, while data are being regularly collected for some organised segements, there is almost complete lack of reliable data in the unorganised segments. For example, data on manufacturing establishments registered under Factories Act, 1948, are being regularly collected through the 11 Annual Survey of Industries 11 But there is no regular collection of dependable statistics for small manufacturing units, i.e. manufacturing establishments using power and employing less than 10 workers or those not using power and employing less than 20 persons (which has been taken as a criterion for

4 44 informal sector units in the present study). The basic difficulties encountered, in this regard, are the following: i. These units have decentralised and geographically diffused character coupled with high mortality rate for individual units, hence the cost of collecting information relative to its importance according to productivity may have been high. ii. This sector is divided into two different production organisations namely a) family enterprises carrying on productive activity in the household helped mainly by family members and b) unregistered workshops with mostly single proprietorship, or partnership where the productive activity is carried on by own account workers with the help of hired labour. The problem of data collection from them is different from that of others. Either household or non-registered manufacturing enterprises can be the ultimate stage unit in the sampling frame. In the first type of frame, the household enterprises are fairly covered, while the non-household ones are not likely to be fully captured, and vice-versa if the second type of frame is used. One important aspect in this regard is the definition of household enterprise which generally varies from one source of data to another. Some times it varies even for the same source of data over a

5 45 period of time. At the sa~e time, in distinguishing between 'gainful' there are problems and 'non-gainful' activity in case of household enterprised. iii. The criteria used for specifying this sector have varied according to the policy regulations and concessions covering the various individual industries within the sector (Saluja: 1988: 54-55}. Only recently (in 1977) the Central Government has started collecting information on the unorganised sector through a country wide Economic Census. Information in this regard for 1961 and 1971 is also available in the Population Census Housing and Establishment Tables for 1961, and. Establishment Tables for 1971 Census. As the availability of comparable data over a period of time for the unorganised sector is limited, it is difficult to judge the growth of this sector as a whole. Even point to point comparison, on the basis of the Census data, is constrained because of definitional change in the 'worker' category. In this section, therefore, every effort has been made to assess the growth and changes in this sector QY adjusting the available data so as to make them comparable. In the 1961 census, information in respect of manufacturing and processing establishments was collected through the household list/ schedule regarding, ( i) the

6 46 product, repair or eervice undertaken, (ii) average number of persons employed, (iii) kind of fuel or power, if machinery used and so on. Data for 1961 are contained in Housing and Establishment Tables and Household Economic Tables of 1961 Census. Since, this census provided only aggregate information, information on manufacturing units is only utilised for our analysis. Information on the number of workers in the formal sector is very difficult to arrive at from this census as data were only given for the total workers in various activities. Analysis for 1971 is based on the information contained in the Establishment Tables. The information collected relate to the type of establishment, average number of workers, whether household or non-household or registered under the Factories Act, description of the product manufactured or processed, types of power use and so on. The results are tabulated separately for the rural and urban areas of each district at. the two digit level industry groups. These tables attempt to cover the number of establishments along with the employment aspects of the entire industrial sector. The data are tabulated separately for the registered factories, unregistered workshops and the household units. In the present study, only those units in the manuafcturing sector having less than 10 workers with

7 47 power and those with less than 20 workers without power have been taken into consideration. For trade, commerce and other establishment cases, units with less than 20 workers are considered as informal. Units with unspecified workers have been included in informal sector and their employment potential is considered as equivalent to the average number of employment of the informal sector. In October-December 1977 the first Economic Census was conducted by Central Statistical Organisation (CSO) in collaboration with the State Directorates of Economics and Statistics. The census was confined to the listing of addresses of the establishments aling with certain basic characteristics like, type of ownership, type of power used, number of persons usually working and so on. For the purpose of this census an establishment was defined as a unit or a household which undertakes non-agricultural activities and employs at least one hired worker on a fairly regular basis. Thus, it did not cover the own-account enterprises utilising family labour. The census covered all the unorganised sector of the economy manufacturing, trade, transport and services. Since this study is based on the whole of unorganised sector, that is both household and non-household units, and the 1977 Economic Census did not cover the own account enterprises, hence in the analysis it was not taken into consideration.

8 48 The second econcimic census was carried out in 1980 along with the house-listing operations for the 1981 population census. enterprises also. This census included own-account Besides non-agricultural enterprises, agricultural enterprises, excluding crop production and plantations, were also covered. The analysis for 1980 is based on the Economic Census of identifying informal sector has been the The criteria for same as in However, in this case the units and workers of the agricultural own account enterprises and establishments have not been taken into account in order to maintain comparability of data with 1971 census. It is noteworth that while in the 1971 census all household units and person~. employed therein have been considered to be in an informal activity, in 1980 all own account enterprises and their employees have been cons ide red for the same purpose. The 1990 analysis is based on the provisional result of 1990 Economic Census. Since this report only provides aggregate figures, to get disaggregated data, various estimates based on proportions and growth rates of 1971 population census and 1980 Economic Census have been used. II.2 INFORMAL SECTOR SCENARIO IN URBAN ORISSA During these two decades one can observe marked changes in the pat tern and growth of the informal sector in urban Orissa, which can be noticed among the districts as well as

9 49 within the districts. To bring out the marked differ.~3nces and show the performance of the informal sector in the urban economy over the decades various ratios have been worked out (see tables II.1, II.2, II.3). Informal Sector Unit:s A high proportion of the units in the urban economy of Orissa are unorganised in nature. From table II. 1 to II. 3 one can see that more than 90 per. cent of the units are informal in nature for all the three time periods. This seems to be inflated because of the criterion chosen for identification of the urban informal sector. The share of the informal sector units has remained constant from 1971 to 1980 but there has been a marginal increase in its share in 1990 from 96.7 per cent to 97.2 per cent. The manufacturing activities of the informal sector in Orissa is in line with the sectoral shift pattern prevailing in the country. Only 22.9 per cent, 21.2 per cent and 21.4 per cent of the units in 1971, 1980 and 1990 respectively have been engaged in manufacturing activities; which clearly brings out the importance of the trade, commerce and other activities in the informal sector. This is due to the fact that most of the new entrants to these sectors are either migrants or poor and, hence, have limited resources to start manufacturing activities. Further, entry into services and

10 50 tradi~g is easier, which may be one of the reasons for the growth of these activities. Share of the informal sector in the total manufacturing of the urban economy is having the same trend as that of the share of the total informal sector in total urban economy (Table II.1 to II.3). A higher proportion (more than 90 per cent) manufacturing units are informal in these areas. Informal Sector Workers Analysis based on the workforce participation is more important than analysis of the units in case of the urban informal sector as it brings out the logic of informal sector in a clearer manner. Any study to show the importance of the informal sector in the urban economy can either be based on the income generation capacity of this sector or employment generation capacity. Since secondary data on the income generation aspects of the sector is limited or non-existent, this study focuses on the employment aspects. Number of workers per unit is an important indicator in assessing the labour absorption capacity of the informal sector. An informal sector unit. in the urban areas of Orissa has employed 2.3 workers in 197~, 2.1 workers in 1980 and 2.3 workers in There exists wide disparity in employment per units at district level. In 1971, it varied from 2. 6 workers in Mayurbhanj and Keonjhar to 2. 1 workers in Dhenkanal district (table II.1). Table II.2 reveals similar

11 51 trend for 1980, where workers ratio is the highes<.. in Sundargarh and lowest in Balasore. Employment requirement per unit in the manufacturing activity is higher than that of trade or services except for 1971 (see table II.1, II.2 and II.3). Presence of high selfemployment in the trade and services may be taken as a plausible explanation for low employment requirement ratio in these activities compared with manufacturing activities. The structure of employment in the informal sector differs significantly among divisions of activities and among the districts [see tables II.1, II.2, II.3]. Informal sector workers constituted around one-half of the total employmen~ of the urban economy in However, it declined to 52.2 per cent in 1980 aud increased to 57.6 per cent in The share of maufacturing activities in total informal sector employment increased from 22.1 per cent in 1971 to 25.2 per cent in 1980 and then to 34.4 per cent in The increase is due to the increase in the total employment. The above trend is due to large scale economic activities in the urban areas which has attracted the labour from backward areas. But failure of migrant labour to be absorbed in the formal sector has led to the increase in self-employment in micro enterprises in the informal sector. Lack of skill and capital, explains the concentration of

12 52 j labour force in trade and services rather than in manufacturing activities within the informal sector. Increase in large and medium scale manufacturing activities in any urban area leads to increased informal sector activity in that area. Concentration of manufacturing activities in the urban area in turn led to the rural urban migration. Presence of wage differential between the labour markets of the two areas and the prev~iling unemployment and underemployment in the rural area are the two major reasons for this rural-urban migration. In the second stage the said manufacturing activities being highly capital intensive failed to create required number of jobs to absorb the inflated urban labour force and thus, forced the surplus labour to create jobs for themselves particularly in the informal sector. Trade and services activities in the informal sector also increases with the increase in manufacturing activity and thus, inflating the total informal sector. In order to see how far the informal sector activity is related to the manufacturing activity in the urban areas of Orissa a relatinship was tried out between the two. The relationship was found out to be positive and significant in all the three time periods. From this it can be inferred that whichever districts had a strong manufacturing base had a strong informal sector base also and vice versa.

13 53 Increase in the manufactu.i: ing activities in the urban area also led to an increased informal manufacturing activity. Migrants from rural areas, especially the rural artisans, due to the restriction of entry into the formal sector manufacturing have to start their own manufacturing activity either to cater to the demand of the local market or act as an anciliary industry to the formal sector. Even the local surplus labour entered into the informal sector manufacturing because of the increased demand for consumer goods due to the increase in the urban population. Correlating the share of manufacturing worker to the total worker and informal sector manufacturing worker to the total manufacturing worker, it is observed that in 1971 when the. ratio of manufacturing workers to total workers is higher, then the ratio of informal sector manufacturing workers to total manufacturing workers is also high and vice versa. However, in 1980 it shows a negative relationship between t:he two shares which may be due to the fact that increased manufacturing activities in the urban areas led to the increased activities in trade and services in the informal sector rather than an increase in the manufacturing activities. In 1990, however, the re'lationship between the two was found out to be positive but non significant. Increase in informal sector activities also led to the increase in informal sector manufacturing activities. In

14 the relationship was found out to be positive and significant thus showing that districts with strong informal sector base also had a strong informal manufacturing activity base. But in 1980 the result showed a negative relationship between the two which may be due to the increased trade and services activities in the sector and stagnation of manufacturing activities in those districts which had a strong manufacturing base in the early seventies. II.3 GROWTH OF INFORMAL SECTOR Expansion in the urban labour force due to the natural increse in population coupled with increased growth in ruralurban migration has led to the growth of the urban informal sector. Failure of the urban organised sector to absorb this increased surplus labour has also contributed to informal sector growth. In Orissa, the informal sector has grown at a faster rate over the first decade. While a rise in the number of informal sector units and employment is observed during , yet the rate of growth of the sector showed a decline during the second decade. Such contradictions may be partly due to definitional differences in the secondary data source. The trend of growth, districtwise of the informal sector, over the two decades, 1971 to 1980 and 1980 to 1990 are shown in Table 11.4 and II.S. In order to see whether

15 55 the districts had the same growth trend over the two decades in case of units as well as workers, the correlation of coefficient were worked out. From table I I. 4 one can see that the relationship between the growth of the informal sector units over the two decades is positive but non significant. In this case during the first decade the growth rate varied from 27.3 per cent per annum in case of Phulbani to 4.4 per cent per annum in Kalahandi. During the second. - decade it varied from 6. 9 per cent per annum ( Keonjhar and Puri) to 2.4 per cent per annum (Sundargarh). However irom this it is very difficult to ascertain the growth trend of most of the developed districts and the underdeveloped districts. From table I I. 4, which shows the growth trend of the informal sector manufacturing units for three decades, the same trend as in the case of informal sector total units can also be observed. The correlation coefficient between the decades show a positive trend. But the striking feature one can observe in this case is that the growth of manufacturing unit in the first decade ( ) is very less and then there is a sudden ris~ in the growth rate for the subsequent period ( ) and again it is very less for the decade Such a trend may be partly due to definitional differences in the secondary data source.

16 56 In Orissa, growth of the informal sector workers is very high incase of the first period ( ) i.e., 12.4 (tqble II.S). This is also true in the case of manufacturing workers of the informal sector i.e per cent per annum. However, in case of the informal sector total workers it declined sharply in the next decade ( ) but the decline is moderate in the case of manufacturing workers (table II.S). The correlation coefficients are positive in both the cases but are statistically non-significant. Growth of the informal sector can be linked to the growth of the formal sector and urbanisation. District~ with a higher level of formal sector activities and with a higher level of urbanization are liley to have a higher level ot informal sector activities and vice versa. Correlation coefficients between the growth of informal sector worker with that of formal sector workers and level of urbanisation with the level of informal sector workers were worked out:. From this exercise, it can be observed that the growth of informal sector workers is positively related with the growth of the formal sector workers and level of urbanization over the three time periods, thus proving th~ fact that informal sector growth is related to the growth of other two parameters (table II.6 and II.7).

17 57 Table II. 1 Level of Informal Sector Activities ln Urban Orisse D1str1cts C/A 0/B G/A H/B E/G F/H E/C F/0 D/C F/E Balasore Bolang1r Cut tack Dhenkanal Ganjam Kalahandi Keonjhar Koraput Mayurbhanj Phulban Puri Sambalpur Sundargarh Orissa Source: Based on Establishment Tables, Census of :lnd1a, Note 1 A Total Unit, B Total Worker, C Total Informal Sector Unit 0 Total Informal Sector Worker, E Informal Sector Manufacturing Unit F Informal Sector Manufacturing Worker, G Total Manufacturing Un1ts H Total Manufacturing Worker Correlation Co-efficient between Informal Sector Workers to Total Workers (x), Total Manufacturing Workers to Total Workers (y) and Informal Sector Manufacturing Workers to Total Manufacturing Workers (z) rxy '" 0.64* ryz 0.67* rxz " 0. 77* * Significant at 1% level.

18 58 Table II.2 Level of Informal Sector Activities 1n Urban Orissa, Districts C/A D/B G/A H/B E/G F/H E/C F/0 D/C F/E Balasore B.O Bolangir Cut tack Dhenkanal Ganjam Kalahandi Keonjhar Koraput ' Mayurbhanj Phulbani _fl Puri a Sambalpur Sundargarh Orissa Source: Based on Economic Census, Bureau of Statistics and Economics, Government of Orissa. Note A Total Unit, B Total Worker, C Total Informal Sector Unit D Total Informal Sector Worker, E Informal Sector Manufacturing Unit' F Informal Sector Manufacturing Worker, G Total Manufacturing Units H Total Manufacturing Worker Correlation Co-efficient between Informal Sector Workers to Total Workers (x), Total Manufacturing Workers to Total Workers (y) and Informal Sector Manufacturing Workers to Total Manufacturing Workers (z) 1980 rxy ryz rxz 0.59*

19 59 Table I I. 3 Level 2f~Informal Sector Ast1v1t1es 1n Urban Orissa, D1str1cts C/A D/8 H/8 E/G F/H E/C F/0 0/C F/E Balasore 9B Bolang1r Cut tack Dhenkanal 9." Ganjam Kalahandi Keonjhar Koraput Mayurbhanj Phulban Pur Sambalpur Sundargarh Orissa Source: Based on Provisional Results, Economic Census, ~990. Bureau of Statistics and Economics, Government of Orissa. Note A Total Unit, B = Total Worker, C Total Informal Sector Unit 0 Total Informal Sector Worker, E Informal Sector Manufacturing Unit F Informal Sector Manufacturing Worker, G Total Manufacturing Units H m Total Manufacturing Worker Correlation Co-efficient between Informal Sector Workers to Total Workers (x),, Total Manufacturing Workers to Total Workers (y) and Informal Sector Manufacturing Workers to Total Manufacturing Workers (z) 1990 rxy 0.69* ryz 0.22 rxz 0.07 * Significant at 1l level.

20 60 Table 11.4 Growth of Informal Sector Units and ManufPf.turing Units Total Units Manufacturing Units (x) (y) (z) Ba1asore Bolangir Cut tack Dhenkanal Ganjam Kalahandi Kenojhar Koraput , Mayurbhanj Phulbani Puri , Sambalpur , 6.87, Sundargarh Orissa Correlation Coefficient between Total Units of and (r) 0.16 't' value (0.54) Correlation Coefficient between Manufacturing Units of and (r) xy 0.32 't' value (1.12) Correlation Coefficient between Manufacturing Units of and (r) 0.39 't zvalue (1.4)

21 61 Table 11.5 Growth of Informal Sector Workers and Manufacturing Workers Total Units Manufacturing Units Ba-lasore Bolangir Cut tack Dhenkanal Ganjam Kalahandi Kenojhar Koraput Hayurbhanj Phulbani Pur Sambalpur Sundargarh Orissa Correlation Coeff1c1ent betweent Total Units of and (r) 0.28 't' value (0.97) Correlation Coefficient between Manufacturing Units of and (r) 0.37 't' value (1.32)

22 62 Table 11.6 Growth of Urban Formal Sector and Informal Sector Workers Informal Sector Worker Growth Formal Sector Worker Growth Balasore Bolangir Cut tack Dhenkanal Ganjam Kalahandi Kenojhar Koraput Mayurbhanj Phulbani Puri Sambalpur Sundargarh ; Correlation coefficient between informal sector and formal sector worker ( ) r 't' value (0.4} Correlation coefficient between Informal sector and formal sector worker ( ) r 't' value (1.12)

23 63 Table 11.7 Level of Urbanisation and Informal Sector-Workers % of Informal Sector Workers % Urban Population % Informal Sector Worker % Urban Population Balasore s. 5 Bolangir Cut tack Dhenkanal Ganjam Kalahandi Kenojhar Koraput Mayurbhanj Phulbani Puri Sambalpur Sundargarh Correlation Coefficient between Percentage of Informal Sector Workers and Percentage of Urban Population in 1971 (r) 0.17 't' value (0.56) Correlation Coefficient between Percentage of Informal Sector Workers and Percentage of Urban Population in (r) 0.5 't' value (1.92)