Advertisement

Dualism and Structural Transformation: The Informal Manufacturing Sector in India

  • Surbhi KesarEmail author
  • Snehashish Bhattacharya
Original Article
  • 8 Downloads

Abstract

We identify a basic dualism within the informal manufacturing sector (IMS) in India between a ‘traditional’/non-capitalist segment, comprising family-based household enterprises that constitute the vast majority of the IMS, and a segment of ‘modern’/capitalist enterprises employing wage labour. We focus on the high-growth decade of 2000–2001 to 2010–2011 to analyse whether there has been a marked tendency of this ‘traditional’ segment to transform into a ‘modern’ segment. We construct a variable, the net accumulation fund, which indicates the ability of an enterprise to accumulate and grow, and explore its evolution, over time and across industries, for enterprises with different production structures and firm-level characteristics. We show that while, on one hand, the average ‘traditional’ enterprise has been able to economically reproduce itself rather than withering away, the dualism between the ‘traditional’/non-capitalist and the ‘modern’/capitalist segments has been reproduced and further reinforced during this period of high economic growth, raising questions about the process of economic transformation as envisaged in much of development literature.

Keywords

Informal sector Dualism Structural transformation Manufacturing India 

Résumé

Nous identifions un dualisme fondamental dans le secteur manufacturier informel (SMI) en Inde entre un segment “traditionnel”/non capitaliste, comprenant des entreprises familiales, basées sur le foyer, qui constituent la grande majorité du SMI, et un segment “moderne”/d’entreprises capitalistes employant de la main d’œuvre salariée. Nous nous concentrons sur la décennie à forte croissance de 2000-01 à 2010-11 afin d’analyser s’il existe une tendance marquée de ce segment « traditionnel » à se transformer en un segment « moderne » . Nous construisons une variable, le fonds d’accumulation net, qui indique la capacité d’une entreprise à accumuler et à se développer, puis nous étudions son évolution, dans le temps et selon les industries, pour des entreprises ayant des structures de production et des caractéristiques au niveau de l’entreprise différentes. Nous montrons que, si, d’une part, l’entreprise “traditionnelle” moyenne a été capable de se reproduire économiquement plutôt que de dépérir, le dualisme entre les segments “traditionnel”/non capitaliste et “moderne”/capitaliste a été reproduit et renforcé encore pendant la période de forte croissance économique, soulevant des questions sur le processus de transformation économique tel qu’envisagé dans de nombreux ouvrages sur le développement.

JEL Classification

O14 O17 J46 

Notes

Acknowledgements

We are grateful to Rohin Anhal for unreservedly sharing his expertise and for his detailed comments and several discussions. We thank Anirban Dasgupta for his comments and suggestions on various drafts of this paper. We would also like to thank the two anonymous reviewers for their rich and detailed comments and suggestions.

Compliance with Ethical Standards

Conflict of Interest

On behalf of all authors, the corresponding author states that there are no conflicts of interest.

References

  1. Bardhan, P. 2009. Notes on the Political Economy of India’s Tortuous Transition. Economic and Political Weekly 44 (49): 31–36.Google Scholar
  2. Basole, A., D. Basu, and R. Bhattacharya. 2015. Determinants and Impacts of Subcontracting: Evidence from India’s Unorganised Manufacturing Sector. International Review of Applied Economics 29 (3): 374–402.CrossRefGoogle Scholar
  3. Bhaduri, A. 2017. A Study in Development by Dispossession. Cambridge Journal of Economics 42 (1): 19–31.CrossRefGoogle Scholar
  4. Bhattacharya, S. 2017. Reproduction of Noncapital: A Marxian Perspective on the Informal Economy in India. In Knowledge, Class, and Economics: Marxism Without Guarantees, ed. T. Burczak, R. Garnett, and R. McIntyre, 346–358. New York: Routledge.CrossRefGoogle Scholar
  5. Bhattacharya, R., S. Bhattacharya, and K. Sanyal. 2013. Dualism in the Informal Economy: Exploring the Indian Informal Manufacturing Sector. In Development and Sustainability: India in a Global Perspective, ed. S. Banerjee and A. Chakrabarti, 339–362. New Delhi: Springer.CrossRefGoogle Scholar
  6. Bhattacharya, S., and S. Kesar. 2018. Possibilities of Transformation: The Informal Sector in India. Review of Radical Political Economy 50 (4): 727–735.CrossRefGoogle Scholar
  7. Binswanger-Mkhize, H.P. 2013. The Stunted Structural Transformation of the Indian Economy. Economic and Political Weekly 48 (26–27): 5–13.Google Scholar
  8. Chakrabarti, S. 2016. Inclusive Growth and Social Change: Formal-Informal-Agrarian Relations in India. New Delhi: Oxford University Press.CrossRefGoogle Scholar
  9. Chen, M.A. 2014. Informal Employment and Development: Patterns of Inclusion and Exclusion. European Journal of Development Research 26 (4): 397–418.CrossRefGoogle Scholar
  10. De Soto, H. 1989. The Other Path: The Informal Revolution. New York: Harper Collins.Google Scholar
  11. De Vries, G.J., A.A. Erumban, M.P. Timmer, I. Voskoboynikov, and H.X. Wu. 2012. Deconstructing the BRICs: Structural Transformation and Aggregate Productivity Growth. Journal of Comparative Economics 40 (2): 211–227.CrossRefGoogle Scholar
  12. Deaton, A. 1985. Panel Data from Time Series of Cross-Sections. Journal of Econometrics 30 (1): 109–126.CrossRefGoogle Scholar
  13. Fajnzylber, P., W.F. Maloney, and G.V. Montes-Rojas. 2009. Releasing Constraints to Growth or Pushing on a String? Policies and Performance of Mexican Micro-firms. Journal of Development Studies 45 (7): 1027–1047.CrossRefGoogle Scholar
  14. Falco, P., and L. Haywood. 2016. Entrepreneurship versus Joblessness: Explaining the Rise in Self-Employment. Journal of Development Economics 118: 245–265.CrossRefGoogle Scholar
  15. García, G.A. 2017. Labor Informality: Choice or Sign of Segmentation? A Quantile Regression Approach at the Regional Level for Colombia. Review of Development Economics 21 (4): 985–1017.CrossRefGoogle Scholar
  16. Ghose, A.K. 2010. Reinventing Development Economics. Economic & Political Weekly 45 (42): 16–22.Google Scholar
  17. Ghose, A. K. 2015. Employment in a Time of High Growth in India. ILO Employment Working Paper No 180. Geneva: International Labour Organisation.Google Scholar
  18. Günther, I., and A. Launov. 2012. Informal Employment in Developing Countries: Opportunity or Last Resort? Journal of Development Economics 97 (1): 88–98.CrossRefGoogle Scholar
  19. Harriss-White, B. 2012. Capitalism and the Common Man: Peasants and Petty Production in Africa and South Asia. Agrarian South: Journal of Political Economy 1 (2): 109–160.Google Scholar
  20. International Labour Organisation (ILO). 2018. India Wage Report: Wage Policies for Decent Work and Inclusive Growth. Geneva: International Labour Organisation.Google Scholar
  21. La Porta, R., and A. Shleifer. 2014. Informality and Development. Journal of Economic Perspectives 28 (3): 109–126.CrossRefGoogle Scholar
  22. Lewis, A.W. 1954. Economic Development with Unlimited Supplies of Labour. The Manchester School 22 (2): 139–191.CrossRefGoogle Scholar
  23. Maloney, W.F. 2004. Informality Revisited. World Development 32 (7): 1159–1178.CrossRefGoogle Scholar
  24. Mandelman, F.S., and G.V. Montes-Rojas. 2009. Is Self-Employment and Micro-Entrepreneurship a Desired Outcome? World Development 37 (12): 1914–1925.CrossRefGoogle Scholar
  25. Margolis, D.N. 2014. By Choice and by Necessity: Entrepreneurship and Self-Employment in the Developing World. European Journal of Development Research 26 (4): 419–436.CrossRefGoogle Scholar
  26. Mehrotra, S., Gandhi, A., Saha, P. and Sahoo, B.K. 2012. Joblessness and Informalisation: Challenges to Inclusive Growth in India. IAMR Occasional Paper No 9. Planning Commission of India.Google Scholar
  27. Moreno-Monroy, A.I., J. Pieters, and A.A. Erumban. 2014. Formal Sector Subcontracting and Informal Sector Employment in Indian Manufacturing. IZA Journal of Labour & Development 3 (1): 1–17.CrossRefGoogle Scholar
  28. Moser, C. 1994. The Informal Sector Debate, Part 1: 1970-1983. In Contrapunto: The Informal Sector Debate in Latin America, ed. C.A. Rakowski, 11–20. Albany: SUNY Press.Google Scholar
  29. Nataraj, S. 2011. The Impact of Trade Liberalization on Productivity: Evidence from India’s Formal and Informal Manufacturing Sectors. Journal of International Economics 85 (2): 292–301.CrossRefGoogle Scholar
  30. National Commission for Enterprises in the Unorganised Sector (NCEUS). 2007. Definitional and Statistical Issues: Task Force Report. New Delhi: NCEUS.Google Scholar
  31. National Sample Survey Organisation (NSSO). 2008. Unorganised Manufacturing Sector in India- Employment, Assets and Borrowings NSS 62nd Round (Report No. 525). New Delhi: NSSO, Ministry of Statistics and Program Implementation.Google Scholar
  32. Nguyen, H.C., C.J. Nordman, and F. Roubaud. 2013. Who Suffers the Penalty?: A Panel Data Analysis of Earnings Gaps in Vietnam. Journal of Development Studies 49 (12): 1694–1710.CrossRefGoogle Scholar
  33. Nurkse, R. 1952. Some International Aspects of the Problem of Economic Development. The American Economic Review 42 (2): 571–583.Google Scholar
  34. Organisation for Economic Co-operation and Development (OECD). 2017. Purchasing Power Parities (PPP) (indicator).  https://doi.org/10.1787/1290ee5a-en.
  35. Papola, T.S. 1980. Informal Sector: Concept and Policy. Economic and Political Weekly 15 (18): 817–824.Google Scholar
  36. Perry, G. (ed.). 2007. Informality: Exit and Exclusion. Washington: World Bank Publications.Google Scholar
  37. Radchenko, N. 2014. Heterogeneity in Informal Salaried Employment: Evidence from the Egyptian Labour Market Survey. World Development 62: 169–188.CrossRefGoogle Scholar
  38. Raj, R.S.N., and K. Sen. 2016. Out of the Shadows? The Informal Sector in Post Reform India. New Delhi: Oxford.CrossRefGoogle Scholar
  39. Ranis, G., and F. Stewart. 1999. V-Goods and the Role of the Urban Informal Sector in Development. Economic Development and Cultural Change 47 (2): 259–288.CrossRefGoogle Scholar
  40. Rosenstein-Rodan, P.N. 1943. Problems of Industrialisation of Eastern and South-Eastern Europe. The Economic Journal 53 (210/11): 202–211.CrossRefGoogle Scholar
  41. Sanyal, K. 2007. Rethinking Capitalist Development: Primitive Accumulation, Governmentality and Post-Colonial Capitalism. New Delhi: Routledge.Google Scholar
  42. Sanyal, K., and R. Bhattacharyya. 2009. Beyond the Factory: Globalisation, Informalisation of Production and the New Locations of Labour. Economic and Political Weekly 44 (22): 35–44.Google Scholar
  43. Sethuraman, S.V. 1998. Gender, Informality and Poverty: A Global Review. Washington DC: The World Bank.Google Scholar
  44. Srivastava, R. 2012. Changing Employment Conditions of the Indian Workforce and Implications for Decent Work. Global Labour Journal 3 (1): 63–90.CrossRefGoogle Scholar
  45. Storm, S. 2015. Structural Change. Development and Change 46 (4): 666–699.CrossRefGoogle Scholar
  46. Timmer, C.P., and Akkus, S. 2008. The Structural Transformation as a Pathway out of Poverty: Analytics, Empirics and Politics. Center for Global Development Working Paper no 150. Washington DC.Google Scholar
  47. Tingor, R. 2004. Unlimited Supplies of Labour. The Manchester School 72 (6): 691–711.CrossRefGoogle Scholar
  48. Verbeek, M. 1996. Pseudo Panel Data. In The Econometrics of Panel Data, ed. L. Mátyás and P. Sevestre, 280–292. Dordrecht: Springer.CrossRefGoogle Scholar

Copyright information

© European Association of Development Research and Training Institutes (EADI) 2019

Authors and Affiliations

  1. 1.Faculty of EconomicsSouth Asian UniversityChanakyapuriIndia

Personalised recommendations