Outside the formal sector is a realm of economic activities constituting an important part of the urban economy. This is true not only of the capital but other urban centres in the country as well. Delhi is one of India’s oldest cities. As the country’s capital, it enjoys considerable privileges. For example, it is ahead of other Indian cities in its roads, electrical service, water supply, and per capita investment on financial overheads – even though in these respects it still falls short of what is required. At the same time, the urban poor make up one fourth of Delhi’s total population. These people live in extremely squalid environments and survive at subsistence level in largely uncertain economic conditions. Their numbers are growing as the city absorbs a continuous stream of migrants, exacerbating the problems of inadequate housing, services and infrastructure. To cope with the pressures of rapid urbanization and immigration into the city, in 1985 the Central Government adopted a policy of balanced regional development. A National Capital Region (NCR) was created, incorporating territory from the adjacent states of Haryana, Uttar Pradesh and Rajasthan in addition to the Union Territory of Delhi. The aim was to decentralize the growth of industrial, commercial, residential and infrastructure facilities. While establishment of the NCR is a great step forward in the planning of the capital and surrounding areas, it addresses primarily spatial and infrastructure concerns. It largely neglects issues such as position of the poor and particularly the informal sector to the city’s economy, or how their strategies for survival can be enhanced. The strains of growthThe population of Delhi grew from 406,000 in 1901 to 917,000 in 1941, 1,744,000 in 1951, and 6,220,000 in 1981. Large-scale immigration – averaging 116,000 per year – is responsible for most of the population growth. Migrants come mainly from the neighbouring states of Haryana, Punjab, Rajasthan and Uttar Pradesh. Both “push” and “pull” factors prompt them to migrate – problems in the rural hinterland as well as employment opportunities in the capital. By 1981, Delhi’s working population numbered some 1.94 million people, a figure more than double that of 20 years earlier. They were employed in activities ranging form government service, industrial labour, finance and real estate to agriculture and roadside vending. Since the organized economic structure has been unable to absorb this growing workforce, many of the urban poor seek employment elsewhere. The result has been the proliferation of certain unorganized and uncertain occupations characterized by low skill and capital intensity, low productivity and meagre incomes. These informal activities do, however, demonstrate the inventiveness of the poor in adapting to their given market environment. They seek a means of livelihood by bridging the gap between the effective demand for goods and services, and their supply. The informal sectorThere are various possible methods of estimating the size of Delhi’s informal sector. Workers can be categorized according to occupation – formal, informal, or formal/informal. For example, electricity supply would fall within the formal sector, and household manufacture of clay toys in the informal sector. Cloth weaving, however, could belong in either category, depending on whether it is done on a large scale in a factory or as a household industry. Census statistics do not distinguish between such cases, and so some adjustment must be devised to apportion the third category between formal and informal. Estimates based on this method indicate the proportion of workers in the informal sector to be in the range of 28 to 50 per cent, with a probable figure of 45 per cent. Another method is to categorize workers according to employment situation, distinguishing between those who work in establishments with employers and employees, and those who work alone or in family occupations. Estimates based on this method show only 26 per cent of the workforce engaged in informal economic activity. Still another method is to subtract the number of workers recorded in the public and private sectors form the total number of workers. An estimate based on this method suggests that the informal sector accounts for about half the workforce. The accuracy of that figure, however is questionable since data are unavailable on child workers, unemployed women, or workers registered at the employment exchange who have temporary jobs. One major difference between the formal and informal workforce is the latter’s substantially lower labour productivity and wage rates. This source of inexpensive labour and services may be a factor contributing to Delhi’s emergence as one of India’s fastest-growing business centres. Of course there are other factors, among them the excellent infrastructure, the ease of access to government departments, and the presence of large private and public sector enterprises. But the true strength of Delhi’s rapidly growing economy may well lie in the proliferation of small, mostly unregistered units over the last 20 years. Unregistered units in the informal sector have generally grown much faster than many of the formally registered industrial estates. In the Anand Parbat area, for example, almost 2,000 units employing over 12,000 workers operate under appalling conditions – two thirds of them on lots ranging from 50 down to 20 square metres. Some of these units subcontract their work to still smaller entrepreneurs living at the fringes of survival. Many of them, however, seem privileged compared to the large number of urban poor employed in unorganized activities carried out in even worse work environments. It is these people who are our primary concern. Understanding their living and working conditions will reveal the larger part of the hidden and real economy, and will help in planning to improve their way of life. Why bother to register?One of the major differences between formal and informal activities is the role of regulatory bodies. Once an activity has been registered with the relevant authority, it is legitimately entitled to make use of facilities provided by the formal sector. These include easier access to bank credit, municipal electricity and water supply, insurance against calamities, and social welfare facilities for workers. If an activity is not registered, these public services are unavailable. Registering, however, involves a long process of obtaining licences, getting permissions and obeying the norms and standards laid down by the relevant authorities. This process takes up many workdays – indeed, in some cases, as much a year of full-time effort. It also involves various financial or non-financial “hidden” transactions. And once an activity has been registered, it must pay regular taxes. The benefits of registration may outweigh these costs in the case of a large enterprise with a high productivity level, characteristic of the formal sector. For small-scale enterprises, however, the costs may prove prohibitive. Another factor is that usually, people in the informal sector are poorly informed of the benefits to which they are entitled, or the procedures for obtaining them. Even if they have the information, they may not consider it worth the effort to use it. For example, a small manufacturing unit operating within a household in an unauthorized slum has little to gain from registering with the authorities if doing so will not ensure access to municipal electricity or water. The proprietor would rather make an illegal payment to an unscrupulous policeman or municipal employee, or bribe a local political leader who has the needed influence, rather that register and pay taxes. This is true especially in sections like Old Delhi containing congested slum and squatter settlements. Who are the informal workers? Studies indicate that people employed in the informal sector are mainly first-generation migrants who were formerly engaged in agriculture as marginal farmers, landless labourers or sharecropers. They work mainly on construction sites and as porters, cooks, waiters, domestic and unskilled office help, street hawkers and pretty traders. They are paid on a daily basis, and their earnings can fluctuate greatly from one day to the next. A majority of them are unskilled, an on average they earn little more than half as much as factory workers. Women earn half as much as men, and the large majority of them are domestic workers employed in jobs with the lowest status and remuneration – for example, utensil cleaners, laundresses and sweepers. Upward mobility is evident as length of residence in the capital increases. From construction, manual work and industrial labour, migrants begin to move into vending, petty shopkeeping and skilled trades. The longer the duration of the stay, the greater is the tendency to graduate from unskilled, low-paid jobs to self-employment or better-paid, skilled occupations. Kinship, caste and community no longer determine the choice of occupation for migrants, but despite secular urban pressures, these traditional ties provide preferential access to employment opportunities. Apparently, both modern and traditional social patterns are operative in bringing about occupational change and social mobility. Another form of mobility is the practice of moving from one type of unskilled work to another with the seasons – for example, selling peanuts in winter and repairing shoes during the summer and rainy season. A large proportion of migrants also retain close ties with their home villages, leaves their families there or returning regularly to help out in farming. Still another type of mobility is that of occupations over generations. The low income of workers in the informal sector finds its reflection in their patterns of consumption. By far their largest expenditure is for food and other basic necessities. Over half are in debt, usually to moneylenders, and pay interest rates of up to 120 per cent per annum. Only half own any property in their home villages. Nearly two thirds of informal workers belong to the scheduled castes, ranking lowest in the traditional social order of India. Nearly half the men and nearly all the women are illiterate. Most informal workers face a lack of space to carry on their activities. Most of them sell products or services outdoors, without protection from weather of pilferage. They also suffer harassment from municipal authorities, police, and owners of nearby registered businesses. Given the lack of security, capital and skills, many of them must struggle even to earn a bare living. The role of social networks Nearly all informal workers live in nuclear rather than the traditional extended families – perhaps because of lack of space. However, they are helped by extended kinship ties that provide friendship, psychological support and more tangible benefits. It is through these networks, for example, that the urban poor generally find jobs, lodging, emergency assistance, and even loans for starting a business or building a squatter’s shack. Side by side with such traditional, small-scale networks are others functioning on an impersonal, much larger scale in the realm of goods and services, employment, mobility and opportunity. These two types of networks provide the basis of life for people engaged in informal economic activities. Indeed, the real economy largely depends for its functioning on the social networks that operate among the urban poor. The typical forms of groupings found among the urban poor are:
The urban poor thus have evolved a web of social relationship – of necessity as well as choice. They are excluded from most formal urban institutions, and so have had to create alternatives for themselves. But through their groupings, they have also sought to provide the social security needed in hard times, to help in the search for employment and lodging, and to disseminate news. The groups they have formed therefore function as bridges between rural and urban cultures. Towards a sustainable city It is clear that the informal component of the real economy is sizable, and that there are various shades of grey according to which the real economy may be characterized. Further research would certainly contribute to a better understanding of the economic processes in a large city One needed study is a quantitative and qualitative investigation of the various key sectors and activities forming the weft of the urban socio-economic fabric, and the institutional regulatory mechanisms making up the warp.
Perhaps more
important is the need for deeper knowledge of the interactions between small
enterprises in the formal and informal sectors. The mutual dependence of
formal and informal sector activities, and the impact they have on each
other, are significant factors. We must understand these to design better
policies aimed at stimulating sustainable urban development.
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