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: KP Kannan, a member of the National Commission for Enterprises in the Unorganised Sector, is one of the country’s foremost experts on the informal sector and labour markets. He has served in various capacities on national and international bodies, including those of the ILO and UN. A fellow (and former director) of Centre for Development Studies, Thiruvananthapuram, Kannan is conference president-elect of the Indian Society of Labour Economics for its golden jubilee conference in December. He was also recently awarded the first VVGiri Memorial Award in Labour & Development. In an interview with FE’s P Raghavan, Kannan elaborates on the role and prospects of the informal sector. Excerpts:
You have been a leading expert on labour markets, especially in the unorganised sector. What is the most striking aspect of this sector in India, compared with other emerging economies?
The most striking aspect of the informal sector in India is its massive size. Some 86% of the workforce is in the informal sector. To this one must add another 6% that are informal workers in the formal sector. That makes 92%. For China, the comparative figure is 68%. If you exclude agriculture, which is generally the case in many countries while speaking about informal sector, India has 72% of its workforce in the informal, non-agricultural sector, while that figure is around 45% in China, 60% in Brazil, and 55% in Mexico.
One should also keep in mind that India has one of the lowest shares of regular wage employment, at around 16%, while in China it is exactly double at 32%. In this sense, employment security in China is much higher than what India has been able to provide for its working people.
Q: How has the unorganised sector fared in relation to output and employment?
What I have told you relates to the most recent period for which data is available, ie, 2004-05. The National Commission for Enterprises in the Unorganised Sector (NCEUS) has defined the unorganised sector as the informal sector consisting of enterprises that are private and unincorporated employing less than ten workers. In this sense, employment in the informal sector is around 393 million of the total workforce of 457 million. By deploying this definition, the NCEUS has also calculated that the GDP originating from the informal sector comes to 50%. You can see that per worker output in the informal sector is only one-sixth...
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