Whistleblowers not allowed!

Whistleblowers not allowed: so how did Rakhi Sawant break into the big league?!


The prime minister, Dr.Manmohan Singh, in an intriguing but most welcome Labour Day speech at the inauguration of the new campus of the Institute for Studies in Industrial Development (ISID) in New Delhi said, among quite a few other things, that, “The employment intensive nature and the greater regional spread of SMEs makes them an attractive option for industrial growth”.

An SME, for those not familiar with the acronym, is short for small-and-medium-enterprise. The prime minister went on to suggest that SMEs need to be protected and encouraged and felt that the bulk of the industrial growth was being cornered by the big-boy-beneficiaries of a desi species of “crony capitalism”. In fact, Dr. Singh referred to media comments that had suggested that most Indian billionaires operated in “oligopolistic markets and in sectors where the government had given them special privileges.”

Anyway, the “enterprise” that the prime minister was specifically referring to was manufacturing industry and he was speaking in the context of stimulating employment opportunities. Presumably, he meant manufacturing industry in both the so-called “organised” sector, (meaning establishments incorporated under the Indian Factories Act, 1948, Mines and Minerals (Regulation and Development) Act, 1957, the Company Law, the Central/ State Sales Tax Acts, and the Shops and Establishment Acts of the State governments), as well as the “unorganised” sector, (meaning all unincorporated enterprises and household industries which are not regulated by any acts of the above mentioned type and which do not maintain any annual reports presenting the profit and the loss and balance sheets).

Because much too often, the government is silent on the unorganised sector, as if its existence was some kind of dirty secret. The facts however illustrate how different the truth actually is. For the moment, however, if one interprets Dr. Singh’s intent broadly to cover all enterprise small and medium that has a potential for generating employment including self-employment - then it is quickly apparent that the travails of small and medium industry are shared by professionals and small/medium entrepreneurs alike in a wide swathe of fields that fall both within the organised and unorganised scheme of things.

Sadly, too many worthy citizens of India have been blatantly discriminated against for much too long even though they may be part of a vital and thriving field of endeavour that could benefit from some policy support. Translated and bluntly put, this means money and other practical inputs at the operational level but this has not been forthcoming despite 92 per cent of India’s 457 million workforce being employed in the unorganised sector. And despite 98 per cent of total enterprise in India being classified with the unorganised label. And even after this unorganised lot accounts for 60 per cent of our GDP (Gross domestic product) as per the latest figures!

It must be noted that the entire farm sector (and thus some 60 per cent of the population) falls under the unorganised sector, while only one-fifth of the non-farm workers are found in the organised segment. Estimates suggest that in non-farming activity, as one moves up the income ladder, the share of the unorganised sector gradually declines. It makes you wonder why the organised economy gets away with all the kudos!

It might help if we look at the basis for calling this majority of enterprise and productivity “unorganised”. The ILO (International Labour Organisation) defines the unorganised sector as having such features as a low level of organisation; being small in scale, usually employing fewer than 10 workers, often from the immediate family; possessing ease of entry and exit compared to the formal sector; usually involving minimal capital investment; little or no division between labour and capital; labour-intensive work requiring low-level skills; an absence of formal training; labour relations based on casual employment and/or social relationships as opposed to formal contracts, and so on.

But how applicable is this in India when the unorganised sector is not only a parallel economy but 20 per cent bigger than the organised economy? The government has little control over the unorganised sector and has chosen to ignore it officially for decades. In fact, the first nationwide survey on the unorganised sector under the National Sample Survey (NSS) was conducted during the 55th round (July 1999-June 2000) and included all unincorporated, proprietary and partnership enterprises in its purview.

Perhaps the categorisation needs to be looked at afresh now for whatever can be incorporated. After all the sector includes everything there is a demand for - not just hawkers but all sorts of informal cooperatives, a good deal of Bollywood, much underworld activity, street and ad hoc financing, small scale manufacturing and a good deal of informal broking, banking and other servicing industry. The supremely efficient Dabbawalas too were once unorganised.
Of course, all of this accomplishment has come about without a paisa of government support though it is true that not many of these citizens pay taxes or own PAN cards. But when the prime minister is soul searching on how to be inclusive he should perhaps spare a thought about these citizens, engaged in such myriad activities and eagerly helped on to the electoral rolls by grass roots party workers for their ubiquitous vote.

The discrimination towards the unorganised sector is both unfair and baffling if you consider just how much of the mainstream political activity is funded by the prosperous in this sector. In fact, much of the organised sector itself maintains a degree of flexibility by keeping more than a nodding acquaintance with its friends on the other side of the fence.

But so far not only has the government been unhelpful but it does nothing to restrain the nominally autonomous public sector banks, the lending institutions, the credit card companies and even the private banks that also discriminate against the unorganised sector. They all prefer to lend to the safer bets but here too they stay away from categories of would-be borrowers described in the so called “negative” list.

The “negative list” includes journalists, lawyers, policemen, politicians, anyone connected with real estate and the stock market. All such people have to dissemble about their source of income to get as much as a credit card let alone a loan of any kind. And this when the country makes its external payments with the FII money that comes into the bourses, reduces the housing and office space shortage by virtue of all the entrepreneurs building housing and offices, and informs the electorate via the fourth estate!

Even if one concedes a natural fear of lawyers and policemen, should it form the basis for blatant discrimination? As for politicians, it’s just as well that most of the time and in most cases they don’t need bank money anyway. But it should be remembered that such discrimination does not diminish the whistle blowing and influence peddling potential of any of these people.

Others who have trouble getting a loan from anyone are, as always, the poor. That is why the Grameen Bank and micro-credit was born. Nobel laureate Mohammad Yunus of Bangladesh said he lends to the marginal and the forgotten that the World Bank won’t touch with a bargepole. But he has done it and turned it into a grand success story. We need it badly here in India, to extend credit to the poor honestly and differently from the traditional village money lenders of yore typecast for their venality in countless Hindi movies.

By way of contrast, we, in the cities, who are so conditioned to believe that Sensex and Nifty companies drive the economy and employ tens of millions need to be aware that in 1999-2000, for example, the organised sector's total contribution to employment was a paltry 8 per cent, of which the private sector's contribution was only 2.5 per cent. The remaining 92 per cent came from the unorganised sector.

So much so, that the Planning Commission estimates that if the organised sector, which includes the government and public sector enterprises (PSUs) grows at 20 per cent per annum and the private organised sector at 30 per cent per annum, their contribution to employment will increase by some 1.5 to 2 per cent of the total over the Tenth Plan period. Accordingly, in a burst of recently discovered pragmatism, the Commission has targeted the unorganised sector to achieve its Plan target of employment creation!

Ignoring the unorganised sector hasn’t stopped its progress. And like the charming and vital if arriveste actress Rakhi Sawant so delighted to hold forth one-on-one in Koffee with Karan recently, it will get to its objectives with or without official help. The smart thing to do therefore is get on with inclusion. And official policy may have just signalled its willingness to do so.

(1476 words)

By Gautam Mukherjee
Budh Purnima, May 2nd 2007
This and all original essays on GHATOTKACHSERIES are copyright 2005-2007 by Gautam Mukherjee. All Rights Reserved.