THE latest edition of the Global Wealth Report published by the multinational bank based in Switzerland, Credit Suisse, should gladden those Indians who go gaga about the ‘Shining India’ that is emerging as the fastest growing economy in the world. It says that Indian households hold wealth equivalent to five trillion in US dollars and, since 2000, the annual growth rate in wealth in India is at a high of 9.9% compared to the world average of 6.8%. Of course, India accounts for only a tiny share of 1.8% of the total global wealth of $280 trillion, but then there are 2.45 lakh dollar millionaires in India. But this news also comes with a rider and that is: 92% of Indians have wealth of less than 10,000 US dollars or Rs 6.5 lakh such that 80% or more of the remaining wealth is shared by just 8% of the population. This news about wealth inequality seems to match the rising income inequality.¹

There is no denying the fact that the India we see and experience today is vastly different from what it was a quarter century ago. Despite setbacks, the policies of liberalization, privatization and globalization (often referred to an inflammatory sounding acronym, LPG) have given rise to many visible forms of Shining India be it the new sprawling airports, widespread construction activity, and crowding automobiles in congested roads leading to breath-stopping pollution. The number of television channels would be the envy of any country, if that is a barometer of prosperity or the virtual reality of splendour and pomp that it creates along with the thriving Indian cinema industry. Marketization and commoditization have been a hallmark of this shining process that has not spared even drinking water. Health and education are now enterprises for quick profit making. All these and the speculative rise in prices of real estate have contributed to the creation of ‘added value’ pushing the growth in GDP.

Therefore, it is not surprising that the growth in GDP during the last 25 years (1992 to 2017) has been 570% or 5.7 times – that is close to double the growth during the earlier 25 years (1967 to 1992) of around 290% of 2.9 times at constant prices. To get an idea of the growth in nominal terms, we find it was 2260% or 22.6 times during the last quarter century.

Such enormous increase in income and wealth should have placed the country at a respectable rank in terms of material prosperity and a whole range of basic capabilities. There is a claim that the high growth has rescued around 140 million people out of poverty. That would indeed be the case if one sticks to the officially determined poverty line which, speaking in relative terms, has shrunk from 57% of per capita income in 1973 to 30% in 1993 and then to just 12% since 2010. There is no doubt that some among the poor have become less poor, but that is not saying much.

 

When the United Progressive Alliance came to power in 2004 against the backlash of a campaign of Shining India by the then ruling National Democratic Alliance, there was an explicit political recognition that the common people or the aam aadmi not only did not benefit from this new prosperity but also got excluded on several counts. That recognition was also linked to the fact that the employment mechanism that ought to have translated the high economic growth into increased income and welfare of the common people did not work effectively, since they were predominantly in what is called the unorganized or informal sector of the economy consisting of mostly casual (with irregular work) or self-employed workers.

This was the background to the constitution of a National Commission for Enterprises in the Unorganized Sector (NCEUS) that brought out a series of reports highlighting the plight of the working poor and their households. In the process it also put paid to the idea of a binary division of the population as poor and non-poor (BPL and APL) and brought out several other characteristics of the pervasive nature of informality, insecurity and multiple forms of deprivation among a very large section of the population.² These may be summarized as follows.

 

First, it was brought out that poverty and non-poverty has a gradation and it needs to be seen as belonging to different bands; at least six groups were identified by benchmarking the official poverty line as (a) extremely poor, (b) poor, (c) marginally poor, (d) vulnerable, (e) middle income and (f) high income. During a period of growth, some among the extremely poor managed to move up to the next category of poor, while some among the poor moved up to become marginally poor and so on.

Second, and more important, arising out of this gradation one could discern a class of poor (extremely poor, poor and marginally poor) and the vulnerable. The latter may technically be above a predetermined poverty line but have not yet reached the stage of non-poor given the insecurities in employment and income. Moreover, any catastrophic event such as a serious sickness of a family member or accident/death of the earner would push the household straight back into a poverty trap.³

Third, an economy wide estimate found that around 84% (now 82) of workers in India eked out a living by working in the unorganized or informal sector of the economy defined as establishments and enterprises with less than 10 workers and owned either on a proprietary or partnership basis. However, a much more significant finding was that employment in the formal sector has a sizeable presence of informal workers, i.e. without any employment or social security and that it was increasing. It was 42% in 2000, 47 in 2005, 51 in 2010 and 56 in 2012. That is to say a majority of workers today in the formal sector of the economy are informally employed. One only needs to look around the emergence of ‘temps’ (temporary workers) supplied by labour supply companies to a whole range of big factories, banks and other public and private sector establishments, including some government departments, and the widespread practice of employing guest faculty and contract faculty in colleges and universities.

 

The above two features put together have led to an as yet unchanging figure of 92% of workers as informal workers in the Indian economy.⁴ Such a pervasive nature of insecure work coexisted and contrasted sharply with a rising and growing India. This was a jolt to the notion of economic transformation engineered through a progressive shift of labour from insecure, low paid and low productivity jobs to more secure employment with decent wages and social security in the organized, expectedly in the non-agricultural, sector. Nonetheless, this does not mean that the Indian economy has not undergone a structural transformation.

 

In terms of income generation, agriculture ceased to be an important sector, with only a little more than one-third of the share of GDP even in the early 1980s and only a little less than 15% in 2012. Whereas employment share in agriculture continued in a lopsided fashion with 69% share in the early 1980s and 56% in 2005 finally declining to around 49% in 2012, the year that one may say marked a structural transformation. But the content of employment as exemplified by 92% informal workers robbed this transformation of any substantive meaning in terms of a higher standard of living for the majority.

But this is not the only story of employment. The ability of the economy to generate more employment even with high growth – what economists call the employment elasticity, i.e. percentage growth in employment for every percentage growth in income – seemed to have taken a beating, in turn leading to a debate on ‘jobless growth’.⁵ Economy-wide data on employment since 2012 are not available but the figure may have gone into the negative zone. Going by the employment data generated by the Labour Bureau for selected sectors of the economy, it appears that there has been a net decline in employment that was precipitated by the crisis arising out of the ill-thought through demonetization in 2016.

 

Informal employment need not necessarily be low paid, some would argue. True, there are a wide range of independent professionals like doctors, lawyers, artists, traders and the like whose income could be quite high and at times even be on par with well paid employees in the formal sector. But that is certainly a minority. An overwhelming proportion of the 52% self-employed in the Indian workforce of 476 million (in 2012) would belong to the category of poor and vulnerable. In terms of establishments, the latest Economic Census of 2013-14 reports that 57.7 million, or 98.6% of all establishments other than agricultural crop cultivation and public administration, are unincorporated enterprises employing less than 10 workers. This includes nearly 42 million who are classified as Own Account Workers in the sense that they have no hired workers to assist. These ‘own account’ self-employed are the street vendors, home-based workers who are often paid by piece rate system – rickshaw pullers, autorickshaw drivers, petty traders and so on.

To this category one must also add those small and marginal farmers in agriculture who account for 84% of total farmers in the country. There is no way to determine their wages because what they earn, by stretching their labour time, i.e. resorting to ‘self-exploitation’ a la Chayanov, is a combination of wages and profits. More often than not, it would just about cover the wages of casual workers going by the duration of work. But there is a big chunk of wage workers in the informal workers category. The 48% of the remaining workforce is divided between casual and regular workers. While casual workers, constituting 63% of total wage workers, are by definition informal workers, more than half the regular workers are also informal workers even if they are employed in the formal sector of the economy.

 

Wages of casual workers would give us an idea of the working poor because they not only get the lowest wages but also face irregular work. Detailed work on the wage system in India revealed that, on an average, daily wage of casual workers was only around 30% of the regular workers until 2012 when it rose up to 35%.⁶ Interestingly, such an increase in wages was mostly visible in rural areas and happened after the introduction of the National Employment Guarantee Scheme in 2005. It signalled an idea of minimum wages in rural areas and many women who participated in the employment scheme benefited by it. Our own estimates show that the per capita earnings from the employment guarantee scheme was roughly equal to 10% of the officially determined poverty line⁷ and that certainly helped a section of the poor who were at the edge of the poverty line to come out of it.⁸

 

But what is striking is the wage inequality in the Indian economy characterized by a long tail of low wages that mostly concern low educated women, more rural than urban, with an over representation of SC and ST than Muslims and OBCs. Except a minuscule share of regular workers (presumably domestic workers), all of them were casual workers. What is shocking is the high proportion of women whose wages were lower than the recommended national minimum daily wage of Rs 122 in 2012.⁹ This, by the way, is only marginally higher than the price of a coffee at any metropolitan airport in India. This wage is actually based on the expenditure required to cross the official poverty line that was subjected to severe criticism, even from the Supreme Court, as being too low for survival. In 2012, 68% of women agricultural labourers and 53% in non-agricultural sector in rural areas received less than this national minimum. The corresponding figures for men workers were 47% and 28%. The urban scenario may be characterized only as less grim with 65% and 27% for women and 37 and 31 for men.

Wages, of course, are not an independent phenomenon but an outcome of a combination of factors and circumstances. What we found in terms of wages is not merely the inequality between types of employment status or location and/or gender but also a systematic hierarchical ordering as in the case of poverty. Social exclusion and increasing social inequality has been part of India’s story of high growth with high deprivation.¹⁰ It is evident in the wealth distribution as in education, health or housing. Some idea of the nature of inequality in these areas should suffice to get an idea of the pervasive nature of insecurity and deprivation in a situation of heightening social equality.

 

Education has emerged as a powerful factor in overcoming poverty and inequality despite social identity and gender and location working as limiting factors. However, it is the social identity¹¹ that seems to exert a greater debilitating influence. For any kind of meaningful inclusion there cannot be two opinions on the role of education and it is here that India has a substantial backlog despite some progress achieved through what I would call ‘snail’s pace’ over a long period of time. Taking a secondary level pass as a minimum, recent estimates reveal that just about one-third of adults in India (15 years and above) have attained this level of education. But the variation across social groups is equally striking, with the socially advantaged sections reporting a majority of 53%, followed by Hindu-OBC with 32%, Muslims with 23%, SCs with 22% and the lowest among STs with 18%.

The inter-state variations, presented in Table 1, are quite sharp but what emerges is the irrelevance of location and the importance of social group identity. Even the best performing states of Himachal Pradesh and Kerala, maintain a similar social ranking, although those at the bottom there – the SC and ST groups – have made substantial progress over their counterparts in other parts of India. Between the SC and the socially advantaged group of Others, Himachal Pradesh and Maharashtra have a lower gap than Kerala. In fact Table 1 speaks a lot more about the interaction of social and regional inequality in India on such a crucial basic capability as education for at least ten years.

Health is another area that challenges India in its quest for inclusion. Take the case of anaemia among women. While the latest round of the National Family Health Survey (2016) reports an incidence of 53% among women between 15 and 49 years, the progress made compared to the previous round in 2005-06 was a decline of only 2.3 percentage points. Since detailed data are yet to be released, we know from the earlier round that social disparity is no less significant in this respect as well. While a formidable 61% of those belonging to SC and ST groups together were found to suffer from anaemia, the figure was around 55% for Muslims as well as Hindu-OBC group while even the Others reported an incidence of close to 50%.

I would argue that housing conditions represent, along with education and health, a robust indicator of multidimensional deprivation for a population. Latest available data (2012) show that 43% of households do not have access to a private latrine of any kind in this land of ‘Swatch Bharat’ that, in my view, directly hurts the dignity, especially of the womenfolk. It varied from 68% for ST households and 59% of SC to 19% for the socially advantaged. A less well known but a similar picture emerges when one looks at the availability of a space called ‘separate kitchen’. 47 per cent households reported that they had no ‘separate kitchen’; that figure varied from 68% for the ST households to 28% of the socially advantaged.

It hardly needs to be stressed that several of these deprivations reinforce one another in which both quantity and quality of employment assume a central role working through access to type of employment, its regularity, decent wages or income from self-employment, education and conditions of work. Therefore, the measurement of poverty has moved on to focus on its multidimensional character that in a way would sum up the challenge of inclusion in a fast growing India. A recent estimate of multidimensional poverty in India reported that 55% of its population are multidimensionally poor, placing the country as among the most poor by majority criterion.¹² Here again, there are two dimensions that need to be highlighted.

In Table 2, we present the incidence of multidimensionally poor for the four segments belonging to the Hindu religious group¹³ along with the state-wise estimates. While the state-wise figures inform us of the wide regional inequality, the social group-wise figures bring out the importance of social identity and the robustness of social hierarchy in the outcome on this measure. The social groups as well as the states are compared to countries with similar incidence of multidimensionally poor to give an idea of where the country stands and that should humble anyone, especially those with a high-standing inflated self-image of the country. No disrespect is meant to the countries, especially those with a high incidence of multidimensionally poor with which Indian states and social groups are compared, except to say that the common people in such countries also face formidable challenges, perhaps with more barriers but no claim to a long period of high economic growth or monopoly of all knowledge in science and technology from ancient times.

That China has been marching forward not just in economic growth and per capita income terms but also in overcoming widespread poverty and deprivation is quite evident. That two states, Delhi and Kerala, compare favourably to China’s achievement in reducing multidimensional poverty goes to show that it is not impossible to catch up, although it would indeed be a long haul for the country as a whole to be even with its obvious comparator. It also reveals how hollow the official trumpeting that is often dished out by pointing out that India has now overtaken China in achieving a higher rate of aggregate economic growth is. If welfare of people is what ultimately matters for a country, then that seems to be a far cry for a majority of India’s aam aadmi.

While many in India wax eloquent about its democratic polity to assert the superiority of its system over many others, especially China, there is little questioning as to why such a superior system is so slow in addressing basic issues of poverty, economic security and dignity of the vast majority of common people. Political parties swear by the common people and the need for ending poverty and promoting inclusion, but policies needed for realizing such objectives are, at best, relegated to a lower order of priority when in power. However, the bigger danger comes from today’s post-truth world where exclusion is promoted by using the rhetoric of inclusion. An otherwise vibrant and active civil society of yesteryears now seems somewhat numbed. However, there is some realization that without large-scale aggregation of demand through nationwide mobilization even the basic rights and entitlements of the common people are unlikely to be highlighted, let alone achieved.

 

A silver line in an otherwise gloomy scenario is the recent unity of trade unions in demanding a national minimum wage of Rs 15,000 per month at current prices. Despite its blatant rejection by the regime, it should be held up as an anchor for creating solidarity across the large mass of poor and vulnerable and informally employed. But this could, at best, constitute only one pillar of a much needed ‘social floor’. The other pillars – some requiring strengthening and some others to be newly created – would refer to the publicly funded social security legislation for a minimum standard for conditions of work in the unorganized/informal sector, and the public provisioning for a universal basic education and health care with special care for children and mothers. None of these are beyond the economic and political capacity of the country. What is needed is a politics of development with inclusion, not bombast and bigotry.

 

Footnotes:

1. See Lucas Chancel and Thomas Piketty, Indian Income Inequality, 1922-2014: From British Raj to Billionaire Raj? Wealth and Income Database (WID) World Working Paper No 11, World Inequality Lab, Paris School of Economics, Paris, 2017. Their study on Indian income inequality concludes as follows: ‘We document a large increase in the level of inequality in India over the recent period and a large increase in the current level as compared to survey-based statistics generally used in public debates. We find that our results are robust to a large set of alternative estimation strategies addressing important data gaps. According to our benchmark estimates, the top 1% income share is at its highest level (22%) since the creation of the Income Tax during the British Raj, in 1922. Top income shares and top income levels were sharply reduced in the 1950s to the 1970s at a time when strong market regulations and high fiscal progressivity were implemented. During this period, bottom 50% and middle 40% incomes grew faster than average. The trend reverted in the mid-1980s with the development of pro-business policies.’

2. Two reports that dealt with economy-wide issues of informality and poverty are NCEUS, Report on Conditions of Work and Promotion of Livelihoods in the Unorganised Sector. Academic Foundation, New Delhi, 2008 and NCEUS, The Challenge of Employment in India: An Informal Economy Perspective. Academic Foundation, New Delhi, 2009.

3. While three-fourths of the population was found to be in the category of ‘poor and vulnerable’ in 2005, it had declined to 69% by 2010. A recent estimate of the incidence of poor by taking two PPP dollars as the threshold finds that around 58-59% were below this threshold (World Bank 2016). But the process is the slowest among the ST and SC given their life of everyday struggle, not to speak of oppression. For a recent study of this process based on in-depth ethnographic fieldwork see, Alpa Shah, et. al., Ground Down by Growth: Tribe, Caste, Class and Inequality in 21st Century India. Pluto Press, London and Oxford University Press, New Delhi, 2017.

4. Informality in the Indian context is essentially a matter of insecurity of employment and social security unlike the definitions adopted in western countries. The NCEUS identified two kinds of informality; one based on the sector or enterprise and the other based on employment. From a sectoral point of view it defined ‘The unorganised (or informal) sector consists of all unincorporated private enterprises owned by individuals or households engaged in the sale and production of goods and services operated on a proprietary or partnership basis and with less than ten workers.’ From an employment point of view it defined ‘Unorganised (or informal) workers consists of those working in the unorganised enterprises or households, excluding regular workers with social security benefits, and the workers in the formal sector without any employment or social security benefits provided by the employers’ (NCEUS 2008, op. cit., p. 3).

5.The average annual growth in national income for the period 1994-2012 was an impressive 7.5% that was somewhat higher during the latter half of 2004-12 at around 8%. However, employment growth was around 1.8% during 1993-2004 but then declined to less than half-a-percent per annum during 2005-12. That is to say, high growth in income did not lead to a correspondingly high growth in employment: employment elasticity declined from over 0.4 during 1983-93 to 0.3 during 1994-2005 and then to as low as 0.06 during 2005-12.

6. T.S. Papola and K.P. Kannan, Towards an India Wage Report 2016. Working Paper, ILO-DWT for South Asia and ILO Country Office for India, New Delhi, 2017.

7. K.P. Kannan and Varinder Jain, ‘Historic Initiative, Limited by Design and Implementation: A National Overview of the Implementation of NREGA’, in K.P. Kannan and Jan Breman (eds.), The Long Road to Social Security. Oxford University Press, New Delhi, 2013.

8. This is based on the average days of employment provided under the NRGS of around 50 per annum. Had this been 100 days (the upper limited provided under the NREG Act), the per capita income earned would have been equivalent to around 20% of the official poverty line.

9. This national minimum wage is worked out every year by the Ministry of Labour and Employment of the Government of India but has no statutory backing.

10. K.P. Kannan, Interrogating Inclusive Growth: Poverty and Inequality in India. Routledge, New Delhi and Oxon., 2014.

11. Social identity here is based on a group to which an individual belongs. For this we have divided the population into ST, SC, Muslim, Hindu-OBC and Others as ‘socially advantaged’ consisting of Hindu Upper Castes, Jains, Christians, Sikhs and other religions except Islam. For details see, Kannan 2014, ibid.

12. Sabina Alkire and Maria Emma Santos, Acute Multidimensional Poverty: A New Index for Developing Countries. Working Paper No.38, Oxford Poverty and Human Development Initiative, Oxford, 2010; Sabina Alkire and Maria Emma Santos, India Country Briefing. Oxford Poverty and Human Development Initiative, Multidimensional Poverty Index Country Briefing Series, Oxford, 2010.

13. The exercise for social groups was confined only to caste groups within the Hindu religious group.