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rethinking urban livelihood: thriving informal economy in urban areas in india

January 24, 2020

Globalisation vs ‘Right to the city’

Over the years, economic policies and strategies adopted for sustainable urban development had resulted in a persistent unequal distribution of income and resources. Such policies have helped a certain set of people, leaving most vulnerable to economic uncertainty, environmental degradation, and poverty.

Although India has experienced an impressive growth rate of GDP (7.1% in 2018), the benefits seem to have concentrated for 23% of the population in middle and high-income groups against the 77% of poor and vulnerable from which 90 per cent of them are working in the informal sector (NCEUS, 2009).

Reducing poverty and absorbing the impact of the economic slowdown in urban areas has been a growing issue for governments and development agencies. Hence, international agencies such as the OECD, World Bank, UNEP are promoting the ‘green economy’ as a solution to the world’s triple crisis. 

It was marketed as advantageous because it places the market economy at the centre of the solution. Green investments can create sustainable economic opportunities, innovation, diversification, and accommodate people within smaller ecological footprints. However, it ignored the informal economy which accounts for more than half of non-agricultural employment in developing countries.

Weavers of Dharavi running their family businesses, Image by Forbes India

The formulation of the green economy relies on capital invested by private enterprises and the expansion of markets in the formal sector, to deliver green jobs and technological improvements to those who need them. It recognises the need to adopt a pro-poor approach but ignores the significance of the informal sector in supporting the lives and livelihoods of the urban poor. For example, a recent report by UNEP (2015) on building an inclusive green economy in Africa makes no mention of the informal economy.

Such oversights questions the approach of ‘inclusive green growth’ by international agencies. The informal economy is extremely diverse and is not usually controlled by the same sort of policies as the formal economy.

Everyday experiences of street vendors in Mumbai, India

The research on street vendors in Mumbai ((OBU-Research Paper-Informal Economy) had shown the opportunities of income generation and livelihood improvement of the urban poor through self-employment which is informal in nature. These activities were not survival strategies or supplementary occupation for these workers. 75% of them were dependent on street vending as a primary source of income. Most importantly, city dwellers or their customers appreciate their affordable and convenient services and goods.

Looking at its positive contribution and persistence growth, the local government should take decisive action rather than consistent dilemma towards this sector. Policy generation and regulations at the national level can have a positive impact if the local government facilitates the informal sector and recognises the importance of sustainable development.

Importance of local government for achieving social and environmental sustainable goals (SDG 10 and 11)

There are segments where local governments can involve and support the street vendors or small enterprises in the informal sector, one of them is social security such as access to capital,  insurance and pension schemes, and right to work. The management and framework of member-based organisations or vendor unions can help in improvising the existing social security framework through microfinancing and subsidies.

Strategic management of the city officials and planners in Indonesia, Pondicherry and Ahmedabad have enabled car-free zones or vending zones. Some of the streets were closed and reopened at certain times by studying the demand and customer fleet.

One such example is Pondy Bazaar in Chennai. The public plaza opened up street vending opportunities by 25% and decreased vulnerability of vendors towards accidents,  eviction and harassment which resulted in secured livelihood.

Therefore, the organisational structure consisted of member-based organisations (or Town Vending Committee, as directed by NPUSV, 2009), vendors unions and city officials play an important role in enabling an equal and inclusive environment in the urban area. The exchange of the roles and responsibilities between organisations/unions and city officials/planners can derive informed decisions and grassroots solutions for the excluded men and women from living and working in the city.

With the support of the state, member-based organisations can provide,

  • Proper training and education for enhancing their skills and business.
  • Social security through microfinancing and health/ safety insurance.
  • Negotiations with the state for the rights of the urban poor and advantageous for the inclusive city in general.
  • Legal status for avoiding evictions or harassment and income insecurities.
  • A framework to enhance the livelihood of the workers and the environmental performance of the business

Think Global, Act Local

If informal economies are ignored in the transition towards the green economy, activities that undermine these environmental goals may be displaced to the informal economy, as it is less regulated. However, if the response is to formalise this sector, those working in or dependent are likely to suffer. Whether intentionally or unintentionally, it will burden the informal economy and settlements. 

Hence, the approach with the informal economy should be a consultative and negotiated process, advocated by experts of pro-poor urban planning and inclusive urban development. 

Figure 4: Unorganised labours working in poor conditions, Image by DNA

Also, the understanding of the interrelationship between formal and informal economies and their differences is important for formulating policies.

Thus, thorough research is required to unlock the environmental and social potential of different segments of the urban informal economy and its potential for enhancing livelihood and inclusion in the city. 

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