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China–IndiaPathways of Economic and Social Development$

Delia Davin and Barbara Harriss-White

Print publication date: 2014

Print ISBN-13: 9780197265673

Published to British Academy Scholarship Online: January 2015

DOI: 10.5871/bacad/9780197265673.001.0001

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‘Lopsided’, ‘Failed’, or ‘Tortuous’: India’s Problematic Transition and its Implications for Labour

‘Lopsided’, ‘Failed’, or ‘Tortuous’: India’s Problematic Transition and its Implications for Labour

(p.157) 8 ‘Lopsided’, ‘Failed’, or ‘Tortuous’: India’s Problematic Transition and its Implications for Labour

Stuart Corbridge

John Harriss

Craig Jeffrey

British Academy

Abstract and Keywords

The structural transformation of the Indian economy is incomplete. While the share of agriculture in GDP has declined sharply, its share of the labour force has not. The agricultural economy is still characterised by extensive small-scale household production, and only a small minority of farming households can produce an income sufficient for family survival. Employment in agriculture has increasingly stagnated and rural non-agricultural employment not expanded as much as might have been hoped. More than 90 per cent of all jobs are ‘informal’ and the absolute numbers of protected ‘formal sector’ jobs declined between 2000 and 2005. There is evidence of the existence of an inverse relationship between output growth and employment growth, and of the effective exclusion of a large share of the labour force from the dynamic, productive sectors of the economy. In these circumstances the Government of India has been introducing major new programmes offering social protection in order to compensate for the failures of the ‘inclusive growth’ promised in the Eleventh Five Year Plan.

Keywords:   structural transformation, informal employment, Indian agriculture, Indian labour force, social protection

THE THREE ADJECTIVES of our title are the different ways in which different authors (the National Commission for Enterprises in the Unorganized Sector, Partha Chatterjee, and Pranab Bardhan respectively) refer to a cardinal fact about India’s economy (Chatterjee, 2008: 55; NCEUS, 2008; refers to the failure of ‘the narrative of transition’). This is that the structural transformation of the economy has not been completed, in spite of years of high rates of economic growth, and India’s ‘transition to an enlarged and dominating sphere of capital in the economy’ (Bardhan, 2009: 31) is correspondingly problematic. In India, the declining share of income from the agricultural sector has not been accompanied by an equivalent decline in employment in that sector. In 1950–51 agriculture accounted for 61 per cent of GDP and for 76 per cent of employment, while it now contributes less than 20 per cent of GDP (16 per cent in 2007–08). Agriculture, however, still employs around 60 per cent of the labour force, according to census data from 2001, or 54 per cent in 2004–05, according to data from the National Sample Survey (NSS) that shows the daily employment status of individuals by activity (see Table 8.2).1 The lowest share of agriculture in GDP across states is 9.5 per cent in Maharashtra, where the level of agricultural employment, however, remains at more than 53 per cent (Mahendra Dev, 2008: table 7.11).

The shift of labour from agriculture in India has been less than in some comparator countries (Table 8.2), though there is less sharp a contrast with China than Bardhan suggests (2009: 33 and see Riskin, Chapter 1, this volume). An important point of difference between India and China is that in (p.158)

Table 8.1. Employment Structure in India—Daily Status (%)































Source: After Eswaran et al. (2009: table 6).

Note: Agr = Agriculture; Mfg = Manufacturing; CTT = Construction, Trade, and Hotels, Transport, Storage, and Communications; G&P = Government Services, Education, Health, Community Services, Personal Services. Total is less than 100 per cent because employment shares of mining and of real estate and finance are not included.

China 55 per cent of the cumulative increase in GDP between 1990 and 2005 was accounted for by manufacturing, which has generated, relatively, a great deal more employment than the services sector, which accounts for 60 per cent of the increase in GDP over the same period in India.

The dispossession of small-scale producers has gone on, and continues to go on, for industrial, mining, and infrastructural projects across the country, and has increasingly encountered resistance from them in actions that often involve the Maoists, who are now active in about a third of the districts of the country. The Indian agricultural economy, however, is still characterized by extensive small-scale, household-based production. The distribution both of ownership and of operational holdings is very distinctly pear-shaped, and what are described as ‘marginal’ operated holdings (of 1 hectare, or less, in extent) now account for 70 per cent of the total. Estimations made by Vikas Rawal (2008), using data from the 59th round of the National Sample Survey (NSS) for 2003–04, show that 31 per cent of rural households across the country as a whole own no land at all, and another 30 per cent own less than 0.4 hectare (or about 1 acre of land), while only a little over 5 per cent of households own more than 3 hectares (and just 0.52 per cent own more than 10). The absolute numbers and the relative share in the rural population of households without land—which have, for a long time, been considerable—have been increasing. The data from 2003–04 are not strictly comparable with those from an earlier round of the NSS, for 1992, but Rawal suggests that they show an increase of as much as 6 percentage points in landlessness, while inequality in land ownership also increased. Still, over most of the country, ‘landlordism’, where small producers depend for access to land and other assets upon the owners of large estates, has declined. The share of leased-in land in the total operated area, according to the NSS, declined from (p.159)

Table 8.2. Distribution of GDP and of Employment across Sectors in India and Comparator Countries


GDP (2007)



















































Source: World Bank Data (accessed at 〈 〉www.worldbank.org/data〉,September 2011).

Note: ‘Employment’ refers to distribution of the labour force by occupation/sector.

10.7 per cent in 1960–61 to just 6.5 per cent in the kharif (summer) season of 2002–03. Traces of classic ‘landlordism’ remain, however, and inequality in land ownership still gives considerable power locally—economic, social, and political—to the relatively small numbers of larger landowners and the increasing numbers of capitalist farmers.

At the same time, those depending upon wage employment have not, generally, been able to find what we might label as ‘good jobs’ in the organized or formal sector, or the most dynamic and productive sectors of the economy, so they take up activities in the unorganized or informal economy, which are often not very productive, and which are outside the purview of most employment legislation. Sinha estimates that the difference in productivity between those formally and those informally employed is as great as a factor of 1:19 (Sinha, 2010: 20, table 1). Workers who are informally employed have no protection—against the loss of their jobs, or in event of illness—and receive no benefits from employers. They are usually low-paid, and their work and their incomes are commonly irregular, though they may also work very long hours and in hazardous workplaces. It is reliably estimated that about two-thirds of India’s GDP comes from such unregistered, informal activity, and that it accounts for more than 90 per cent of livelihoods—more than half of them being generated from self-employment (see Lerche, 2010, for a discussion of the informal economy and classes of labour). Meanwhile, according to data presented by the National Commission on Enterprises in the Unorganized Sector, the absolute numbers of protected ‘formal sector’ jobs actually declined marginally from 33.7 million to 33.4 million between 1999–2000 and 2004–05 (Table 8.3). (p.160)

Table 8.3. Employment by Type and Sector (millions) 1999–2000, 2004–05


Informal workers

Formal workers

Total workers

Informal workers

Formal workers

Total workers






















Source: Sanyal and Bhattacharyya (2009), citing NCEUS.

While a classic theory holds that those employed (often self-employed) in informal activities constitute a ‘reserve army of labour’ (Altvater, 1993) necessary for the development of industrial capitalism over the longer run, it has been suggested (in an argument that will be considered further below) that, in India now, a large share of the labour force as a whole is better described as ‘excluded’, being unnecessary for the growth of the economy as a whole, and surviving in a wide range of activities that are of only marginal significance for the dynamic, corporate sector (Sanyal and Bhattacharyya, 2009). Whatever one makes of this argument, it is clear that the narrative of structural transformation and societal transition breaks down in regard to modern India.

Employment Trends, ‘jobless Growth’, and Workers’ Responses

One significant indicator of employment trends in India in the period of economic liberalization is that the highly successful, widely celebrated IT industry, which now contributes an important share of GDP and of export earnings, generates so little employment. According to NSS data, the IT sector accounted for just 0.7 per cent of the non-agricultural labour force in 2004–05. The sector’s revenues by that time accounted for 4.5 per cent of GDP (and 6.4 per cent by 2010–11), while contributing only 0.21 per cent of aggregate employment (Chandrasekhar, 2007). The major part of the services sector that contributes more than 50 per cent of GDP is still overwhelmingly constituted by traditional service industries, such as retail trade and personal services. In the following discussion, it should be noted that entrants to the Indian workforce grow at the moment by 10 million or more persons per year, a figure greatly exceeding that for all employment in ‘private sector establishments’ (8.8 million in 2006—of which the IT sector makes up only a small part).

It has been widely argued that India is experiencing ‘jobless growth’—a view supported by National Sample Survey (NSS) data, showing that the rate of growth of the workforce as a whole fell below the rate of growth of (p.161)

Table 8.4. Annual Rates of Employment Growth for Usual Status Workers (%)




1983 to 1987–98



1987–98 to 1993–94



1993–94 to 1999–2000



1999–2000 to 2004–05



2004–2005 to 2009–10



Source: National Sample Survey, various rounds (1983 to 2004–05 calculated by Chandrasekhar, 2007).

population in the later 1990s, and well below its rate of growth in the 1980s and early 1990s (see also Sen, Chapter 2). We will consider these trends, starting with rural labour.

Agriculture and Rural Labour

The NSS data (as reported by Chandrasekhar, 2007) show that the rate of rural employment growth has been consistently lower than that of the urban economy, as the share of all employment accounted for by agriculture has slowly declined. And, as Bardhan puts it, ‘the agriculture sector is in bad shape’ (2009: 31), after a decade—1994–95 to 2004–05—of the lowest growth rates in the sector since independence (0.6 per cent a year). This is the result of the very high incidence now of marginal holdings, of the rising costs of inputs, the degradation of the natural resource base, declining public investment, and decreased access to public sector credit (GOI, 2007). Agrarian distress is reflected in the apparently higher rates of suicide among farmers than among the general population (Nagaraj, 2008), and in Patnaik’s calculation that over the period from 1994–95 to 2003–04 the real per capita incomes of India’s agriculturally dependent population remained stagnant, when per capita incomes for the country as a whole increased by more than 4 per cent (cited by Jha, 2007). The point is brought home even more forcefully in findings of the Foundation for Agrarian Studies from village surveys in Andhra Pradesh, Uttar Pradesh, and Maharashtra: that it was virtually impossible in 2005–06 for households with operational holdings of 2 hectares of land or less (who account for all but a small share of all the cultivators in the country, remember), to earn an income sufficient for family survival. The net annual incomes from crop production of very many households were actually negative (Ramachandran and Rawal, 2010).

The rural poor include large numbers of cultivating households, therefore, but an even greater share of agricultural labour households, as we see in (p.162) Table 8.5. They might be expected to have been even more badly affected by the agricultural crisis than cultivating households.

The NSS data suggest that agricultural wage employment increased at the rate—at most—of 1 per cent a year between 1993–94 and 1999–2000 (a lower rate than in the 1980s), even while total agricultural employment stagnated; but subsequently it has declined. In line with these trends, the NSS data show that the annualized rate of growth of weekly wage earnings in agriculture declined from 3.27 per cent in 1983 to 1993–94, to 1.82 per cent in 1993–94 to 1999–2000, and to 1.11 per cent in the period from 2000 to 2004–05. The series Agricultural Wages in India shows a similar path of declining wage increases, and also that real wage rates in most operations actually fell in many districts across the country in the 1990s. This trend may have accompanied changes in the organization of agricultural labouring operations, certainly in some parts of the country, where there has been a shift to more piece-rated teamworking. In line with these trends, there is evidence of increasing indebtedness among agricultural labourers, especially to informal lenders, and of a weakening of school attendance among children from agricultural labour households.

Where real agricultural wages have increased, as in some parts of rural Tamil Nadu, it is in circumstances in which there has been an increase in nonagricultural employment opportunities (see Harriss, Jeyaranjan, and Nagaraj, 2010). Agricultural labour itself has become increasingly feminized, and—most likely—increasingly ‘dailitized’, as those from the Scheduled Castes confront particular barriers in entering even many casual labouring jobs outside agriculture (Harriss-White, 2003; Heyer, 2010). The rate of growth of rural non-agricultural employment in India over the period 1993–94 to 1999–2000, at 2.26 per cent a year, was more than twice the rate of growth of agricultural employment (1.06 per cent), and was higher still in the period to 2004–05, at 5.27 per cent a year, according to NSS data (Himanshu, 2007, table 8)—though it has fallen subsequently, as is reported below. Such increases in agricultural wages as have taken place have probably followed

Table 8.5. Classification of Rural Households According to Major Earnings Source, 2004–05

Income source

Non-poor households

Poor households

Self-employed in non-agriculture



Agricultural labour



Other labour



Self-employed in agriculture






Source: Calculated from NSS data by Eswaran et al. (2009).

(p.163) from a tightening in rural labour markets where non-farm employment is available. Rural distress, following from the crisis in agriculture that is attested most tragically in farmer suicides, but also shown in the evidence on declining trends in the growth of agricultural output and productivity at least until the middle of the present decade, has been offset, no doubt, by the growth in non-farm employment opportunities.

This is often associated, however, with increased migration, both rural– rural and rural–urban, much of it circular (when people move to and fro between village homes and distant work-sites). One recent estimate is that the numbers of such circulating migrants may have reached 100 million, while the National Commission on Enterprises in the Unorganized Sector estimates that the number of seasonal migrants is of the order of 30 million (Bird and Deshingkar, 2009; Deshingkar and Farrington, 2009). What we know of the conditions of life and work of this mobile labour force is limited, but shows that though workers may earn more than in agriculture, their livelihoods are characterized by high levels of vulnerability (Rogaly et al., 2002)—exactly as are those of the comparably large, or even larger, numbers in the mobile labour force of China. Thus far, however, there has been less political mobilization in protest against rural distress in the major agricultural regions of India than there has been in China, where the widespread occurrence of violent incidents has led the government to elevate rural development as a national priority (Dong, Bowles, and Chang, 2010).

‘Jobless Growth’?

The notion of ‘jobless growth’ has been contested, however, in interpretations of NSS data that showed an acceleration of employment growth in 2000–05, within both urban and rural areas and among both men and women. Not only was the ‘jobless growth’ thesis refuted, but it was also argued by Sundaram (2007) that there had been a marked increase of ‘good-quality employment’. The essential points in this case were that self-employment had grown markedly in urban non-agriculture, especially among women; casual employment generally had declined; and regular salaried non-agricultural employment had increased, especially for women—at over 5 per cent a year. This argument depended heavily upon the assumption that self-employment represents ‘good-quality employment’, because over the period in question there had actually been a decline in all wage employment and a very significant increase in self-employment among all categories of workers. All told, about half of all those in the workforce are now self-employed. The idea that this is ‘good-quality employment’ reflects the emphasis in current development thinking, internationally, about the virtues of self-employment, which is understood as ‘enterprise’ (a way of thinking that is reflected in (p.164) the title of India’s National Commission for Enterprises in the Unorganized Sector). But there are many reluctant entrepreneurs among the poor, and the NSS data show that just under half of all self-employed workers do not find their work remunerative, in spite of their usually low expectations of reasonable returns. Chandrasekhar concluded that a large part of the increase in self-employment had been distress-driven, and that ‘the apparent increase in aggregate employment growth may be more an outcome of the search for survival strategies than a demand-led expansion of productive employment opportunities’ (2007).

For Unni and Raveendran (2007), too, the apparently rosy picture painted by Sundaram had to be qualified by recognition that some of the increase of regular salaried jobs was in a subsidiary capacity, indicating part-time working; while the increase in female participation was of women mainly at lower levels of education, implying that their access to employment was either in self-employment or at the bottom of the wage/salaried employment hierarchy (see also Sen’s comments, Chapter 2, on the growth of unskilled employment). There was evidence, too, from the NSS, that the extent of home-working had increased quite significantly, especially among women. The increased employment of women in particular in subsidiary, part-time occupations, some of them involving home-working, and large numbers of them being poorly remunerated, are developments that have been characteristic of economies that have participated in economic globalization (Castells, 1997). Most significant of all, however, for Unni and Raveendran, was the fact that the average daily real wages of regular workers declined in 2004–05, by comparison with 1999–2000 (particularly for females), indicating the growth in urban areas of poorly remunerated jobs in regular salaried employment (and see Sen, Chapter 2, on the failure of employment growth in organized manufacturing). It is altogether likely that the growth of employment in the first five years of the new millennium was driven by distress, at a time when the agricultural economy was in crisis—as Chandrasekhar (2007) argued and as Himanshu, more recently, has shown in an analysis of employment trends over the longer run (2011: 53–55).

The estimates contained in the report on the 64th round of the NSS for 2007–08, and then in those of the 66th round of 2009–10, confirm the misgivings of other scholars as against Sundaram’s optimism about the creation of ‘good-quality employment’ (Economic and Political Weekly, 2010: 7). Total employment increased at a rate of only 0.17 per cent per year between 2004–05 and 2007–08 (the lowest rate of employment generation of the last three decades, and occurring in the context of very high rates of growth of GDP); and rural employment actually declined. The 66th round of the NSS shows that between 2005 and 2010 usual status employment increased by just 0.1 per cent a year. In this period, the deceleration in the growth of urban (p.165) employment (from 4.22 per cent a year in 1999–2005 to 1.36 per cent in 2005–10) and the decline in rural areas (the rate was -0.34 per cent a year in 2005–10) was accounted for largely by the sharp fall in female labour force participation. ‘What seems to have happened is that a large majority of women workers moved into the labour force during 1999–2005 and looked for work outside the home due to the agrarian crisis and distress in rural areas. And it is these women workers who have moved back into their homes as soon as the situation improved because of higher agricultural productivity …’ (‘Editorial’, 2010: 7). At the same time, the data show almost no diversification into rural non-farm employment. The intersectoral productivity gap widened over the period, as did the wage gap between the skilled and unskilled labour force. There is evidence, as Himanshu points out (2011: 56), that there is an inverse relationship between output growth and employment growth.

‘Informalization’ of employment, is of course, greatly to be desired, according to the advocates of economic liberalization, since labour market regulation beyond an absolute minimum is held to give rise to inflexibility. Besley and Burgess have concluded from comparison across Indian states that those ‘which amended the Industrial Disputes Act in a pro-worker direction experienced lowered output, employment, investment, and productivity in registered or formal manufacturing’ (2004: 91). Their arguments have been subjected to significant criticism (Bhattacharjea, 2009), and neither theoretical nor empirical work, in relation to India and to other countries, leads to unequivocal conclusions regarding the impact of employment protection legislation. As Bardhan says, ‘there is hardly any study on the labour absorption question that conclusively shows that any adverse effect of labour laws is particularly large compared to the effects of other constraints on labour-intensive industrialisation’ (2009: 33. See also Kannan and Raveendran, 2010). There is also substantial evidence that ‘employers have been able to find ways to reduce the workforce even with “restrictive” provisions in place’—such as that on the retrenchment of workers, by using the mechanism of the voluntary retirement scheme in the later 1990s, or in the indications of the increase in the numbers of contract workers in the total number of workers in manufacturing (from about 12 per cent in 1990 to over 20 per cent by 2004–05) (Sharma, 2006; see also Nagaraj, 2004; and Sen, Chapter 2, this volume).

Informalization/‘flexibilization’ has certainly been taking place, and its negative consequences for workers are attested in a number of case studies. These show that total household incomes do not necessarily decline, partly because of increased workforce participation on the part of women, and in some cases of children, but that livelihoods have become much more vulnerable. Jan Breman’s analysis of the impact of informalization in Ahmedabad makes this point very forcefully (Breman, 2001); and it is shown (p.166) up as well in Nandini Gooptu’s studies of once permanently employed workers in Kolkata (Gooptu, 2007). In both cities, the decline of ‘permanent’ formal employment in cotton (in Ahmedabad) and jute mills (in Kolkata) has led to what Mike Davis (2006) has referred to—with reference to cities throughout the erstwhile ‘third world’—as ‘urban involution’, meaning the crowding of workers into such activities as local petty trade, transport, and construction, and (generally in relatively smaller numbers) into small manufacturing workshops. Coping with their changed circumstances has meant, in many households, that women and children have entered the labour force in larger numbers (contributing to the phenomenon of increasing selfemployment, especially among women, that we noted earlier). It is for this reason that household incomes have not necessarily declined but livelihoods have become more vulnerable and—according to Breman’s observations in Ahmedabad—living standards have declined. Karin Kapadia, from fieldwork in low-income households in Chennai, also thinks that it is likely that in many of them women have become the main breadwinners—though this coincides with evidence of decline in the status of women in Tamil society (Kapadia, 2010). Among men there has developed a strong sense of their powerlessness and of loss of dignity. Some have responded to their material and identity crises through resort to criminality, and some to violence, in aggressive assertions of masculinity (Gooptu, 2007). But these are not the only or the dominant responses. Some men have turned rather to clubs, and some of these to social service activities. There are signs, too, of increasing religiosity, and of the influence of fundamentalist religious ideology (Breman, 2002).

Labour Organization

Is there evidence of a counter movement among urban, industrial workers, faced either with the lack of or with the loss of ‘good jobs’, reduced protection, and with being pushed into greater dependence upon forms of employment—casual work or self-employment or low-paid regular wage work—that leave them more vulnerable? The weakness of organized labour in this period is reflected in data on the incidence of industrial disputes. This has shown sharp decline, falling consistently below 1,500 a year after 1992, whereas the number had remained well above that level over the previous 30 years, except in the period of The Emergency (Agarwala, 2008: figure 3). What seems to have happened, according to Supriya RoyChowdhury (2008: 34ff.), is that industrial disputes have become increasingly company specific. ‘What is absent,’ she says, drawing on her studies of industrial disputes in Bangalore, ‘is both a movement-like character to the activities of trade unions, and a broad class-based character to workers’ struggles.’ The disputes ‘appeared to (p.167) occur in a relative vacuum, led by trade unions, which were only tenuously connected, and in some cases not connected, to the mainstream trade unions. The form of these protests was that of isolated events which evoked little or no response from the larger body of industrial workers.’ The unions have failed, in her view, to articulate class politics, so that, it seems, ‘people are increasingly looking after themselves’. And, as Nandini Gooptu has described their ideas and values, this is absolutely the outlook of those who have found employment in one of the burgeoning sectors of the ‘new economy’, the shopping malls (Gooptu, 2009).

The overwhelming majority of the labour force of India, as we have seen, is employed in informal activity, so what is happening in ‘the informal sector’ is extremely important. Sanyal and Bhattacharyya (2009) argue that a very large share of those in informal employment in India constitute a ‘surplus’ labour force, outside the circuit of capital (rather than being linked to capitalist enterprises in the formal economy through subcontracting or a distinct form of capital—petty commodity production—in themselves (Harriss-White, 2010)). As we noted earlier, Sanyal and Bhattacharyya describe it as ‘excluded labour’ (see also Li, 2010). The two authors have developed an intriguing argument, inspired by their observation of the opposition to massive redevelopment plans in the huge Dharavi slum in Mumbai—opposition that has come about because of the way in which these take no account of the need for space for informal, home-based activities. The plans take account of Dharavi people only as ‘residents’ and not as ‘producers’. Sanyal and Bhattacharyya suggest that in so far as excluded labour has structural power, it derives ‘from its ability to encroach on the domain of capital; “squatting” becomes the new form of resistance’ (2009: 42). The dispossessed, they argue, ‘fight back through silent encroachment on property’ (p. 42), in resistance that implies the tacit recognition of the impossibility of the completion of the transition to capitalism. Such tacit recognition seems to be reflected in the aims of organizations of informal workers that have come into existence, as among construction workers and women employed in rolling bidis. Agarwala (2008) has shown that the politics of these organizations are taking on a distinctive character, with demands being targeted towards the state rather than being directed against employers, for welfare benefits as citizens rather than for workers’ rights. They are struggling not against informality (the historical objective of the trade union organization) but for rights of recognition in this status (though see also RoyChowdhury, 2003, for a less optimistic view of the potential in the recent organization of informal workers). Lerche, similarly, describes the activities of major unions in regard to the organization of informal workers as being focused on ‘establishing a regulatory framework for conditions of work and pay, and promoting welfare issues, rather than undertaking more classical grassroots union activities … The struggle against (p.168) employers has been replaced by a struggle to secure improvements from government’ (2010: 74).

There are no indications, therefore, of any very strong collective response among the urban labouring classes that would constitute a counter movement to liberalization and its effects on workers. But the Indian state has not entirely ignored the claims of the mass of the working poor for welfare. Indian governments’ record of social provisioning is very mixed, but—under considerable political pressure from within civil society as well as from the left parties—the present government has introduced the most massive public employment programme in the world, in the Mahatma Gandhi National Rural Employment Scheme (which guarantees 100 days of employment to every rural household), and is now under similar pressure to improve food security. These measures lend credence to Chatterjee’s argument that there is now, very generally, an increasing sense that the basic conditions of life must be provided to people everywhere (Chatterjee, 2008. See also Li, 2010). But at the same time, as Chatterjee also argues, mass politics are increasingly concerned with staking claims to state benefits, and there is no longer a perspective of transition, such as characterized the labour movements of the earlier twentieth century. Interventions—such as through the Unorganized Sector Workers’ Social Security Bill of 2008, as well—only ‘provide a way of making informalisation and casualisation more palatable’ (Lerche, 2010: 76).

Conclusion: ‘Excluded Labour’?

The evidence and argument of this chapter have shown that India’s ‘lopsided transition’, with the limited movement of labour out of marginal smallholding agriculture as the economy grew over the first four decades from independence, has continued through the more recent years of very high rates of growth and in the context of India’s partial pursuit of economic liberalism. These years are fairly described as a period of ‘jobless growth’, in spite of the apparently contrary evidence for the period 1999–2005. Employment in ‘good jobs’ in the formal sector has stagnated. There has been little growth of manufacturing employment (Kannan and Raveendran, 2010), and most new jobs have been created in construction and in traditional services (as shown in Table 8.1). The incidence of casual employment may have declined between 1999 and 2005, but real wages in regular employment declined over the same period (certainly in the lower half of the income distribution of regular earners, according to the recent analysis of Sarkar and Mehta, 2010). The assumption that the expansion over the same period of self-employment—which accounts for at least half of all jobs—is an indication of a movement into ‘good-quality employment’ is heroic, to say the least. There are strong indications that a (p.169) significant share of the new jobs that people have taken up over this period has reflected distress rather than ‘entrepreneurial enterprise’ (as we see clearly from ethnographic studies such as Breman’s or Gooptu’s). The poor are often ‘reluctant entrepreneurs’ (as Gooptu has it). The informal sector continues to account for more than 90 per cent of all employment. Perhaps the most critical question, therefore, about labour in India, is that of whether the argument proposed by Sanyal and Bhattacharyya—that a very large share of Indian labour is ‘excluded’ (or constitutes ‘surplus population’ in Tania Li’s more tendentious terminology)—carries weight, or not. What are the prospects for incomes and welfare for those in informal employment?

Both Sanyal and Bhattacharyya, and Tania Li, warn against the easy assumption of the inevitability of the linear pathway of structural transformation—such as appears, for example, in the arguments of the World Development Report for 2008 on Agriculture for Development—and critique the residual functionalism (as Li puts it) in the idea of the ‘reserve army of labour’. They refer to (and Li describes in some detail, from across Asia) the ‘new round of enclosures that have dispossessed large numbers of rural people from the land, and the low absorption of their labour, which is “surplus” to the requirements of capital accumulation’ (Li, 2010). Of course, there are informal activities that are integrated within the circuit of capital, as through subcontracting and outsourcing, but a great deal of informal activity, which—as we have seen—involves large numbers of ‘own account workers’ or the self-employed, constitutes a non-capitalist production space (in Sanyal and Bhattacharyya’s view). This is the economy of surplus or ‘excluded’ labour, which does not contribute to capital accumulation.

As Bardhan has pointed out, the problem with this argument is that the authors suggest that the non-capitalist space accounts for the great majority of informal workers, when the evidence on the point is scanty. This is a fair criticism, but Bardhan’s own further arguments certainly provide no convincing rebuttal of the idea that there is an extensive force of ‘excluded labour’. He refers to data showing that ‘the all-India average market value of fixed assets owned per enterprise was Rs 58 000 in 2005–06 [$1200+] in the informal manufacturing sector’—but the conclusion that he draws when he says ‘so the average informal enterprise is not run by destitute people’ (2009: 34) is perhaps misleading. The great majority of ‘informal enterprises’, after all, are not in the manufacturing sector. Those that are may well include units that have become more capital-intensive over time, as Dibyendu Maiti and Kunal Sen report. But these authors also say that ‘(w)hether the informal sector can be a source of robust and productivity driven employment growth in the future, in the face of weak employment growth in the formal manufacturing sector, is a question that remains to be answered’ (2010: 8). The results, however, of the research that they brought together to test the (p.170) alternative hypotheses of ‘informality as exploitation’ (a ‘site for primitive capital accumulation, with underpaid workers in abysmal conditions’) versus ‘informality as accumulation’ (a ‘venue for economic dynamism and entrepreneurial creativity’, as they put it) generally supported the former. The further question, of course—posed by Li, and Sanyal and Bhattacharyya—is that of just how much informal activity really can be considered to be the site of ‘primitive capital accumulation’. Isn’t much of it reasonably seen as lying altogether outside the sphere of capital accumulation?

We have no means for mapping the distribution of informal economic activity and employment between that which is firmly within circuits of capital accumulation and that which can be held to be outside them, and the notion of exclusion is, to say the least, tendentious when we know that garbagepickers, say, often are linked in ultimately to circuits of capital (as when they supply scrap metal for industry). Rather than referring to a large share of the labour force as being outside the sphere of capital accumulation, therefore, it is more sensible to think in terms of its being ‘excluded’ from the dynamic sectors of the economy, and engaged in activities of such low productivity as barely to allow for survival. There is no question that India’s transition is indeed ‘tortuous’; and there remains a ‘marginal mass’ of labour which barely survives without welfare provisioning on the part of the state, now through the Mahatma Gandhi National Rural Employment Guarantee (NREGA), and (it is to be hoped) through enhanced support for food security and more adequate public health. The ‘inclusive growth’ that was the stated aim of India’s 11th Five Year Plan has remained elusive—and it is in this context, and in part perhaps because of the failure of aspirations to inclusive growth, that the government of India has passed social welfare legislation such as NREGA. The persistence of mass poverty in India has become politically unacceptable, and given the failures of inclusive growth, the state has had little alternative but to resort to the provision of a social safety net. Schemes such as (notably) NREGA, may deliver important benefits to poor people, but they do little to address the problems of human capital formation in India that are the outcome of decades of underinvestment in education, and that have helped to limit the possibilities for inclusive growth.


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(1) But note that NSS data for 2007–08 show the share of farm employment as 55.4 per cent (Himanshu, 2011: 47).