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Informal Economy and Vocational Training in India. Sai Balakrishnan Kaustuv DeBiswas MIT I ndia R eading G roup Mar 06, 2010. Story : Shadow Lives . Story : Shadow Lives . Story : Shadow Lives . Story : Shadow Lives . Story : Shadow Lives .

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informal economy and vocational training in india

Informal Economy and Vocational Training in India

SaiBalakrishnansbalakr@fas.harvard.eduKaustuv DeBiswas

MIT India Reading Group Mar 06, 2010


Story : Shadow Lives

The man who washes Mr. Kapoor’s car, the woman who cleans the dishes in the Kapoor family, the vegetable vendor and the waste-picker are part of the "informal sector" — the economist’s jargon for a vast pool of poorly trained, low wage workers who sometimes work in dangerous environs.


Story : Shadow Lives

Without the intricate web of services provided by these people, families such as the Kapoors would not have their existing comfort level. And yet, the linkage between their lives and the shadow lives of the men and women are outside the regulatory framework of the city’s economyis not easily understood and rarely figure in public discussions.


TheInformalEconomy : Bridge?

Surgical ThreadsThe surgical threads occupation was carried out in a small room about 350 sq. ft. in area. The main occupation of the workers was to clean the goat intestine; treat it with salt water and then dry it and send it to Johnson & Johnson for further processing and finally manufacturing Surgical Threads.


TheInformalEconomy : Chamra Bazaar / Dharavi

Surgical ThreadsThe surgical threads occupation was carried out in a small room about 350 sq. ft. in area. The main occupation of the workers was to clean the goat intestine; treat it with salt water and then dry it and send it to Johnson & Johnson for further processing and finally manufacturing Surgical Threads.





TheInformalEconomy : Definiton

  • A diverse set of economic activities, enterprises, and jobs that are not regulated or protected by the state.

TheInformalEconomy : Broad classification

  • 1. Self-employed, informal employers and employees in informal enterprises
  • 2. Informal workers in formal enterprises
  • 3. Wage workers in informal jobs
  • Informal enterprises = enterprises that are not registered or incorporated and are small in size
  • Informal jobs = jobs that lack legal contracts or social protection
  • Not to be confused with the underground or criminal economy because the informal economy deals with legal goods and services.

TheInformalEconomy : Why is it important?

  • 60-90% of total workforce in developing countries
  • 25-40% of total workforce in developed countries

Informal Employment Informal Employment

(excluding agriculture) as (including agriculture) as % of % of

Non-Agricultural Employment Total Employment

India 83%93%

Source: ILO 2002


TheInformalEconomy : Relevance

Amitabh Kundu, a professor at Delhi’s Jawaharlal Nehru University puts it: " Given the nature of industries experiencing rapid growth in recent years, employment in the organized sector would not grow in any significant manner. A steady decline in the proportion of regular/salaried workers is likely in the future. The multinationals that have come so far, have high capital intensity and low potential for employment generation. Much of the employment growth in the economy is taking place through the process of subcontracting, use of casual or self-employed workers".


TheInformalEconomy : Relevance

Most middle-class educated Indians don’t even know that the informal sector accounts for an astounding 66.7 per cent of total employment in Delhi, that the corresponding figure for Mumbai is 68 per cent and for Chennai, it is 60.6 per cent.

Source: Statistics from UNCHS (Habitat)’s Global Urban Observatory.


TheInformalEconomy : Relevance

Roadside hawkers generated business worth Rs. 8,772 crore (around 2 billion U.S. dollars) in 2005 in Kolkata.


2. Ganguly, Deepankar. "Hawkers stay as Rs. 265 crore talks". The Telegraph, 30 November 2006. Retrieved 2008-02-16.


TheInformalEconomy : Issues

Lack of standards and accountability

One fall-out of the continuous neglect of this vital and growing sector of the economy is a complete lack of standards and accountability. The informal services sector is low-cost and equally low-value.


Lack of capital, working space, education, skills and training severely undermine the efficiency of the informal sector. Ultimately this impinges on the productivity of the formal economy.


TheInformalEconomy : Issues

Unregulated – At times Dangerous

the case of the scrap trade. Waste pickers are at the bottom most rung of the shadow economy. Their work is dirty and dangerous and they get paid a pittance. Usually, such work is done by illegal migrants and those without recourse to any other work.

Not registered or recognized

Typically, the scrap dealer’s shop is not registered. He does not pay any tax. He cannot get a loan to expand his business because dealing in scrap is not recognised as an economic activity by bankers though India has one of the highest levels of recycling in the world. The scrap dealer cannot even mortgage the land where his shop is located — he is a squatter. He sells his scrap to bigger dealers who sell the plastic to remoulding factories, the old newspapers to paper mills. If he needs a loan, he taps this network. The vicious cycle continues.


TheInformalEconomy : Issues

Poor Living Conditions

The new migrants settle in already overcrowded slums where safe drinking water is scarce and sanitation facilities virtually non-existent.

Worst is the insecurity of tenure. Anyday, a hut can be demolished. Even if a shanty dweller has the money, h/she is reluctant to invest in upgrading his/her dwelling. And yet, as case study after case study from the developing world demonstrates, providing slum dwellers security of tenure has dramatic results. The face of a colony changes where the residents have security of tenure. It becomes cleaner. The slum dwellers themselves, often in partnership with NGOs, learn quickly how to negotiate for better facilities. It often leads to occupational mobility. An authorised settlement, even if it is a one-room house, can be used as collateral for a bank loan with which the informally employed can diversify. Clearly, there is a self-interest argument here for all concerned. But these are issues which have been on the back-burner.


The Informal Economy – Questions? Training?

Training? Understanding context – Urban / Suburban

Vocational Training? Curriculum?

Institutes / Organizations? Govt / Non Govt

Recognition? Do they need it? Why? When?

community polytechnics

The Informal Economy: Vocational Training

Community Polytechnics
  • There are now 675 CPs, training about 450,000 people a year within the communities.
  • Courses are of 3 - 9 months duration and there are no entry pre-requisites.
    • 1 month duration courses

Glass painting; screen printing; purse making; carving, soft toys making.

    • 3 month duration courses

Mobile and telephone repair; helper for hospital and nursing homes; electric motor winding.

    • 6 month duration courses

Office management; electrician; plumbing; 2-3 wheeler mechanic; dressmaking, designing, embroidery and fabric painting; fashion designing.

jan shikshan sansthan

The Informal Economy: Vocational Training

Jan Shikshan Sansthan
  • JSS was launched as an adult education program aimed at improving the vocational skills and quality of life of workers and their family members.
  • JSS is financed by the Adult Education Directorate within MHRD. All the JSSs are managed by non-government organisations (NGOs) under Boards of Management that include a GoI representative. They must be registered under the Societies Registration Act, 1860, incorporating a Memorandum of Association, Rules and Regulations.
  • The program initially focused on adults and young people living in urban and industrial areas and on people who had migrated from rural areas.
  • The target group has since shifted to newly literate workers and to unskilled and unemployed youth in both rural and urban areas.
  • Courses range from candle and agarbatti making, sewing and embroidery to computer courses.
  • By the end of 2002 there were 122 JSSs offering 255 types of vocational courses.
  • In 2001-02, almost 1.5 million people received vocational training or participated in other JSS activities.
  • Just over 60 percent of participants were women.
national institute of open schooling

The Informal Economy: Vocational Training

National Institute of Open Schooling
  • NIOS provides “opportunities to those who would have otherwise missed out.”
  • NIOS offers Open Basic Education (OBE) programs designed to bring students to Grade 3, Grade 5 or Grade 8 level.
  • Courses may be taken in combination with academic subjects at secondary and senior secondary levels.
  • Of the 85 course offered, only 12 are open to students who have less than Grade 8 completion; 54 courses (64%) require at least Grade 10 completion.
  • NIOS has accredited 731 training providers to deliver a vocational education programs. These include government financed institutions such as JSS, non-government providers.
others training schemes

The Informal Economy: Vocational Training

Others Training Schemes
  • Training of Rural Youth for Self-employment (TRYSEM)
    • Established in 1979,
    • Aim to develop technical and entrepreneurial skills among rural youth (aged from 18 to 35) from families below the poverty line to enable them to take up income-generating activities.
    • Training is based on the needs of the area
    • Training is provided at ITIs, community polytechnics, extension training centres, Krishi Vigyan Kendras, khadi and village industry boards, state institutes of rural development and institutions run by voluntary agencies.
    • Trainees receive a stipend during their training which is normally for six months.
  • Entrepreneurship Development Centers/Institutes provide training in different fields based on the resource endowment of the area
  • There are many more, but no evaluation of their impact.

The Informal Economy: Vocational Training

  • Non-state vocational training
  • Skill development for domestic workers.
  • ILO to help Indian domestic workers hone their skills
  • Pilot project in Delhi.

Example 1


The Informal Economy: Vocational Training

Domestic workers from Jharkhand singing a folk song at the ILO event


The Informal Economy: Vocational Training

Training provided:

-Maintaining personal hygiene

-Intra-personal communication skills

-Understanding components of urban meal and managing urban kitchens, Handling domestic pets

-Handling kitchen gardens, electricity and electrical appliances and providing first-aid.

Implementing organizations:

NGOs Prayas and TMI

Government agency in charge:

Ministry of Labour and Employment

Role of the government

Fixing of minimum wages for workers

Coordinating role – part of National Skill Development Initiative


The Informal Economy: Vocational Training

  • Non-state vocational training
  • Skill development for clusters

Clusters: Sectoral and geographical concentration of enterprises, in particular small and medium enterprises, that produce and sell related or complementary products.

In India, artisanal and industrial clusters.

Example 2


The Informal Economy: Vocational Training

  • Tirupur knitwear cluster
  • Largest knitted fashion garment exporter in India
  • 90% firms have less than 50 employees, 60% less than 20 employees.
  • Family proprietorship firms.
  • Skill development centers financed through public-private partnership.
  • Additional support by state:
  • R&D
  • Testing services
  • Standardized performance metrics

The Informal Economy: Vocational Training


  • 1. Public sector training institutes inadequate because other skills required for managing micro-enterprises besides technical skills.
  • 2. More appropriate organizations for vocational training for the informal economy: NGOs
  • More flexible
  • Can tailor themselves to specific needs of community/sector
  • But government not out of the picture – plays critical role in providing other kinds of support.
  • 3. Target sectors of the informal economy instead of providing general, universal training.

Back to Story : Future

If I had a world of my own, everything would be nonsense. Nothing would be what it is, because everything would be what it isn't. And contrary wise, what is, it wouldn't be. And what it wouldn't be, it would. You see? – Alice In Wonderland