Contribution of Urban Informal Settlement Dwellers to Urban Economy in India

Proceedings of the National Consultation





15th October, 2013

Magnolia Hall, India Habitat Center, New Delhi

 Society for Participatory Research In Asia (PRIA) along with Society for the Promotion of Area Resource Centres (SPARC) and Forum of Informal Urban Workers (FIUPW) organised a one-day National Consultation on the ‘Contribution of Urban Informal Settlement Dwellers to Urban Economy in India’ at Magnolia Hall, India Habitat Center, New Delhi on 15th October, 2013.

This consultation was organized to share and release the findings of a study jointly undertaken by the PRIA and Indicus Analytics to estimate nationally the Contribution of Urban Informal Settlement Dwellers to Urban Economy in India’. This study was conducted in 50 major cities across the country. About 5,353 households and 24,445 individuals were covered in the study. The main focus of the survey was to capture information about income-expenditure, employment, nature of job, living conditions, education and economic component of life of the people living in slums and slum type urban poor settlements.

The key objectives of the study were:

  • To identify the involvement level of the urban poor (living in slums and other informal settlements) in the city’s economic (including fiscal) and social activities.
  • To measure direct, indirect and induced contribution of the urban-poor population to city’s economy.
  • To understand the shadow impact of non-existence of the urban-poor population in cities, in both qualitative and quantitative terms.

The consultation saw the coming together of more than 60 participants, which included policy makers, senior bureaucrats, academia, members of different associations and federations, NGOs and media groups.

In his opening address, Mr. Manoj Rai, Director, PRIA, giving an overview of the consultation and the purpose of the study mentioned that it is now time to realize and acknowledge the significant role of the urban poor in the lives and economies of our cities and change our perception about them. He further added that the objective of study was to highlight the economic contribution of urban poor, who are often called ‘burden on the city and its economy’. This study has strived to quantify the economic contribution of urban poor who live in slums and other informal settlements in the cities. He also added that the findings of this study are estimates based on sample data from 50 cities. There may be statistical limitations in the estimates but it was also true that economic contribution of urban poor has been found to be very significant for driving economies, sociologies and the politics of cities.

 Sharing of the Study Findings


Dr. Laveesh Bhandari, President, Indicus Analytics

Mr. Dripto Mukopadhayay, Vice-President, Projects, Indicus Analytics


Dr. Rajesh Tandon, President, PRIA


Prof. O.P. Mathur, Vice-President, NIUA, Delhi

Mr. Rakesh Ranjan, Advisor, Planning Commission of India

Ms. Kavita Ramdas, Country Representative Ford Foundation, Delhi

Dr. Pronab Sen, Former Chief Statistician and Secretary, Govt. of India; Currently Country Director, IGC

Mr. Dripto Mukopadhayay giving a background of the study findings mentioned that defining the informal settlements has been one of the major challenges, as no formal definition of informal settlements is available. Informal settlements are generally symbolized with slums (which are settlements of urban poor). Adding further he said that census 2011 estimates reflect that in states like Andhra Pradesh, Delhi and Maharashtra the portion of slum households to total urban poor households is high as compared to states like Bihar, Jharkhand, Assam, Kerala etc., however this is not because there are less proportion of urban poor in those states, but due to the fact that their status is under-reported. There are approximately 65% slum populations in top 10 cities and less than 50% of these slums have access to basic services like toilets, taps and electricity.

Informing the participants about the methodology of the study, he quoted that it was conducted in top 50 cities of the country having million plus population covering 5,353 households and 24,445 individuals. Out of the 50 cities, Bhopal, Raipur, Patna and Jaipur have been treated as core cities (for much deeper sociological studies) where 10 informal settlements were selected randomly, and from each settlement 30 households were further identified (randomly) for the survey. Thus 300 households were sampled from each of these 4 core cities. In the rest of the 46 cities, 3 settlements and 30 households from each were randomly chosen. Thus 90 households from each of the 46 cities were chosen. The study utilized the Social Accounting Matrix (SAM) which is a robust methodology for these kinds of studies.

Some of the key findings shared by him were as follows:

  • Informal settlement dwellers contribute 7.53% to urban GDP of the country (including direct, indirect and induced effects) assuming urban GDP is about 60% of total GDP in India
  • Multiplier effect of urban informal settlements dwellers on the economy is higher than both other urban households and rural households.
  • One unit additional demand from urban informal settlements leads to 2.89 units of additional output in economic sectors

 Key Remarks by Panelists and Chair


Prof. O. P. Mathur appreciating the efforts of both the organizations said that given the scope and scale of the study, this seems to be the largest study which has taken place in last 5-6 decades. Quoting the shared report and its findings he said the report assumes urban GDP to be 60% of the total GDP and the contribution of the informal settlement dwellers to urban GDP as 7.53%; if calculated further it is almost 4.5% of the country’s GDP. Stressing further he said it would have been even better if the study could have highlighted that who (which section) amongst the informal settlement dwellers are contributing towards this GDP? He appreciated the usage of SAM in the study however indicated that the linkages within that could have been presented more clearly.

Referring to recent literatures and studies he mentioned that employment growth in our country has largely been through informal sector, thus the contribution of the informal settlement dwellers cannot be overlooked. Giving further feedback on the study, he also added that a comparative analysis of contribution between the benefitted (where urban schemes and services reach) and non-benefitted (no access to schemes and services) informal settlements will bring to light greater insights regarding their issues and challenges.

Mr. Rakesh Ranjan, continued the session by posing a pertinent question and asking the participants that ‘how can the data and findings of this very important study be used most effectively?’ He further opined that the heterogeneity among the groups of policy makers should be kept in mind and addressed appropriately in order to seek their feedback and inputs on the report.

He mentioned that the study findings should be backed by a critical review and reflection on government allocations and utilization on urban growth and planning, infrastructure development policies etc. so that it becomes a more holistic and logical document, with suggestions and inputs from the civil society. He further encouraged the civil society representatives and members of the academia present in the consultation to continue their efforts on assessing the functioning of the government agencies and give constructive feedback on regular basis, so that the government can take effective measures.

Quoting the Kundu Committee report he further mentioned that 0.53 million people have no houses in the country. In the upcoming National Urban Livelihood Mission (NULM) there are some provisions for providing shelter to these people. Urban Local Bodies (ULBs) play a major role in the cities hence we should also seek support from them. He also suggested that in addition to the economic contribution of the informal settlement dwellers, the study should also talk about their political participation.

 Ms. Kavita Ramdas, highlighted the long association of Ford Foundation with urban issues in India. She said there has been a miraculous growth in urban sector but this growth has been disproportionate and has created multiple challenges in the sector, for e.g. 210 million people in India are not getting enough to eat in spite of 6-8 percent of persistent growth. Emphasizing on the changing scenario and trends of urbanization she mentioned that earlier migration to big cities used to be towards manufacturing units but now the primary engines of growth are changing, which needs to be recognized and understood.

Commenting on the findings of the report she said the rights of citizens/informal workers also need to be measured. She also suggested that the study should take a more focused view on the contribution of women workers within these informal settlements, as they are the ones who suffer the most and get the least privileges and benefits. Highlighting the unequal distribution of resources she said, the study should be used to generate arguments on “Fat India (prosperous developing India) and Thin India (under-developed, poor India)” and it can also be used for a comparative analysis of contribution of ‘Urban Thin’ and ‘Rural Thin’ and linkages between both of them.

 Dr. Pronab Sen, started his deliberation by pointing towards the study and raised some questions to the participants:

  • What are we trying to achieve?
  • What are we able to measure?

Adding further, he said there has been a significant change in the dynamics of informal settlements in India as the urban spaces are shrinking and as a consequence the newcomers/new migrants are finding less space for themselves. Further he said, investments on infrastructure are directly related with the slum count e.g. if Delhi government stops investing in infrastructure the number of informal settlements will increase from 21-50%.

Differentiating between the contribution of new and old migrants he said that a new migrant will generally contribute less and spend more due high migration cost. Adding a new dimension he said, there are own account workers and it is hard to estimate about their income, thus in the study there is need of segregating data of own account enterprises. He said informal settlements can be bifurcated into two parts (i) permanent (ii) temporary, if the study could account for their contributions separately and their access to entitlements (PDS, ID Cards etc.) it would be truly enriching.

Dr. Rajesh Tandon, talking about the study finding of 7.53% contribution, he said that is the average figure of 50 cities and data for each city is available separately and it can be used accordingly. Further he added that the study has tried to capture direct, indirect and induced contribution of the urban informal settlement dwellers and further it needs to analyze the land issues with economic contribution, hence we need to look upon the ownership of land, its control and its utilization.

Further quoting the findings of the study he said that in the discussions with the urban non-poor i.e. the middle income groups it was revealed that in the first instance 50% of them considered the urban poor/informal settlement dwellers as a burden to the city and in the second instance, when counseled 75% of them felt that the city’s economy and services will be effected if they (the informal settlement dwellers) will be removed from the cities. Thus, this change in perception after having got the information about the contribution of the informal settlement dwellers raises the need and the importance of engaging with the urban middle class and changing their perspective and behavior on the issue of urban poverty.

In the end, Dr. Rajesh Tandon summarized the whole discussion and emphasized we should approach the universities and colleges to conduct similar studies on such themes as it won’t be possible for Civil society actors like PRIA alone to do such large scale exercises. It is time that thedifferent stakeholders, i.e. academic institutions, NGOs and governments come together and collectively conduct research and advocacy on such critical issues.

Issues and Suggestions Raised in Open Discussion


A number of issues and concerns were raised by the participants on the theme of study and all of them reinforced that the contribution of the informal settlement dwellers and the informal sector as a whole needs to be recognized. Some of the major suggestions and points raised by the participants were as follows:

  • A number of questions were raised on the methodology and scope of the study and the participants tried to understand the process and objectives behind the study.
  • Participants also commented on the implications of the study as many of them thought that study underestimated economic contribution of urban poor. However, they acknowledged that study provides an insight on the extent to which the informal settlement dwellers contribute economically to the city and now the focus should be on what they get in return and how can urban poor be supported in a better ways.
  • Commenting on the findings of study participants raised the issue that contribution of urban poor workers is directly proportional to the infrastructural facilities, and thus the study should take into account that aspect as well.
  • The participants also pointed out that study should have also covered the homeless population and their contribution also vis-à-vis the services that they are able to access and how it impacts their productivity. They suggested that the per capita energy consumption of the urban poor is relatively less, which means they are indirectly contributing by saving large resources to the city; hence it should also be measured in the report.
  • Participants also stressed on the need of conducting a separate study on the contribution of occupational groups such as rag pickers, waste pickers etc. to understand the extent of their economic contribution.
  •  Emphasizing on the habitat of urban population, participants said there is a possibility of informal sector workers living in formal settlements and formal sector workers living in informal settlements and this needs to be considered as well. The location of the informal settlement within/or outside the city and the impact of distance and time in relation to the work place of the worker on his/her contribution was another point raised by some participants.
  • They also pointed out the need of calculation of investment versus return from the policy advocacy point of view as there is a need to understand and recognize the areas for strengthening the contribution of urban poor.

3 thoughts on “Contribution of Urban Informal Settlement Dwellers to Urban Economy in India

  1. Jorge Carrillo November 26, 2013 at 9:13 am Reply

    Is this report available online? Thxs

    • terraurban November 26, 2013 at 9:51 am Reply

      Not yet Jorge, by end of this year shall have the report up.

  2. International Journal of Research March 27, 2014 at 2:36 pm Reply

    Really good workshop…

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