ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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How Mobile Are Workers across Informal and Formal Jobs in India?

The Indian labour market is characterised by a high level of informality, with large numbers of workers in poorly paid “lower tier” informal jobs, and somewhat better paid “upper tier” informal jobs, and no benefits or security of tenure as formal jobs.

The ‘Missing Middle’ Problem in Indian Manufacturing

The Indian manufacturing sector, with few mid-size firms, has the problem of the “missing middle.” The critical constraint is imposed by “predatory institutions” and their corruption that mid-size firms face in their day-to-day interactions with the state. The current policy approach towards improving the ease of doing business by reforming regulatory institutions is not enough in this case. To solve the missing middle problem, lower-level bureaucrats engaged in petty corruption need to be disciplined, and government procedures should be made transparent and accountable to reduce the scope for such corruption.

Unmaking ‘Make in India’

India’s business climate has historically been considered poor, resulting in low-rankings in the World Bank’s Doing Business Indicators. The National Democratic Alliance government has attempted to reverse this situation by improving the de jure rules related to the business climate. Whether this approach will improve the ease of doing business in India is analysed by using firm-level data on the number of days it takes to get an operating licence or construction permit. De facto deals between the state and businesses, rather than de jure rules, characterise the state–business relationship in Indian states. States with weaker quality of governance provide higher proportions of good deals in terms of the speed of obtaining licences and permits, and easing the norms of business regulations need not necessarily lead to higher productivity.

Rags to Riches? Intergenerational Occupational Mobility in India

The paper examines intergenerational occupational mobility in India among males. This analysis differs from previous work in three important respects. First, a finer-grained categorisation that takes into account differences in skill levels across occupations as well as India’s social hierarchy of labour is used. Second, both large and moderate ascents and descents are examined. Third, the situation in India with mobility patterns at other times and in other countries is compared. The results show vast differences in the upward and downward mobility prospects of urban and rural residents and upper-caste Hindus versus Scheduled Castes and Scheduled Tribes. The findings also reveal that downward mobility risks loom large in India and that mobility patterns in India and China appear remarkably similar.

Some Puzzles about Firms

Despite the presence of a large number of manufacturing firms in the informal sector in India, we know very little about their characteristics and evolution over time. We present some puzzles about firms in the Indian informal manufacturing sector, using unit-level data from the National Sample Survey Office surveys of unorganised enterprises from 2000-01 to 2010-11. There is clear evidence of a positive relationship between worker wages and firm productivity, indicating the importance of improving firm productivity in the Indian informal sector as a means to improve the living standards of workers. Our analysis also shows that there are social and economic barriers to informal enterprises increasing their productivity, which is a matter of major policy concern. There are also gender-related differences in the productivity of firms. Targeted government programmes are needed to address the issues that socially disadvantaged groups and female entrepreneurs face in the informal manufacturing sector.

Where Have All the Workers Gone?

India's post-reform economic development has seen a sustained decline in the labour intensity of the organised manufacturing sector, including in labour-intensive industries. This paper argues that this occurred due to an increase in the real wage to rental price of capital ratio, which, in turn, was mostly due to a fall in the relative price of capital goods. The decrease was driven by trade reforms in capital goods, and falling import tariffs on capital goods. While a fall in the relative price of capital may have led to an increase in the rate of private fixed investment in machines, and consequently, economic growth, one inadvertent consequence of the trade reforms was that they disincentivised firms from hiring labour.

Boom and Bust?

India's post-reform growth experience can be separated into three distinct growth episodes. The first growth episode was from 1993 to 2002 and was characterised by a set of predictable informal relationships ("ordered deals") between political and economic elites, which were relatively open as well. The second episode was from 2002 to 2010, and deals in this period became increasingly closed, leading to negative feedback effects along with structural retrogression of the economy. The third episode, beginning in 2011, was one of an incipient growth deceleration, and was characterised by increasingly disordered deals. This paper argues that this deceleration is the outcome of two separate phenomena: (1) increasing political delegitimation of the growth process that was seen as highly predatory and corruption-intensive; and (2) the pushback from accountability institutions in the post-2010 period. For growth to return, more than economic reforms or infrastructure spending, it is necessary for a realignment of the relationships between political and economic elites and between elites and non-elites such that there is a return to "open ordered deals".

Was the Mandal Commission Right? Differences in Living Standards between Social Groups

Affirmative action has been at the heart of public policy towards the socially disadvantaged in India. Compensatory discrimination policies adopted for the scheduled castes and scheduled tribes since independence are now available to Other Backward Classes. This paper examines why the obcs have lower living standards, as measured by per capita household consumption expenditures, relative to the mainstream population, and whether these reasons are similar to those observed for scs and sts. It finds that while the causes of the gap in living standards for the obcs are broadly similar to those for the scs and sts, the role of educational attainment in explaining the gap is particularly important for the obcs.

Organised versus Unorganised Manufacturing Performance in the Post-Reform Period

This paper analyses the productivity performance of both the organised and unorganised segments of the Indian manufacturing sector using unit level data. Both partial and total factor productivity measures are employed. Our analysis reveals that labour productivity has increased for the organised sector over time, whereas both labour productivity and capital intensity growth have slowed down in the unorganised sector during the period between 2000-01 and 2004-05. The improvement in TFP growth in organised manufacturing in the post-2000 period as compared to the second half of the 1990s across most states in India is heartening as also the fact that output growth was mostly productivity-driven in the post-reform period. However, the declining TFP and the increasing capital intensity of the unorganised sector are causes of worry and raise several important questions.

Why Did the Elephant Start to Trot? India's Growth Acceleration Re-examined

It is commonly believed that India's growth acceleration has been mainly due to a change in the state's attitudes towards business in the early 1980s and not so much because of changes in economic policies. This paper re-examines this argument and shows, first, that the turnaround in growth took place earlier in the late 1970s. It also shows that growth has been mostly driven by the rate of private equipment investment (which increased in the mid-1970s), and that this in turn has been driven by financial deepening, public fixed investment and the relative price of equipment investment. The paper concludes that the effect of the attitudinal shift of the state towards the private sector on growth was of the second order, and if it did have an effect, it was through changes in economic policies, rather than independently of the latter.

On India's Poverty Puzzles and Statistics of Poverty

The greater availability of NSS data sets has prompted a flurry of studies on poverty in India generating much debate. Some of the controversy relates to issues to do with quality of data. This article surveys the debate on poverty and the key issues raised in the debate, discussing the construction of the original poverty lines. The authors present new evidence on the divergence between calorie-based poverty measure and the official poverty line, and explore alternative explanations for this divergence.

Political Budget Cycles in India

Political Budget Cycles in India Kunal Sen Rajendra R Vaidya Political Business Cycle Theories argue that opportunistic incumbent political parties attempt to manipulate policy instruments prior to elections in order to increase the probability of being re-elected. In this paper the authors test the empirical implications of these theories for the Indian economy. They find a distinct increase in both the budget deficit and in its monetisation in the years leading to an election. No evidence is found of an electoral cycle in output. While the aggregate price behaviour is found to be unaffected by elections, there is some evidence of a pre-election increase in the price of manufactured products.


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