OF THE MEETING OF THE NATIONAL COMMISSION
ON ENTERPRISES IN THE UNORGANISED/INFORMAL SECTOR
WITH THE PRIME MINISTER
ON 11 DECEMBER 2004
1. The Prime Minister had an intensive interaction with the National Commission on Enterprises in the Unorganized/Informal Sector and its Advisory Board on 11.12.2004. The List of participants is enclosed.
2. At the outset,
Dr. Arjun K.Sengupta, Chairman of the Commission, thanked the Prime
Minister for sparing his time to meet the Commission.
Acknowledging the Prime Ministerís personal contribution in the
constitution of the Commission, he stated that the wide-ranging terms of
reference formulated for the Commission reflect the concerns and priorities of
the Government in respect of the informal sector of the economy.
The Chairman informed the Prime Minister that the Commission has been
focussing on a few significant programmatic interventions, which could be
adopted in the immediate term. The
Commission and its Advisory Board have held two meetings. Detailed
discussions have also been held with various stakeholders.
In the light of these deliberations, the following issues have been
identified for investigation by the Commission in the
next few months.
ō The notion of growth poles for the informal sector in the form of clusters/hubs, where external economies need to be provided to spur employment generation and productivity enhancement and the feasibility of integrating the initiatives and programmes of various Ministries in this domain;
ō Skill formation in the informal sector and the potential for public private-partnership in the provision of the required skills;
ō Provision of micro finance and related services to informal sector enterprises and strengthening of the institutional framework in this area;
ō Issues concerning social security for the workers in the informal sector and instrumentalities for achieving this objective.
3. Dr.Sengupta stated that the Commission will also look into the impact of the legal and regulatory framework on the functioning of the unorganized/informal sector and the legislative initiatives needed to unleash its potential for employment generation.
4. The Chairman indicated that issue papers on the identified priorities are being prepared for initiating a discussion with the Ministries concerned, State Governments and other stakeholders. Interactions with eminent thinkers such as Prof. Amartya Sen are also being organized. He hoped that the Commission would be able to formulate a few concrete proposals for the ensuing Budget exercise. He made a special mention on the unstinted support extended to the Commission by Shri T.K.A.Nair, Principal Secretary to the Prime Minister, Shri R.Gopalakrishnan, Joint Secretary, Prime Ministerís Office and Shri B.V.R.Subrahmanyam, PS to Prime Minister, without which the Commission could not have become functional within a short time of its constitution.
In his address to the Commission, the Prime Minister underlined the
importance of formulating a new development strategy in view of the fact that
the organized sector has ceased to be a creator of employment opportunities. The
growth of productivity and employment generation capacity in the informal
sector, which accounts for 90-95% of the employment in the economy, has to keep
pace with the rate of increase in the labour force.
In this context, the Prime Minister highlighted the concerns which the
Commission would have to address on priority.
In the first place, the problems of production, including the
availability of capital, which confront the unorganized sector, will have to be
taken up. In particular, the
imperfections of the market for capital in relation to the informal sector will
need to be addressed. Measures for
facilitating market access for the unorganized sector, which is at a
disadvantage compared to the organized sector, also need to be devised. The Prime Minister also underlined the importance of
identification and adoption of best practices in the field of technology
upgradation in the context of an unprecedented acceleration in the generation of
knowledge and technological advancement.
The Prime Minister laid special emphasis on the relevance of the Gandhian
model of decentralized development. The
Chinese experience of promoting vast conglomerates of village and municipal
enterprises to stem the exodus from the countryside also needs to be studied.
7. The Prime Minister
underlined the importance of comprehensive social security for the informal
sector in view of the increasing commercialization of the society and the
weakening of the traditional social fabric.
Referring to a certain bias in the system against the informal sector,
the Prime Minister called for a review of the existing legal framework and
cautioned against the risk of substituting one set of inspectors by another in
the name of environment protection and other concerns.
In conclusion, the Prime Minister exhorted the Commission to come up with
a charter of a new deal for the informal sector of the economy.
He said that ideas are more influential than vested interests and there
is an urgent need to reach out to the forgotten sections of the society.
the Prime Ministerís address, Members of the Commission and the Advisory Board
articulated their views and shared their insights with regard to the informal
11. Dr. K.P.Kannan, Member recalled
the work done by the Centre for Development Studies in Kerala
on issues of social security and
underlined the need to view social security in a larger canvas and as an
investment in human capital so that it addresses not merely the question of
equity but also efficiency. Citing examples of the
existing national and regional level models, which provide some measure of
social security to certain sections of workers, he suggested that the
Commission should assess their potential and examine the modalities of enlarging
their scope and coverage to more occupations and regions.
The approach has to be one of developing a social security framework in
which different models could coexist. Dr.Kannan
also underlined the importance
of public-private partnership in the provision of
social security and the need to preserve the space for innovative
initiatives and voluntarism.
12. Shri K.K.Jaswal, Member
Secretary stated that the Commissionís interaction with the Central
Statistical Organisation and the Report of the 55th NSS Round have
been helpful in a proper appreciation of the definitional issues in the
unorganized/informal sector and the
characteristics of employment in informal sector enterprises.
The concept of growth poles/clusters could be employed to supply the
deficiencies of the enterprises in a cost-effective manner, provided there is a
convergence in the strategies and programmes of different sectoral
and territorial units of Government.
He also underlined the importance of harnessing Information and
Communication Technologies to the development of informal sector enterprises.
The success of programmes such as e-Chaupal of ITC, Chirag of N-Logue and
Akshaya in Kerala has demonstrated the
potential of Information and Technology as well as the scope of public-private
partnership in this domain.
13. Dr.Bibek Debroy, Rajiv Gandhi Foundation suggested that the multitude of rules and regulations applicable to informal sector enterprises should be rationalized. The existing system inhibits entrepreneurship and the Commission needs to focus its attention on this issue.
Dr.B.N.Yugandhar, Member, Planning Commission highlighted the skill
incongruence existing in the country. There
is a mismatch between the education provided in schools and colleges and
the skills required for absorption in the labour market.
The skill deficit in the informal
sector needs to be assessed and measures taken to bridge the gap between demand
and supply of qualified manpower.
He suggested that the capacity of existing institutions be enhanced by
operating second and third shifts
in the I.T.Is. and other technical
institutions. In the context of an
alarming increase in the number of literate unemployables, he advocated a revamp
of the plethora of employment generation schemes, which, if provided the required linkages, could absorb upto 3.5 million entrants in
the labour force.
Kishwar, Editor, Manushi made a
strong plea for police reform, as police connivance was an
important factor in the excesses of
the Inspector Raj. Extortion
by enforcement agencies is often accompanied by
abuse of human rights. There is a need to redefine the mandate of the
regulatory mechanism. Another issue
of concern is that of delays and defaults in
payments by the organized sector to the enterprises in the unorganized sector.
As a first step, the disclosure of dues to small and tiny units must be
made mandatory for the corporate sector. She
also underlined the urgency of reviewing the policy for utilization of public
land to promote employment generation in the informal sector and protect petty
traders, craftsmen and service providers from appropriation and exaction by
enforcement agencies. She
suggested that a few pilot projects may be taken up to demonstrate the
feasibility of creating extortion-free havens for informal sector enterprises.
Shri Joginder Kumar, President, Federation
of Tiny and Small Scale Industries of India welcomed
the constitution of the Commission to address the problems of the tiny and small
scale sector, which have generally been overlooked.
In this context, he drew attention to the imposition of service tax on
outsourced manufacturing services, which together with the levy of tax on
Commission Agents was proving detrimental to the small scale sector.
He pleaded for extending the exemption of service tax currently available
to textiles, agriculture, printing and education to the whole of the
manufacturing sector. He stated
that the current rate of duty on secondary and defective steel was seriously
affecting the competitiveness of the small scale-manufacturing sector in the
global market. Shri Joginder Kumar
also urged that this sector should be given a representation in the
Prime Ministerís Economic Advisory Council.
Ms.Mirai Chatterjee, Self Employed Womenís Association (SEWA)
observed that social security and work security cannot be considered in
isolation. The experience in SEWA
proves that these issues are closely inter-linked. The challenge lies in developing
appropriate mechanisms to reach the poorest of the poor in the country.
She advocated the concept of Identity Cards for
entrepreneurs in the informal sector, which would entitle them to the requisite clearances and assistance from Government, banks
and other agencies. She also
pleaded for expediting the review of regulations in the area of micro savings
and insurance. The removal of
regulatory hurdles in the area will give an impetus to the expansion of micro
finance services in the informal sector.
Professor Bhalchandra Mungekar, Member Planning Commission
was of the view that the process of growth
was likely to be more and more exclusive;
hence the need to expand social security. Structural factors like
caste and gender discrimination, rural urban divide and low skill levels have
also contributed to unemployment. The Employment Guarantee Scheme needs to be
adapted to local conditions in the States.
He suggested that the 13 million
hectares of cultivable wasteland available in the country should be distributed
to the landless SC and ST labourers and its utilization integrated with the Employment Guarantee Scheme. Referring to the rampant
frustration in the tribal belt, he suggested an immediate review of Forest Laws
to restore traditional tribal rights to forest produce and protect the
livelihoods of tribal communities. Dr.
Mungekar also drew attention to the alarming drop out rate in schools in
backward areas, for which a specific intervention has to be devised.
The skills being imparted by technical institutions need to be upgraded
constantly in step with the market demand.
Prof.Amit Bhaduri was
of the view that academic input could
be used to critically appraise the current strategy for the development of the
informal sector and visualize feasible alternatives to it. The problem of
marketing may either be seen as an issue of market share or one
of market size. Strategies for
increasing the size of the market
will have benefits across sectors.
As regards skill formation, an emphasis on the supply side
alone will not yield the desired results; there is a need to address the demand side
concerns as well.
21. Prof. Jean Dreze noted that the Commission, like most Government bodies, did not have any woman Member. Referring to the Employment Guarantee legislation, he stated that it was evoking a positive response from State Governments and bodies of employers. The Scheme seems to offer a viable strategy for providing a measure of security of employment to the disadvantaged sections of the labour force. He was of the view that the issues of corruption and harassment could largely be addressed by a strong Right to Information Act. Striking a note of caution in regard to the pursuit of deregulation in the informal sector, he stated that even in informal enterprises, there were areas of conflict and a certain degree of regulation was needed to offer a minimum level of protection to the workers.
The meeting ended with a vote of thanks to the Prime Minister.