Friday, April 21, 2006

A nation of self employed what we are argues R.Vaidyanathan in The Hindu Businessline. His pieces are always thought provoking and he looks at something that is not very widely discussed/known and with hard data.

A major debate regarding decline in employment, particularly in the organised government sector, post-liberalisation, has concluded that unemployment has increased after the 1990s.

And we have seen this manifest in various forms in the Indian blogosphere in debates on the effectiveness of globalization in removing poverty and such like.

This debate does not take in to account the fact that India is a country of the self-employed, and not of employees.

Our economy is not that of wage earners and shareholders. A significant portion of the economy consists of the self-employed who are both wage-earners and shareowners. The share of the proprietorship and partnership forms of organisations in the national income is 35 per cent, that of corporates around 15 per cent, of government around 25 per cent, and agriculture around 25 per cent. Combine agriculture and the self-employed in industry and service sectors, nearly 60 per cent of the national income is generated by the self-employed and does not fall in the paradigm of either capitalism or socialism.

I would not want to replicate the data he has put together in the piece, but after all that, his conclusion is..

The large corporates are increasingly resorting to `outsourcing' their regular manufacturing activities to small and medium enterprises. Earlier companies in soap powder and biscuit and shampoo categories did it, but now firms in the consumer durables sector as also in technology and heavy engineering `outsource'.

Hence employment is growing. Not in corporates but in the self-employed segment. Self-employment is the answer to the Western choice of capitalism and socialism.

Perfect. But do our policy makers know this caught as they are between providing quota at various private companies or regulating courier companies ( there is a lot of casual labour/contractors/self employed at both these places).

It is interesting that the largest contributors to the national income and employment and capital providers are not talked about or considered in policy formulations. They are often dismissed as `unorganised' or `residual' sectors. India is one of the fascinating countries where more than 60 per cent of the activities are called `residual' sector.

He concludes it with this, but do read the entire piece for the full picture.

The opposing groupings, of the globalisers and the Left intellectuals, interestingly support the slow death of the self-employed group. Not only that, we seem to be bent on creating a huge mass of unemployable persons with the education having no links to trade and craft. The globaliser would like the entire country to be a giant corporation, FDI funded and owned, where every one is a wage earner. For the Left thinkers it is a historical, and an inevitable, process wherein the small entrepreneurs are destroyed to become workers. And jobs in public sector units are more important than the livelihood of millions of street-corner vendors. Due to faulty policies, supported by the metropolitan elite and the Marxist intellectual, we may end up having a huge mass of unemployable persons who are currently self-employed. The policies to be adopted in the service sector in retail trade, restaurants, construction, road transport, etc., are going to require massive employment guarantee schemes (EGS) even in the urban areas, which will make the state wither away.

The self employed really are the backbone of the nation, starting from the small tea shop at construction sites to scrap dealers to vegetable vendors and going all the way up to hotshot entrepreneurs. This is something we need to encourage, since it has been shown time and again that private entrepreneurship and initiative is, really, one of the big things about India.

(Cross posted on The Indian Economy Blog)


sreehari said...

sound treatment but lack sufficient depth ..i hav a feelin .that u hav a prejudiced outlook against both the left and the right :)

Ritesh said...

I totally agree that there is a huge percentage of self employed sector in India. However, i have always thought that India's economy was 65% driven by agriculture...but you say that only 25% is agriculture and the remaining 35% is actually self employed sector which is classified under agriculture.

Also, I am not sure as to why the column says that the we are not encouraging the self a matter of fact...I always believed that the self employed have better scope of survial in India compared to China because of our better "Soft" infrastructure......

However, i do completely agree with you that the claim that there is a decrease in employment is baseless and that we need more efficient ways to measure unemployment rates....considering how many people actually visit our employment offices to get a job...:)