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Calcutta 1981

 | 
Jean Racine

Session 2. A. A Metropolis in Crisis

Addendum E. A Case Study of the Informal Sector

Small Industries in Pilkhana Bustee, Howrah

Emmanuel Romatet

Texte intégral

  • 1 For another case study of the informal sector, see Addendum K: "Whom does one plan for? A case stu (...)

1With 70,000 inhabitants packed on a roughly square area of half a square kilometre, right in the heart of Howrah, between a major railway line and the busy Great Trunk Road, Pilkhana is one of the largest bustees of the Calcutta Metropolitan District. A residential area, Pilkhana is also a place —as are most bustees— of intense economic activity: a heaven of small industrial units of the informal sector, most of them light engineering workshops1. Such small units are not always viable, they are plagued by lack of funds and marketing expertise, plagued also by a constant power shortage which compels the workers, most of them paid at piece rates, to work whenever power is available, be it night or day. But they are nevertheless of the utmost importance for the economy of the metropolis and also as far as the employment capacity is concerned. Two figures underline the fact: according to the 1971 census, enterprises with less than ten workers represented as much as 92 per cent of the industrial units and 40 per cent of the industrial employment in the Calcutta Urban Agglomeration.

  • 1 See Emmanuel Romatet: "Le rôle des petites industries dans le développement économique de l'Inde: (...)

2In the larger framework of a study of the role of small industries in Calcutta, French economist Emmanuel Romatet carried out in 1981-82 a random survey of some fifty units of the informal sector in Pilkhana bustee1. With his kind permission, we shall quote from his study some significant data and notes, along with his conclusions on Pilkhana industrial activity (J.R).

THREE DOCUMENTS ON PILKHANA

Document 1: A survey of 53 industrial units of the informal sector

Distribution of units by type of fabrication

  • Light engineering: 35 (aluminium: 13; Steel: 22) pen parts, radio parts, domestic ustensils, washers, clips, etc.
  • Light Chemical: 9 (plastic: 6, rubber: 3):ball pens, battery covers, caps, sandals.
  • Textile 4: thread windings, bags, collars, sari printing.
  • Wood 2: photo frames, loudspeakers frames.
  • Ceramic 2: earthen tea pots.
  • Food 1: bakery.

Proprietorship

One owner: 47units

= 89%

Partnership: 6units

= 11%

Age of the units

Less than 1 year: 13

= 25%

1 to 3 years: 18

= 34%

3 to 10 years: 14

= 26%

More than 10 years: 8

= 15%

Units registered as small scale industries or factories:12

= 20%

Area of the workshop

Less than 10 m2: 23

= 43%

10 to% 20 m2: 16

= 30%

20 to 50 m2: 8

= 15%

More than 50 m2: 6

= 12%

Use of the workshop

- Only for industry: 23

= 43%

- Industry and residence: 11

= 20%

- (the workers sleep always in the workshop)

- Industry and residence for a part: 19

= 36%

Annual activity

- Full year activity: 39

= 73%

- Lock out for 3 to 6 months a year: 12

= 23%

- Lock out for more than 6 months a year: 2

= 4%

Daily activity

3One shift a day. Theoretical timings 8 a.m. to 5 p.m. with one hour break for lunch. Practically all depends on Orders and availability of electricity

Workers per unit

- 5 or less: 23

= 43%

- 6 to 10: 26

= 49%

- More than 10: 4

=8%

Distribution of employment amongst the 329 "permanent workers of the 53 units surveyed

Apprentices (including one child): 3

= 1%

Unpaid family labour (including one child): 29

= 9%

Hired workers (including 13 women and 17 children): 241

= 73%

Supervisors, accountants: 9

= 3%

Managers: 47

= 14%

Average salaries

4Men and four children: Rs. 51 a week
13 children: less than Rs. 30 a week
(minimum salary in the large scale industries: Rs. 350 a month)

Distribution of workmen's weekly salaries amongst 242 workers

Less than Rs. 35: 63 workers

= 26%

Rs. 36 to Rs. 59: 93 workers

= 39%

Rs. 60 to Rs. 89: 61 workers

= 25%

More than Rs. 90: 25 workers

= 10%

Type of retribution

- Household unit without salary

= 8%

- Daily, weekly or monthly salaries

= 28%

- Piece-rates salaries

= 60%

- Mixed type (small fixed wage + piece rates)

= 4%

Fixed capital per unit

Less than Rs. 5000: 23

= 43%

5000 to 10,000: 12

= 23%

10,000 to 25,000: 10

= 19%

More than Rs. 25,000: 8

= 15%

Average: Rs. 2132 per worker.

Mechanical equipment

Tools, no machines: 5

= 10%

Machine built up by the unit: 1

= 2%

Second-hand machines in total: 18

=34%

New machines in total: 14

= 27%

New machines for a part: 15

= 28%

Monthly turnover (for 49 units)

5Less than 5000: 20

65000 to 10,000: 5

710,000 to 25,000: 19

8More than Rs. 25,000: 5

Monthly added value (for 42 units)

Less than 5000 Rs: 39

More than 5000 Rs: 3

Loans granted (for 53 units)

  • Demands for loan submitted to the CMDA: 26
  • Loans granted by the CMDA (yearly rate: 11 %): 3
  • Personal or family loans (yearly rate: 10%): 1
  • Usurious loans (monthly rate: 5-7%)) 2

Document 2: Some industrial units of the informal sector in Pilkhana, from bottom to top of the spectrum

9One end of the spectrum is represented by the two ceramic units and by the rubber sandal-making unit. In these three cases, invested capital and income are extremely low (less than Rs. 200 and Rs. 250 per month respectively). There is no hired worker, but only family labour. These extreme cases are more properly to be considered as handicrafts rather than as industrial units: activity is based on a very simple traditional technology, and none of these units use machines. The sandal-making unit, moreover, is an instance (found in two more cases during the survey) of mixing business and family funds: the entrepreneur, who is a full-time employee in a Calcutta company, started his unit so as to give employment and income to both his unemployed brothers. But he had to take money from the working capital so as to finance his sister's wedding. The unit had then to close for several months.

10At the other end of the spectrum the cases of two successful industries may be quoted:

11The first one manufactures aluminium parts for air-conditioners. It is one of the two units of the survey that sells its products outside Calcutta. Invested fixed capital is above Rs. 60,000 and though the figure of surplus was not available, the "assets" side of the balance sheet showing "Bank" with Rs. 17,000 and "Creditors" with Rs. 20,000 is a sign of very substantial profits. The unit belongs to the wife of the entrepreneur who works as supervisor with a fixed salary of Rs. 600 per month. Other workers get fixed wages of Rs. 150 (2 workers) and Rs. 210 (4 workers) per month, lower than the average of Rs.50.75 per week (Rs. 220 per month). Then even in very profitable Companies, market wages prevail whatever the productivity differences may be. The profit accrues to the owner only without a part of it being shared with the employees.

12The second one manufactures battery cell covers for automobiles. The entrepreneur has devised his own formula in bakelite for this product which is usually made in hard rubber. Though investment is relatively low (less than Rs. 5,000) a turnover of Rs. 87,000 in 1980, checked from the profit and loss accounts kept by the owner, left him with a surplus of Rs. 16,000 (Rs. 1,335 per month). This is the only case of a unit that has developed its own product: in all other cases the product is copied from units manufacturing a similar item, or is a family tradition. This may explain why Pilkhana concentrates on the manufacture of only a few products.

Document 3: How to climb the rungs in the small-scale mechanical industry units of Howrah

13The boy, 12-16 years of age, who usually comes from a village in the neighbourhood of Howrah, in search of a job, becomes a trainee in one of those units. For the first month, sometimes for the first six months, he does not receive any salary. He helps the qualified hands and watches how the workshop is run.

14During lunch-break or whenever no work is on, the trainee runs the machines under the watchful and critical eyes of his "seniors". After a year or two, he becomes a semi-skilled worker. He gets a daily wage of Rs. 4 to 6 (Rs. 2 when he was a trainee). After one or more years he is promoted to the status of skilled labour and his salary is raised accordingly. He gets Rs. 8 to 12 a day. Generally in every workshop there is one highly qualified man called mistri. He is given the charge of the workshop whenever the founder-owner is out, and he oversees the work of the other workers. He may even buy raw materials, and attend lo clients if the owner trusts him enough.

15In short, the mistri enjoys an enviable position which also enables him to learn the entrepreneur trade in all its aspects, since for all practical purposes he runs the workshop on behalf of the owner. The last Step is taken when he makes up his mind, after acquiring enough experience, to start a business of his own. To begin with, he will get a few orders which he will execute in the evening after working time on his employer's machines. And if the quantity of the Orders improves, he will join, in his tum, the rank of entrepreneurs. Sometimes one of his employer's clients may offer to provide him with Orders if the price quoted is lower than what he used to pay to his former supplier.

Slum industries in Pilkhana bustee: Romatet's conclusion

16Two basic conditions explain the survival and development of informal sector units as well as its capacity to provide employment to numerous non-skilled workers. The first one is the very low wages of hired labour (Rs. 220 per month on an average) who have to suffer long working hours and complete lack of a job security, as well as deplorable working conditions such as small space, lack of safety, insufficient lighting. Formal and informal sectors are thus demarcated by a clear-cut separation. Whereas in the former the level of employment is fixed by a demand for labour at given wages rates, in the latter the abundance of the stock and flow of labour means that demand variables like productivity do not play any role in determining wages: they fix themselves at subsistence levels much lower than those of the organized sector. Secondly, these small units depend entirely on prices imposed by the market on which they do not exert the slightest control because of competition against one another, lack of specialization and simplicity of techniques utilized. The predominant role of dealers-wholesalers in Calcutta has already been underlined: they not only dictate the selling prices, but also the prices at which informal sector units should buy their raw materials. The same statement applied to manufacturers with which quite a few units deal. Informal unit establishments cannot earn the same income per unit of production as in the formal sector.

17Finally, the informal sector units supply a considerable number of low-priced goods and provide jobs to people who, otherwise, would swell the ranks of the unemployed. This kind of production and job creation is possible with a low capital raised through the owners' funds. But the working conditions of these units make them subservient to the formal sector of the metropolitan economy, be it organized industry or trade. The workers and owners of these units derive from them means of subsistence which cannot be compared with the facilities the formal sector employees get.

18One then can try to answer the question: should one promote the informal sector? The answer is positive: the role it plays in terms of employment and income cannot be substituted in the metropolitan economy. Rallier than to wait for the hypothetical advantages of an overall development policy to percolate down to the downtrodden, it is necessary to conceive and implement a specific policy towards the informal sector, the aspects of which might be as follows:

  • To strengthen the associative capacity of the sector by encouraging the inception of cooperatives or groups capable of bargaining with or exerting pressure on the formal sector.
  • To provide to these units a more efficient bank credit enabling them to strengthen their capital base. Such banking facilities should be accompanied by marketing inputs.
  • To favour a growth pattern linking the two sectors through subcontracts between informal and formal sector units. Such subcontracts should include transfer of know-how through processes, drawings and possibly new equipment.

19It follows that working conditions of informal sector units are detrimental to their workers. The fact remains that even in cases of higher productivity, the wages remain the same which indicates a higher degree of workers' exploitation when value added and capital invested per unit rise. A policy encouraging the growth of these units, which is justified in terms of production, employment and capital, should go along with the regulations on the working conditions and wages of this sector.

Notes

1 See Emmanuel Romatet: "Le rôle des petites industries dans le développement économique de l'Inde: l'exemple de Calcutta". University of Paris, Ph.D. thesis 1982, 310 pp + annexures, unpublished. One will find a summary of this research work written by the author himself in E. Romatet: "Calcutta's Informal Sector: Theory and Reality", Economic and Political Weekly, Vol. 18, n° 50, Bombay, 1983, pp. 2115-2128. This article includes, in Part C, the "Results of a survey on slum industries in Pilkhana, Howrah" from which most of the following pages have borrowed, before the EPW published them (J.R.).

Notes de fin

1 For another case study of the informal sector, see Addendum K: "Whom does one plan for? A case study of rickshaws and rickshawallahs of Calcutta" (J.R.).

© Institut Français de Pondichéry, 1990

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