Expert Group
on
Informal Sector Statistics
(Delhi Group)
11th &12th May 2006
New Delhi, India
Agenda Item 5: Data Quality of Surveys on Informal Sector and Informal Employment
Sampling Hurdles and data insufficiencies confronted in Informal Sector surveys
Subrata Dhar
CSO, India
Sampling Hurdles and Data Insufficiencies confronted in Informal Sector Surveys
SUBRATA DHAR*
Introduction
After a period of strong state influence and a heavy degree of financial repression, enormous economical changes have taken place in India over the last decade. These changes were needed to respond to shifts in the underline structure of the economy and the shocks of globalization, liberalization and privatization. New and ever-increasing sectors have popped up in the industry and service horizons with large scope for formal and informal employments and addition to the country’s GDP.
With globalization, the Indian industries opened up to fair and unfair competition from foreign industries not only in the organised and formal sectors but also in the unorganized informal sector. Whereas the WTO Ministerial talks held in different parts of the globe discussed the tariff and non-tariff obstacles of trade in organised, large scale, technology intensive sectors, the fate of small scale and unorganized, labour intensive sectors was left on tenterhooks with the additional pressure of illegal dumping activities. Against this backdrop, a number of tariff studies were conducted in 2000-01 utilising results of informal sector sample surveys in mixed household –enterprise sectors. As many of these surveys were the first of its kind, the methodologies used were original and innovative, and are worth discussing.
Similarly, privatization of production and services in many sectors brought about needs for reformulating the price structures based on the new demands – supply mechanism. The millions of farmers who work in the Indian fields belong to the private sector. They have been both the mainstay and the main burden of the Indian economy. Though certain small
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* The views expressed are personal. This paper has been prepared for presentation at the meeting of the Expert Group on Informal Sector Statistics “Delhi Group” to be held in May 2006 at New Delhi.
scale/cottage industries have grown in the rural areas, for them production of agricultural products still occupies the main focus. Because of difficulties
in defining informal sector activities in agriculture sector, agriculture activities are excluded as per the ILO guidelines used for defining informal sector.
In fact the Fifteenth International Conference of Labour Statisticians (ICLS) defined the informal sector as all un-registered or un-incorporated enterprises below a certain size, including micro-enterprises owned by informal employers who hire one or more employees on a continuing basis; and own-account operations owned by individuals who may employ contributing family workers and employees on an occasional basis. In many countries and at many forums this “informal sector” has been expanded to consider informal employment and thus the “informal economy”. The estimation of this informal sector employment, the related GDP, poverty, variety in jobs, seasonality, remunerations, unions and labour problems are becoming new arenas of research as this emerging category increases in size. Surveys providing insights into their problems are timely and necessary and as the informal sector covers mostly the services sector, these studies are exemplary.
The intention of this paper is to study the needs of the different survey, their methodologies and the limitations of these methodologies in conducting the surveys and to discuss possible improvements that may be envisaged to improve these surveys. Many of these the studies discussed in the following paragraphs were carried out by different organizations of the Government of India, though only the survey methodologies have been discussed . It is realized that as the commodity list spans more than 10,000 commodity codes, production of many of them are partially or wholly in the informal sector and survey requirement for any of these will be an exercise by itself. These examples will give a documentation of the hurdles that one may confront in conducting informal sector surveys. Suggestions and experimentation carried out could only serve as future guidelines.
2. Surveys relating to the Secondary Sector
Seven items of Industrial Production namely locks, footwear, umbrellas, batteries, bicycles, toys and writing instruments were referred by the Department of Commerce for examining and recommending appropriate price structures and levels of import tariff based on (i) trends in demands – supply, of the commodities in the overall macro economic set up of the country, (ii) disability quotient of these commodities as they form part of the domestic industry and (iii) import potentials in the context of new tariff arrangements. These studies were conducted during 2000-01, and some of the results have been compared with published data obtained from DGCI&S and other national and international agencies. Within the limited scope of this paper we would investigate the methodologies considered in culling out primary information from the organised and unorganised sectors for purpose of the study.
(a) Study on Locks – Locks are produced both in organised and unorganised sector. The largest producer in the organised sector is M/s Godrej & Boyce Manufacturing Company Ltd. Mumbai, which had a turnover of around Rs. 90 crores in 2000-01. There are concentration of lock manufacturing units in the small scale, tiny and unorganized sectors at Aligarh(UP), Jallandhar, Ludhiana, Ropar, Chandigarh, Delhi, Kanpur and Dindigal (Tamil Nadu). In Aligarh there are around 5,000 units employing approximately two lakh workers. Out of this 989 units were registered with the General Manager, District Industry Center, Aligarh in 2000.
Different types of locks are available namely (a) lever, (b) wafer tumblers, (c) single pin cylinder, (d) multi-row pin cylinder. Though Godrej Company manufactures all types of locks, the domestic unorganized sector mainly restricts their production to type (a) and (b) only. Locks from China are mainly pin cylinder type which are superior to the domestic variety as they cannot be copied/replicated.
A brief questionnaire considering different particulars of the production process was issued to M/s Godrej & Boyee Mfg. Co. Ltd. Associations of Lock Manufacturers, Aligarh and the General Manager, DIC, Aligarh. The questionnaire was also canvassed among a number of production units at random. It considered the market availability of foreign locks and the disability in the sector due to the dominance of foreign products. The results of these surveys were used to prepare the report. Where the problems of data inadequacy and of under- response were observed. Though the study, lacked information from other lock producing areas and companies and inadequate responses from others, Government of India sanctioned Rs.5.5 crores for modernizing of lock industry with UNIDO assistance at a subsequent stage.
(b) Study on umbrellas: The umbrella-manufacturing units are small in size, unorganized, have low margins of profits and cater to seasonal employment. Production is done at cottage and small- scale unit levels by assembling different parts or components.
DGCI&S shows that turnover of the industry is around Rs. 300 crores with 150 units busy with production of various components and 1200 units engaged in assembling work. Share of straight and folding umbrellas to total production is 45% and 55% respectively. The cloth used is a special water proof variety imported mainly from Taiwan, Japan, Korea and in recent day from China.
A brief questionnaire was prepared and issued to the following four Associations :
(i) The Kolkata Chhata Vayvasayee Association, Kolkata
(ii) West Bengal Chhata Karmakar Mazdoor, Kolkata
(iii) All India Umbrella Federation, Mumbai
(iv) Umbrella Component Manufacturing Association, Mumbai.
However, data was not available from the Associations as it was informed that the Associations themselves did not have necessary information. Primary data had to be collected in May 2001 from Falna in Rajasthan and Bardawan and Suiliguri in West Bengal by random selection of units . Prices of umbrella components were ascertained from assembling units and of complete pieces from the retail units.
As this industry operates mainly in the informal sector, data availability and reliability is a disadvantage. The Associations themselves do not compile sub national level data nor do they have any sampling frame of the producers. Studies of these types produce unscientific results and can not be considered as the representative standard for the country. The only conclusion that could be derived was that cheaper varieties are available from foreign markets brought to the domestic markets often as illegal consignments through Indo Nepal Border. This created a perceived threat to the domestic producers.
(C) Study on bicycles and other cycles: India is the second largest producer of bicycles. It is primarily produced in the organised sector (95% of total production) by companies like Hero, Atlas, TI Cycles, Aone and RMI Cycles. Tariff study of this sub-sector was possible with data from this organised sector.
Cycle rickshaws, delivery cycles, tri-cycles and toy bicycles are produced in the unorganized sector according to demands in the local markets. Data on this sector was difficult to obtain both due to differences in the demand and innovations made for suiting the local needs. Though some markets in the metropolis, Delhi and Mumbai, were visited no concrete date was available. The only data source for this was NIC but this data also suffered from huge data gaps. As this unorganized/informal sector covers a huge segment of transport requirement in rural areas, regular data on this sector was needed. Such sporadic, unreliable data could not be used for any conclusive result.
3. A Survey related to Production of Cash Crop
A survey on opium cultivators was attempted in 2001 to determine the cost of production and the minimum support price for the crop on the request of Ministry of Finance. Though CACP does calculate cost of production of a number of crops like rice & wheat, opium is excluded. The Ministry of Finance grants license to individual villagers for cultivation of the crop as cultivation of the crop is illegal otherwise. Opium is grown in the villages of Madhya Pradesh, Uttar Pradesh, Rajasthan and is concentrated in particular districts of these states. The villagers concerned, were historically being allotted license for cultivation of this crop and the Government keeps a close tap on their production, sale and utilization. Being a sensitive issue the cultivation of opium is done under close supervision and secrecy.
For determining the cost of production of opium the total number of registered cultivators state-wise was utilised and a sample of cultivators were selected using multistage PPS sampling method. Some other parameters which were also considered while selecting the sample were (a) area of cultivation by the farmer and (b) previous years production as obtained from the District Narcotic Officers’ record. The multi-stage sampling method helped in identifying nearby districts and then villages within those districts.
The cultivators obtain prior licenses issued by the Narocotic Cell, Department of Revenue and therefore belong to the category of registered but not regulated producers. Though sale of their productions are regulated to some extent pilferage and illegal sale cannot be totally avoided. It may be also pertinent to note that there are others sporadic cultivation done in other plots of land and in nearby states . Production data from these areas were totally missed out from the survey.
By definition, production of opium, may be considered outside the informal sector as opium is an Agricultural product. Some studies have shown that 40% of the production in the Sector is not accounted for by the Narcotic Department of the Government .This is the portion which is sold at high prices in illegal markets and leaves huge gaps in the GDP calculations. Employment generated is also missed out. Though this study was not completed due to various reasons, a survey of this sector should yield interesting results
4. Surveys relating to Services
(a) Determining the milling charges for raw rice and par-boiled rice
On a request from the Ministry of Consumer Affairs a study was conducted in ten states for determining the milling charges that should be paid to rice mill owners for conversion of paddy into raw rice and parboiled rice. Earlier, in October 2003, a similar study had been conducted in four states of India but the results were not considered representative for the country.
For the study, from the 10 states, a sample of mills were selected taking into account relevant parameters like, capacity of the mill, quantity of custom milled rice produced per day, and location of mill within State. The selection of mills was done randomly and was restricted to 2 to 3 per cents of the total rice mills located in the states subject to a minimum of 15 mills in each category.
For collecting data, questionnaire was designed and forwarded to the selected rice mills located in 10 states. No information was received from the mills located in the States of Bihar, Uttarachal, West Bengal within the stipulated time and so data from only 7 States were analysed. Additionally, data received from some mills were haphazard and incomplete in many of the filled in questionnaires. Reasonable data was available from the following State for the given number of mills only:
Andhra Pradesh 14
Chattigarh 10
Haryana 8
Orissa 13
Punjab 28
Tamil Nadu 6
Uttar Pradesh 19
On the basis of these information, milling charges for raw rice and paraboiled rice were estimated. These charges/price included the transport cost of taking the material to the mills and from there to the Government warehouses. The conversion rate considered was 67% for raw rice and 68 % for paraboiled rice. The by-product like broken rice, rice barn, phack and husk generated which have reasonable economic values are retained by rice mill owners, could not be accounted for.
Together with non-response from number of State, as explained above, data was unreliable and biased. Additionally in the balance sheets, financial information were often clubbed with other activities making it difficult for clear cut estimation. As different modes of transportation for different distances were used, the transport charges varied drastically. Opportunity cost due to delays in transportation and due to waiting time were not accounted for. The seasonal factors, too, were also extremely important, but all these could not be quantified.