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Urbanisation and Informal Sector

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Published: 30th Jan, 2020

Urbanisation and Informal Sector
  • Wellbeing, one of the crucial dimensions of which is access to productive employment. Opportunities is Purdy and particularly in the present context of globalization.
  • Growth that is currently taking place is accompanied by informalisation, e.g., sub-contracting in the production process and various other mechanisms that tend to leave labour with less bargaining power.
  • On the whole, the informalisation process is feared to involve substantial welfare losses and deterioration in terms of governance. However, in the face of inadequate livelihood opportunities in the rural areas, even the urban informal sector, which is grossly characterized by low productivity, tends to attract migration. 
  • This in turn has serious challenges in terms of urbanization. Though in the Indian context rural-urban migration rates are moderate, rural-to-large city population-flow has always been alarming. Thus, city growth, informal sector employment, and low living standards including slum inhabitation involve considerable overlaps.
  • Quite clearly while the new Urban India by introducing various smart strategies to attract investment from all quarters unfolds opportunities. For those who are highly skilled. It also tends to continue with certain Urban ills that have perceived over the decades.

Migration and Opportunities:  

  • Higher rural literacy and improvements in educational level may raise the rural-to-urban migration rate. The presence of disadvantaged social categories in the rural areas also has motivated migration rate, supporting the view that they migrate to escape their vulnerability. Migration reduces both rural and urban poverty.
  • In other words, rural poor by shifting to the urban location are able to access better livelihood opportunities and thus, poverty declines.
  • The urban informal sector, notwithstanding the manifestation of low productivity activities, appears to be better in comparison to the rural job market scenario. Higher urbanization and work participation rate in both rural and urban areas are positively associated with migration, suggesting that those in the labour market are more likely to migrate, and after migration they are expected to continue in jobs rather than moving outside the labour force.
  • Migration, urban informal sector employment, and the incidence of socially backward population in the urban and rural areas are all positively connected with each other, suggesting that such groups are more likely migrate and land up in the urban informal sector.
  • Though there is no definite relationship between the size of the informal sector and the extent of urbanization, the role of the urban informal sector in providing sources of livelihood cannot be undermined.
  • In fact, with rapid urbanization the rural transformation is faster as the positive spill-over effects initiate new activities and opportunities. The other new challenge for urban India can be envisaged in terms of the emergence of the census towns.
  • The constituents of urban areas are statutory towns, census towns, and outgrowths. The major distinction between statutory and census towns are as follows: All places with a municipality, corporation cantonment board, or notified town area committee constitute statutory towns.
  • On the other hand, the census towns are defined on the basis of the following criteria
  1. A minimum population of 5000;
  2. At least 75 per cent of the male workers are engaged in non-agricultural pursuits; and
  3. A density of population of at least 4000 per square Km. The results from 2011 census show a huge number of census towns which emerged in the last ten years (2001-2011).

What can explain such faster growth of census towns?

  • If we analyze the regional aspect of these towns we can say that they are mostly situated in the neighborhood of very large cities, these towns may be treated as the satellite towns growing in response to the spur of economic activities.  
  • The number of statutory towns of all sizes is rather positively associated with the number of census towns implying that urbanisation as a whole seems to be expanding from the spill-over of the existing urban localities into the hinterland.

Are these census towns well equipped to assure a reasonable quality of life?  

  • The residential and infrastructural facilities in these towns are inadequate to keep pace with the new activities that are spilling over as a result of saturation of the large urban centres. The new towns do not have enough living space to accommodate the migrant workers.
  • As migration is usually more than the actual number of job vacancies it would mean that the surplus labour would get residually absorbed in low productivity jobs.  Though the very large cities also have had the similar problems, there have been several support mechanisms at the same time.
  • Besides, the real earnings in the informal sector have been higher in the large cities than in smaller towns.
  • The capacity of the small towns to provide for the population is highly limited even after discounting for the scale factor that the large cities enjoy. There are problems relating to generation of resources required for sustainable development.

Why Spill-over growth is bad?

  • If such new towns grow purely in response to the dynamics of agriculture growth and the subsequent demand for trading or other non-agriculture activities, the outcomes are desirable.
  • The urbanization spill-effect which ushers in a major change in land use patterns may pose threat not only in terms of food security in short run but also sustainable livelihood for those who lose their agricultural land.
  • The mismatch between the demand for and the supply of labour can be serious in these towns keeping in view the employability issue. Trade-offs to certain extent between growth and agricultural land are inevitable here. However, sufficient safety nets need to be created to meet the deficiencies and the new challenges.

Impacts and Future Strategy

The next question is whether these new towns as a spill of very large cities are the proper substitutes of the second-ranked cities which are expected to play the role of engine of growth, once the megapolises or very large cities meet the saturation point. Usually in urban economic literature we have learnt that once the largest cities exhaust the economic opportunities the second ranks cities come up to replace them in terms of investment, growth and employment generation. These cities are certainly much better off in terms of infrastructure compared to the new small town. But for them to take over the lead role, proper coordination between the state and those who have a thorough understanding of the growth dynamics of the urban space is essential. In the Indian context a clear-cut Initiative for the urban investment or planning is yet to emerge on the basis of the growth potential of different cities and towns with economic cum geographic perspective. 

Verifying, please be patient.

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