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The Challenge of Employment in India   
The Challenge of Employment in India
An Informal Economy Perspective

Report of the
National Commission for Enterprises
in the Unorganised Sector, Government of India

Chairman: Arjun K. Sengupta

Paper  Back Book (8˝" x 11")   :   Set of Two Volumes
Volume I: Main Report ; Pages : 422
Volume II: Annexures ; Pages : 150
2009  Edition         :   ISBN - 978-81-7188-777-4
Price : Rs. 1295.00  : US$ 99.95;
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This is the final report of the National Commission for Enterprises in the Unorganised Sector, which was set up by the Government of India on 20th September 2004 under the chairmanship of Dr. Arjun K. Sengupta to "review the status of unorganized/informal sector in India including the nature of enterprises, their size, spread and scope, and magnitude of employment." This was the first step taken towards fulfilling the commitment of the new UPA government to ensure "the welfare and well-being of all workers, particularly those in the unorganised sector, who constitute more than 93% of our workforce" (likely to be around 502 million by 2012 as the Commission estimates).

During the four and a half year of its existence, the Commission examined in detail all the literature and statistical evidence that exists on this sector, held numerous consultations with different stakeholders, such as government officials and policy makers at the Centre and in the States, trade unions and associations of workers representatives, civil society organisations, academics and experts. This final report on 'The Challenge of Employment in India: An Informal Economy Perspective' is now presented as an overarching report based on all the earlier work of the Commission, to provide a perspective and strategy for expanding employment in India. The report takes an aggregative perspective of what the Commission calls the central problem of the challenge of employment namely, deficit in its quantity and quality. The comprehensive report also examines the issue of labour market reforms in India.

The most important conclusion that follows from the findings of the Commission is that all efforts to improve the quantity and quality of employment in the unorganised sector would require a new approach to economic planning in India. The report offers numerous suggestions and concrete recommendations towards attaining the objective of 'maximizing employment' and ensuring inclusive growth.




Volume I - Main Report

1. Introduction

Wide ranging consultations 

Past Reports

This Report

Organisation of Chapters

2. Expanding employment in the Indian economy


Formal Sector Employment

Formal and Informal Employment in the Formal Sector: Commission’s estimates

What explains lack of growth in Formal Sector employment?

Growth and Employment

Some Implications of the Growth Pattern for Incomes

The Informal Workers

The Approach of NCEUS

Commission’s Approach in this Report

Concluding Note

3. Employment & Unemployment in India : Alternative Measures &
  their Meaning


Measures of Employment/Unemployment : Sensitivity to Concepts & Definitions Used

Labour Force Measures Used in Recent Plans

Requirements of a Good Measure

Modified Current Weekly Status (MCWS)

Advantages of the MCWS Approach in Labour Force Measurement

Measures of Employment & Unemployment

Measures of Non-utilization of Labour Time

The Measurement Used in this Report

Policy Implications

4. Labour Supply & Demand :


Population Growth & Composition

Trends in Size & Composition of Labour Force

Overall Size, Growth & Composition

Rural-Urban Distribution 44

Labour Force Participation Rates (LFPR) 45

Labour Force Participation Rates by Social Groups 45

Age-Specific Labour Force Participation 47

Age Specific LFPR in Rural & Urban Areas 48

Low Educated: A Huge Underbelly 49

State-level Scenario in LFPR 52

Sate-wise Composition of Labour Force 53

State-wise Labour Force Participation Rates by Social Groups 54

State-wise Labour Force by Education 54

State-wise Rural/Urban Difference in Labour Force 56

Trends in Size & Composition of Work Force 57

Gender Differentials in Education by Industry Groups 60

Industry-wise Distribution of Workers by Social Groups 60

Classification of Industries by Growth in Employment 61

Policy Implications 63

5. Demographic Dividend or Demographic Burden?

National and State Level Projections of Labour Force 102-129

Demographic Dividend 102

Earlier Population Projections 103

Methodology 103

Projected Population 104

Projected Labour Force 110

Comparison of Growth Rates 111

State-wise projections of UPSS Labour Force by Sector & Size 111

Projected MCWS Labour Force 115

State-wise Projections of MCWS Labour Force 117

Additions to Labour Force 117

Educational Status 118

Policy Implications 122

6. Employment Generation & its Quality:

Looking through the Lens of Formality & Informality 130-167

Introduction 130

Commission’s Perspective on Employment Question 131

Projections of Employment 132

Structure of Employment in the Formal & Informal Economies 134

Formal & Informal Sector Shares 135

Shares of Formal & Informal Workers 138

Unemployment 138

Part Time Workers & the Underemployed 138

Socio-economic Profile of Unorganized Workers 140

Wages & Earnings 140

Conditions of Work of Agricultural Wage Workers 142

Conditions of Work of Wage Workers in Non-agricultural Sector

Socially Objectionable or Extreme Conditions of Work 145

Self-employed Workers in Non-agriculture 148

Conditions of Work of Self-employed Workers 149

Constraints on Self-employed Workers & Informal Enterprises 150

The Commission’s Strategy of ‘Levelling Up’ 152

7. Labour Law Reforms : Beyond a Narrow Agenda 168-187

Introduction 168

Evolution of Labour Laws in India 168

Important Labour Regulations & Their Coverage 169

Relation between Labour Laws & Employment Generation 170

Major Issues in Labour Law Reforms 173

Labour Laws & the Unorganised Sector 180

Recommendations for Labour Law Reforms 182

Conclusion 185

8. The Challenge of Skill Formation & Development 188-213

Introduction 188

Skill Formation, Productivity & Growth 189

The Skills-Productivity-Growth Link 189

The Case of the Informal Sector 189

Skill Profile of the Indian Workforce 191

Selected International Experience 201

System of Skill Development in India 202

Recommendations 208

Conclusion 213

9. Public Employment Programme for the

Unorganised Workers: The Case of NREGA 214-230

Introduction 214

National Rural Employment Guarantee Act 215

The Context & Contours of NREGA – A Review 215

A Snapshot of NREGA Over Three Years 217

Some Positive Benefits 219

Lessons from Variations in Performance 222

Success Stories 222

Remaining Gaps 223

Need for Safeguarding Essential Entitlements 224

Some Operational Deficiencies 225

Recommendations 226

Conclusion 230

10. An Employment Strategy for Agriculture Centred on Marginal
    & Small Farmers 231-253

Introduction 231

Employment Potential of Indian Agriculture 232

Growth Potential of Indian Agriculture 235

Recent Initiatives in Agriculture 237

Dimensions of Marginal/Small Farming in India 239

Key Issues & Problems of Marginal & Small Farmers 242

Integration into Markets and Risk 246

Approach of the Commission & Recommendations 247

Conclusion 253

11. The World of Micro Enterprises : Characteristics and Constraints

Introduction 254

Micro Enterprises in Rural and Urban Areas 256

Unravelling the Heterogeneity 257

Industrial Distribution of the Micro Enterprise Sector 259

Contribution to National Income 259

Informal Manufacturing and Productivity: A Disaggregated Picture 259

The All-India Picture 261

A Regional Picture 262

Major Industrial Groups (Enterprises) by States 266

Constraints faced by Micro Enterprises 267

Constraints on Micro Enterprises: A Summing Up 274

Sub-Contracting : An Aspect of Linkages between Micro and Large Enterprises 274

Policy Implications 274

12. Access to Credit 281-297

Introduction 281

Size and Characteristics of Unorganised Enterprises 282

Access to Credit to Micro and Small Enterprises: The Present Scenario 282

Micro Credit as a Palliative 284

Institutional and Policy Support for Credit 286

Informal Credit: Role of Money Lenders 288

Policy Measures to Promote Credit to Micro and Small Enterprises 288

Credit Policy in the Current Context: A Micro Enterprise Perspective 289

Some Larger Issues 290

Conclusion and Policy Recommendations 291

13. Access to Technology, Marketing and Raw Materials 298-333

Introduction 298

Access to Technology 298

Technology and Innovation in MSEs: The Salient Analytical Issues 299

Technological Interventions and Innovations that transform an industry:

The Role of the Central Leather Research Institute (CLRI) in the Leather industry 301

Fostering rural innovations - the Rural Innovations Network 302

Intervening in a cluster: EDI in Jamnagar brass parts cluster 303

Technology Acquisition and Upgradation: Two Case Studies 304

Access to Marketing 314

Sector Typology and Marketing Issues 315

Marketing Infrastructure for the Unorganised Sector 317

The Handloom Industry – Issues in Marketing and Existing Institutions 317

The Handicrafts Sector: Marketing Issues and Institutions 319

Access to Raw Materials 322

Summing Up 326

Policy Implications and Recommendations 327

Rationalizing, simplifying and expanding schemes 331

Providing Better Linkage 332

Adequate Credit 332

Policy Implications to enhance marketing 333

Recommendations to Improve Access to Raw Materials 333

14. From Industrial Clusters to Growth Poles 334-356

Introduction 334

Defining industrial clusters 335

Potential benefits of a Cluster 335

Importance of clustered micro and small enterprises 335

Determinants of cluster development 336

MSE Clusters in India 336

Importance of cluster-oriented MSE development policies 340

MSE cluster development policies in India 340

Micro enterprises in Value Chains 341

Indian success stories and failures of cluster development policies 343

Case Studies for Value Chains in Indian Small Industries 344

Interfirm Linkages in Micro-enterprises: A Summing Up 350

Policy Implications 350

The NCEUS Proposal for Growth Poles 350

Recommendations 355

15. Recommendations 

Definition of Informal Sector and Informal Employment 357

Measurement of Employment and Unemployment 358

Labour Force Projections 358

A Strategy for Promoting Decent Employment 358

Labour Reforms 359

Skill Formation 360

Public Employment Programmes (NREGA) for Unorganised Sector Workers 363

An Employment Strategy for Agriculture centred on marginal and small farmers

Access to Credit

Access to Technology, Marketing and Raw Materials

Cluster-Based Growth Poles for the Unorganised Sector


Volume II - Annexures

1.1: Past and Present Composition of the Commission

1.2: Composition of the Advisory Board

1.3: Task Forces and Technical Expert Groups Constituted

3.1: Measures of Labour Force Participation and Utilisation

5.1: State-wise UPSS Labour Force by Sector and Sex as on 1st April of 2007, 2012 and 2017

5.2: State and Age Group-wise UPSS Labour Force by Sector and Sex as on 1st April of 2007, 2012 and 2017.

5.3: State-wise MCWS Labour Force by Sector and Sex as on 1st April of 2007, 2012 and 2017.

5.4: State and Age Group-wise MCWS Labour Force by Sector and Sex as on 1st April of 2007, 2012 and 2017.

5.5: State-wise UPSS Labour Force by Educational Status, Sector and Sex as on 1st April of 2007, 2012 and 2017.


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