Informal Sector- Answer to poverty alleviation?

Shared by Nidhi Singh nee Batra- PRIA

Is there another dimension to ‘slums’ that media and professionals tend to ignore?

Slums are known to be workhouse of many activities- recycling industries, microenterprises, bidi making etc. They obviously do not follow any regulations and some flourish to form dense unsafe work environments. The fact that slum dwellers livelihood is dependent on these microenterprises and the formal system has yet not found any way to include their skills or provide jobs result in microenterprises to be encouraged and even preserved by many activists.

Here is an article by Jason Overdorf that we came across which questions – The much-hailed “ingenuity” of India’s slum enterprises: evading taxes, exploiting workers, and polluting the environment.

It has raised many other arguments such as:

  • Dharavi where “a churning hive of workshops” generates “an annual economic output estimated to be $600 million to more than $1 billion.” That is without adhering to any regulations/paying taxes etc
  • Or making a case against the informal recycling sector: If an old computer is recycled through the informal sector, ET writes, desperate workers manually break it down and dip it in acid to sift gold from copper and silver, leading to “avoidable pollution and the loss of many more metals.” And only “30-40% of gold and silver are extracted.” In contrast, organized sector recyclers separate metal from glass using a mechanized, magnetic separator, sift plastic, non-ferrous metals and aluminum with eddy currents and process copper, tin, lead and gold by smelting and electro refining. The result: more than 95% of precious metals are extracted.
  • On other hand has cites some tragic cases such as: A 2-year-old girl drowns suspiciously in a pail, and a father empties a pot of boiling lentils over his sick baby. As Boo explains, “sickly children of both sexes were sometimes done away with, because of the ruinous cost of their care.” “Young girls in the slums,” she adds, “died all the time under dubious circumstances, since most slum families couldn’t afford the sonograms that allowed wealthier families to dispose of their female liabilities before birth.”

 Jason argues that a Slum is not horrific by accident, but the product of government neglect and the exploitation by the informal sector that is so often described, erroneously, as “plucky self-reliance.”

To read the article:

Please share your views- Should the informal sector be preserved and encouraged? Does this sector have answers to our poverty alleviation? Or as Jason says- a government that sees self-employment as the answer to its massive job shortage, and promotes training programs in such modern activities as basket weaving – as though the country has an insatiable design for baskets and stone carvings – will never draw that conclusion.




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