Labour force participation rate for China is a CEIC estimate, based on World Bank data. Available at: https://www.ceicdata.com/en/indicator/china/labour-force-participation-rate. China’s LFPR estimate pertains to the age group fifteen and above.
6. We refer to those with more than a secondary level of education as ‘educated’. They may have graduate degrees, postgraduate degrees or shorter two-year diplomas. All figures from PLFS 2017–18.
7. There are two concepts involved in defining informality. One can look at the company—its size, whether it is registered with the government, pays taxes and is liable to provide certain protections to workers. Firms that fulfil these criteria are called ‘organized’. Firms that do not—that are too small, and fall below legal thresholds for registration or worker protections—are ‘unorganized’.
One can also consider the characteristics of the job itself—whether there is a contract, whether one is assured work and payment (either indefinitely, or for some defined number of days), and the ease with which one can be fired. Jobs may be classified into formal (a contract ensures a certain period of guaranteed employment, with protections against summary dismissal); informal (there may or may not be a contract, but duration and payment are assured in some form); or casual (there is neither contract nor assurance of work from one day to the next.)
In this book, we use the terms ‘informal economy’, ‘informal sector’, and ‘informal work’ in a less technical or precise sense. We mean it as shorthand for everyone who is not either a full-time employee or a contract worker at an organized firm. In other words, informal workers fall somewhere on the spectrum that runs from a self-employed or casual labourer at one end, to full-time workers—with or without contracts—at unorganized micro and small firms at the other end. The concept of formality/informality does not translate easily to the agricultural sector, in part because it relates to whether one works for a registered factory or company, whereas there is no such thing as an unregistered farm. Still, if we define formality in terms of job security, regular income, contracts for labour, or non-wage/social security benefits, the farm workforce would be considered informal.
8. A beedi is a thin mini-cigar filled with tobacco flakes.
9. Labour productivity (which we refer to as ‘productivity’ throughout this book) refers to the quantity of goods and services a worker produces in an hour of work. How much a worker earns—their wage—is, all else being equal, determined by the value of goods and services they are producing per hour—their productivity. Thus, when comparing industries/sectors of the economy, we use average wage levels as a proxy for productivity, recognizing certain shortcomings—for example, the structure of different sectors, such as the strength of labour unions or how heavy automation adoption is, also affects the wage–productivity relationship. Broadly, it is assumed that a sector with higher wages is more productive than one with lower wage levels.
10. Differences in daily earnings are based on data from PLFS 2017–18. Informal sector workers include casual and self-employed workers. The former earns on average 55–70 per cent less than formal sector workers, while the latter earns 25–30 per cent less per day of work. In aggregate, the differential between the formal and informal sectors is 30–40 per cent. The average wage per month for all formal sector workers is ₹16,500 ($236) while it is ₹10,600 ($152) for informal sector workers.
CHAPTER 22: A TWO-TRACK ECONOMY
1. Primary education includes all levels of educational achievement below tenth grade. Secondary education includes those who have completed tenth or twelfth grade. Tertiary education includes those with graduate and postgraduate degrees, which typically involve three to four years (or more) of study at a university after the completion of a secondary education. We also consider those completing shorter diploma courses—that typically take one to two years, after secondary education—as tertiary educated. Nearly 64 per cent of India’s working-age population (fifteen years and above) has an educational attainment, at best, up to primary school. This includes around 27 per cent of the working-age population that is not literate. This figure is even higher in the workforce, with nearly 67 per cent having, at best, a primary education. Data based on PLFS 2017–18.
Vocational and skills training offers an alternative set of qualifications to those unable to complete formal secondary or tertiary education. It usually involves undertaking a two- to three-month course, at a recognized government or private institution, in order to gain skills for a particular type of job. The PLFS 2017–18 estimates that only 2 per cent of those in the age group 15–59 and 2.5 per cent in the age group 15–29 have received formal vocational training. Non-formal training—such as learning on-the-job, self-learning or being taught by parents—is much more prevalent, with 6 per cent in the age group of 15–59 years reportedly receiving non-formal training. The figures are similar to those in the last large sample survey conducted by the National Sample Survey Organisation—it found that 2.2 per cent in the age group of 15–59 years received formal vocational training, with 8.6 per cent reporting non-formal vocational training.
2. Rajya Sabha Unstarred Question No. 1224, answered by the Ministry of Skill Development and Entrepreneurship on 13 February 2019. Available at: https://164.100.158.235/question/annex/248/Au1224.pdf
For a discussion on the challenges with skilling, see: Antara Sengupta, ‘India’s skilling challenge: Lessons from UK, Germany’s vocational training models’, Observer Research Foundation, 4 June 2018. Available at: https://www.orfonline.org/expert-speak/indias-skilling-challenge-lessons-from-uk-germanys-vocational-training-models/
Haris Zarigar, ‘Lack of quality trainers impending India’s skill mission’, Mint, 19 February 2018. Available at: https://www.livemint.com/Industry/iLeYEW1rqsxkIS3DA7FIeN/Lack-of-quality-trainers-impending-Indias-skill-mission.html
3. Analysis by Tata Sons based on multiple sources.
Employment levels and share of secondary educated workers in different sectors for 2011 is based on unit-level data from the sixty-eighth round of the National Sample Survey Organisation’s Employment and Unemployment Survey, 2011–12.
Real Gross Value Added (GVA) from the National Accounts Statistics (NAS) 2011–12, Central Statistics Office, Ministry of Statistics and Programme Implementation.
Split of GVA between organized and unorganized manufacturing from Radhicka Kapoor, ‘Understanding the Performance of India’s Manufacturing Sector: Evidence from Firm Level Data’, Centre for Sustainable Employment Working Paper 2018-2, March 2018.
4. ‘2018 Talent Shortage Survey: Solving the Talent Shortage’, Manpower Group, 2018. Available at: https://www.manpowergroup.co.in/TalentShortageSurveyIndia2018.pdf
Judges’ numbers: Pradeep Thakur, ‘Govt plans exam to recruit 6,000 judges for lower courts’, The Times of India, 22 October 2018. Available at: https://timesofindia.indiatimes.com/india/govt-plans-exam-to-recruit-6000-judges-for-lower-courts/articleshow/66309316.cms
Physicians’ numbers: ‘Lok Sabha Unstarred Question No. 1728,’ Ministry of Health and Family Welfare, July 2018. Available at: http://164.100.47.190/loksabhaquestions/annex/15/AU1728.pdf
Elementary school teacher numbers: ‘How have States Designed their School Education Budgets?’, Centre for Budget and Accountability (CBGA) and Child Rights and You (CRY), 2016. Available at: https://www.cry.org/resources/pdf/Study%20Report%20by%20CBGA%20and%20CRY-1.PDF
Private sector vacancy numbers: ‘2018 Talent Shortage Survey’, Manpower Group. Available at: https://insights.manpowergroupsolutions.com/2018-talent-shortage-survey/
5. Reproduced from Ajit K. Ghose’s ‘India Employment Report 2016’, Institute for Human Development. US data taken from ‘Current Population Survey, 2012 Annual Social and Economic Supplement’, U.S. Census Bureau, 2012. The grouping ‘Primary and below’ includes not literate and those educated up to the eighth grade (that is, both primary and middle school).
6. UP messengers’ job application numbers: Pathikrit Chakrabort
y, ‘In UP, 3,700 PhD holders apply for messenger’s jobs’, The Times of India, 30 August 2018. Available at: https://timesofindia.indiatimes.com/city/lucknow/3700-phd-holders-apply-for-messengers-job/articleshow/65601510.cms
7. Calculated using data tables on ‘Enrolment by Level of Education’ and ‘Expenditure on Education (Government) in PPP$’, downloaded from UNESCO Institute for Statistics.
8. Nancy Birdsall et al. (edited by Lawrence MacDonald), ‘The East Asian miracle: Economic growth and public policy: Main report (English)’, World Bank, 2013. Available at: http://documents.worldbank.org/curated/en/975081468244550798/Main-report
The link between secondary-educated workers and economic growth is discussed in Robert J. Barro, ‘Education and Economic Growth’, OECD, 2001. Available at: https://www.oecd.org/education/innovation-education/1825455.pdf; and T.R. Breton, ‘The role of education in economic growth: theory, history and current returns’, Educational Research, Vol. 55, No. 2, pp. 121–138, 2013. Available at: https://www.tandfonline.com/doi/abs/10.1080/00131881.2013.801241
CHAPTER 23: TWICE EXPOSED
1. The monthly income of an average Indian is nearly ₹11,900, which translates to ₹142,800 ($2,040) per year (India’s per capita income) at an exchange rate of ₹70 per US $. Rajappa’s earning of ₹20,000 per month is just over two-thirds higher than this.
CHAPTER 24: ESCALATOR SECTORS
1. ‘South Asia Economic Focus, Spring 2018: Jobless Growth?’, World Bank, 15 April 2018. Available at: https://openknowledge.worldbank.org/bitstream/handle/10986/29650/9781464812842.pdf?
2. Analysis for India based on the data release accompanying the publication: D.K. Das et al., ‘Measuring Productivity at the Industry Level–The India KLEMS Database’, Reserve Bank of India, March 2018. Available at: https://m.rbi.org.in/Scripts/PublicationReportDetails.aspx?UrlPage=&ID=894
Korea data from the World KLEMS Initiative, who in turn source it from the Korea Productivity Centre.
3. Employment shares from PLFS 2017–18. Contribution to GDP reflects the sectoral shares in nominal gross value-added, as sourced from CEIC. Data for 2017 is used for comparability with employment data from 2017.
CHAPTER 27: THE ENTREPRENEUR’S TALE
1. Kirana stores are neighbourhood mom-and-pop grocery retail stores in India.
2. Rajasthan is a state in western India, with a population of roughly 70 million.
CHAPTER 29: THE GREAT SKEW
1. SME definition: There are different ways of classifying enterprises—based on revenue, capital investment, turnover or number of workers, among other considerations. The Indian Ministry of Micro, Small and Medium Enterprises (MSME) uses a definition based on investment. However, given that the focus of this book is jobs, we have generally used an employment-based definition for our purpose. Globally, the most widely used definitions categorize micro enterprises as those hiring less than ten people; small as between ten and forty-nine; and medium as between fifty and 249. Self-employed individuals (that is, those who have no additional employees) are also considered micro enterprises. Wherever possible, we have used this definition, unless otherwise specified in the endnotes.
2. Average firm size in India as of 2014 was 2.24. See ‘All India Report of Sixth Economic Census’, Central Statistics Office, Ministry of Statistics and Programme Implementation, 2014. Available at: http://www.mospi.gov.in/all-india-report-sixth-economic-census
The Economic Census has well-documented issues in accurately capturing the total number of people employed in firms. See for instance, R. Krishnaswamy and S.L. Shetty, ‘Sixth Economic Census 2013: Intriguing Numbers’, Economic & Political Weekly, Vol. 49, No. 38, 20 September 2014. However, it is the only source that attempts to profile the full spectrum of enterprises in the country. We use elements of the survey, such as the average firm size and the distribution of workers across firms of different sizes. We then apply this data to figures of the overall workforce used in other parts of the book.
In India, as of 2014, around 174 million people—38 per cent of the workforce—were employed in firms. This number does not include farm workers, public administration and defence employees, or casual labourers. However, it does include employees of government-run enterprises (Public Sector Undertakings or PSUs).
3. Apparel sector size: ‘Textiles & Apparel Sector’, Department of Industrial Policy and Promotion, 2016. Available at: http://pibphoto.nic.in/documents/rlink/2016/nov/p2016112503.pdf
Employment in apparel sector in India and China: ‘Enterprises in Asia: Fostering Dynamism in SME’, Asian Development Bank, 2009. Available at: https://www.adb.org/sites/default/files/publication/27727/ki2009-special-chapter.pdf
4. Data limitations prevent a direct comparison of like-for-like firm size aligned to the SME definitions (1–9, 10–49, 50–249) we have adopted.
Micro enterprises have low productivity and low prospects of growth: Rana Hasan and Karl Robert L. Jandoc, ‘Labor Regulations and the Firm Size Distribution in Indian Manufacturing’, Columbia University, 2012. Available at: https://academiccommons.columbia.edu/doi/10.7916/D88G8TVH/
Four-times productivity differential: ‘Enterprises in Asia: Fostering Dynamism in SMEs’, Asian Development Bank, 2009. Available at: https://www.adb.org/sites/default/files/publication/27727/ki2009-special-chapter.pdf
Eight times as productive: Radhicka Kapoor, ‘Creating Jobs in India’s Organised Manufacturing Sector’, ICRIER Working Paper 286, September 2014. Available at: http://icrier.org/pdf/Working_Paper_286.pdf
5. India’s firm size brackets (1–9, 10–199, 200+) are different from the US, Germany, Brazil and Israel (1–9, 10–249, 250+). The comparison is not precise, but indicative.
6. ‘All India Report of Sixth Economic Census’, Central Statistics Office, 2014
Paan, or betel leaf, is an after-meal digestive, popular in the Indian subcontinent. Paan shops, typically small single-manned roadside outlets, sell rolled paan with slaked lime, betel nut and other flavours.
7. ‘The Global Unicorn Club’, CB Insights, 2019. Accessed on 31 July 2019. Available at: https://www.cbinsights.com/research-unicorn-companies
Start-up job figures: ‘Indian Tech Startup Ecosystem: Approaching Escape Velocity’, NASSCOM and Zinnov, 2018. Available behind paywall at: https://www.nasscom.in/knowledge-center/publications/indian-tech-start-ecosystem-2018-approaching-escape-velocity
Nearly 121 million people employed in micro firms: Based on analysis by Tata Sons.
CHAPTER 30: GOLDILOCKS ENTREPRENEURS
1. ‘Financing India’s MSMEs’, International Finance Corporation, 2018. Available at: https://www.ifc.org/wps/wcm/connect/dcf9d09d-68ad-4e54-b9b7-614c143735fb/Financing+India%E2%80%99s+MSMEs+-+Estimation+of+Debt+Requirement+of+MSMEs+in+India.pdf?MOD=AJPERES
Non-banking financial companies (NBFCs) lend and make investments in a similar manner to banks. However, there are a few key differences: 1) NBFCs cannot accept demand deposits; 2) An NBFC is not part of the payment and settlement system and cannot issue cheques drawn on itself; 3) They do not hold a bank licence.
2. India is working to consolidate existing public sector banks to achieve scale, improve efficiency and promote innovation. Simultaneously, small local area banks (regional rural banks, urban cooperative banks, etc.) are needed to serve small businesses, especially in parts of the country where larger banks do not enjoy the same reach. These banks face issues like an inadequate capital base, weaker governance levels and low diversification of funds, leading to losses and stressed assets. Better monitoring of these banks can help them provide better services to the customers they are relatively well-placed to reach.
The term ‘small bank’ is a loose term that refers to local, regional, cooperative and community-focused banks that typically serve local businesses. In India, small banks include regional banks and urban cooperative banks; in Europe, small banks include only cooperative banks; and in the US, small banks include regional and community banks.
Six per cent
and fifteen per cent figures: ‘Financing India’s MSMEs’, International Finance Corporation, 2018. Available at: https://www.ifc.org/wps/wcm/connect/dcf9d09d-68ad-4e54-b9b7-614c143735fb/Financing+India%E2%80%99s+MSMEs+-+Estimation+of+Debt+Requirement+of+MSMEs+in+India.pdf?MOD=AJPERES
Cooperative bank branches in Europe: ‘Annual Report 2017’, European Association of Cooperative Banks, 2017. Available at: http://v3.globalcube.net/clients/eacb/content/medias/publications/annual_reports/final_eacb_annual_report_2017_compressed.pdf
Total bank branches in Europe: ‘Banking in Europe’, European Banking Federation, 2018. Available at: https://www.ebf.eu/wp-content/uploads/2018/09/Banking-in-Europe-2018-EBF-Facts-and-Figures.pdf
SME loans in USA: Karen Gordon Mills and Brayden McCarthy, ‘The State of Small Business Lending’, Harvard Business School, July 2014. Available at: https://www.hbs.edu/faculty/Publication%20Files/15-004_09b1bf8b-eb2a-4e63-9c4e-0374f770856f.pdf
3. Micro Units Development and Refinance Agency (MUDRA) was set up by the Government of India in 2015. MUDRA partners with banks, microfinance institutions and other lending institutions at a state or regional level to provide credit to small enterprises. The maximum credit limit is ₹1 million (~$14,000). MUDRA is only a refinancing institution and does not lend directly to micro entrepreneurs or individuals.
4. Goods and Services Tax (GST) is an indirect tax regime in India that came into effect on 1 July 2017. It was introduced to replace the multitude of indirect taxes (state value-added tax, central sales tax, octroi duty, etc.) that varied by state. After the implementation of GST, India shifted to a single indirect tax system of varying rates, applicable on all goods and services produced and sold in the country.
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