7/30/2019 Stop Calling Them Unorganised

1/4

Stop calling them unorganised

The Hindu Business Line Thursday, Oct 05, 2006

R. VAIDYANATHAN

All non-company forms of organisation, particularly in the service industry are termed

`unorganised.' This is ironic since they too are powerful engines of economic growth and often

better organised than many a global corporation. One is not sure why India should persist with

this colonial construct, says R. VAIDYANATHAN

In seminars these days, it has become de rigueurto include one session or discussion on the`unorganised' sector in India and on how to `reform' or `organise' it. Sometimes the discussion ison the `informal sector,' which is supposed to be a sub-set of the former.

The term itself is used in a non-rigorous manner and there are as many definitions as there areexperts. The Central Statistical Organisation (CSO) in its National Accounts Statistics (NAS)

uses the classification of `organised' and `unorganised' sectors in presenting national incomedata.

According to it: "Generally, all enterprises which are either registered or come under the purviewof any one of the Acts, such as 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, are defined as part of the organisedsector... 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 are classified as unorganised." (NAS, 1980: pp 69).

However, the corporate form is treated as organised for estimating purposes, except in

manufacturing. This is borne out by the explanation in the NAS of a later year. It elaborates thecoverage of the organised sector for major activities in the non-agricultural sector (NAS 1994:

pp7).

The National Statistical Commission (NSC) has also pointed out that "direct estimates (of

national income) mostly relate to the public (of which the government is a component) and the

private corporate sector, so that the estimates related to them constitute what is usually referredto as the `organised' sector, or segment, of the economy. Indirect estimates mostly relate to

households (including non-profit institutions serving households) and constitute the residual`unorganised' sector or segment of the economy." (National Statistical Commission 2001: pp

357)

7/30/2019 Stop Calling Them Unorganised

2/4

Defining Informal Sector

From the point of view of mode of production or economic activity, the ILO defines the informal

sector as having such features as low level of organisation; small in scale, usually employing

fewer than 10 workers, and often from the immediate family; ease of entry and exit compared to

the formal sector; minimal capital investment; little or no division between labour and capital;labour-intensive work requiring low-level skills; absence of formal training; labour relations

based on casual employment and or social relationships as opposed to formal contracts, and so

on.

The informal sector consists of all economic activities that remain outside the official

institutional framework (statutory control and implications and governmental regulation).Consequently, the government has little control over the quality of employment. Generally,

agricultural activity does not come under the purview of the informal set.

This usage has come from Latin-American countries, where US experts have identified a large

number of economic activities not regulated by government and many of them "underground" innature. Hence the term `informal.'

The term `informal sector' has not been used by the NAS. The first nationwide survey on theinformal sector under the National Sample Survey (NSS) was conducted during the 55th round

(July 1999-June 2000). Here, all unincorporated, proprietary and partnership enterprises havebeen defined as informal sector enterprises.

It follows that the informal sector is a sub-set of the non-corporate sector, if we consider all non-

company forms of activities.

Hence, for all practical purposes, non-company forms of organisation, particularly in the serviceindustry, are termed `unorganised,' which is ironic as they are the engines of economic growthand are much better organised than many global corporations. According to experts, the millions

of wholesale and retail trade establishments and truck operators and hotels and restaurants and

other service organisations, including barbers, doctors, dhobis, tailors, plumbers, fitters, painters,welders, masons and electricians, are unorganised.

An unfair classification, for, as the Table shows, they form the dominant segment of theeconomy and the fastest growing, thus acting as engines of growth.

7/30/2019 Stop Calling Them Unorganised

3/4

An Anglo-saxon view

If my doctor treats me from his home-clinic, he is `unorganised'. But, if he joins a `corporate

hospital' and does the same, then he is `organised.' Millions of truck-owners (mostly single-truck

owners) moving goods across country from Ahmedabad to Agartala are `unorganised', thoughthey perform their jobs efficiently. To consider the corporate sector a highly evolved form of

organisation compared to, say, the Hindu Undivided Family (HUF) or proprietorship orpartnership firms or cooperatives or trusts is a colonial hangover. It is derived from the corpus

mysticum construct applied to forms of organisations, where global corporations listed on

multiple exchanges are the highly evolved forms; in that construct, family is not a very evolvedform of organisation. Organising our economy as per this Anglo-Saxon model has thus met with

disastrous results.

Ironically, this model considers the "government" to be "organised" an ultimate travesty of

truth given that thousands of our municipal bodies and many State government "corporations" do

not even have proper accounting systems!

Ernst Kantorowicz, in his well-argued and celebrated essay The King's Two Bodies: A study in

Medieval Political Theology, analyses how the mystical body of Christ, which is central toChristian liturgy, acquired sociological meaning in the later Middle Ages. The corpus mysticum

became the organised body of Christian society and created, in due course, the greatest of

artificial persons, namely, "the state." Out of this modular structure or building block, Westerncapitalism emerged, along with other fictional entities such as the `joint stock company' and

`public corporation' (Princeton, 1957).

Hence, it is a medieval Christian Anglo-Saxon construct that says that `corporations' are more

evolved forms than, say, joint families or cooperatives or trusts. One is not sure why India shouldcontinue to accept this European medieval evolution, which was essential for colonial conquests,driven by joint stock companies such as the East India Company, which considered India

`unorganised' and went about organising it, with results known to us.

In these days of political correctness, perhaps the so-called unorganised sector can be termed

"corporate challenged", while corporates themselves are "disclosure-" and "transparency-

challenged".

7/30/2019 Stop Calling Them Unorganised

4/4

(The author is Professor of Finance and Control, Indian Institute of Management-Bangalore, and

can be contacted at vaidya@iimb.ernet.in. The views are personal and do not reflect that of his

organisation)