Growing Informality, Gender Equality and the Role of Fiscal Policy in the Face of the Current Economic Crisis: Evidence from the Indian Economy

Abstract:

This article analyzes the theoretical and practical problems arising from the effect of the ongoing global crisis on the much neglected informal economy, with specific focus on issues concerning women’s employment and decent work. Recognizing growing informality and its disproportionate impact on women workers, the article discusses the challenges and various coping mechanisms adopted by these vulnerable groups. The current wave of fiscal consolidation and austerity measures pursued in most countries in the form of cutbacks on social sector spending and public expenditures is having devastating consequences on the vast majority of the population. A robust fiscal commitment toward direct job creation programs and increased social protection policies has the ability to enhance resilience. Rejecting the fiscal trajectory and the subsequent austerity measures, the article emphasizes the necessity of a macroeconomic policy framework conducive to the objective of achieving a more equitable outcome in an environment of domestic and global challenges.

Keywords:

• fiscal policy
• gender
• informal economy
• job guarantee

Notes

An enterprise is unregistered when it is not listed under specific forms of national legislation such as factories or commercial acts, tax or social security laws, or professional groups’ regulatory acts.

The term was coined by the British economist Keith Hart in his 1971 study of economic activities in urban Ghana. In the 1950s and 1960s economists assumed that economic growth would lead to eventual transformation of the traditional rural sector into the modern urban sector where all surplus labor would be absorbed (Lewis 1954). In 1972, the ILO’s comprehensive employment mission to Kenya grappled with ways to incorporate activities that could be included neither under the traditional sector nor under the modern sector. Thus informal sector was “born” to encompass a wide range of activities, source of livelihood opportunities, and survival strategies adopted by most of the working poor and nonpoor in the developing countries.

In some countries, such as India, the distinction is organized and unorganized sectors instead of formal and informal sectors.

It is important to recognize that only a small part of the informal economy engages in criminal and illegal activities. Many owner-operators of informal enterprises operate semilegally or illegally often to avoid the cumbersome and sometimes nonexistent registration process and taxation, but the workers in these firms are not employed illegally.

The term “value chain” refers to different stages of activities involved in the production process of a good from its conception to its final form when it is delivered to the consumer. “Global value chain” refers to the globalized production process that occurs in various parts of the world.

MGNREGA is the name of the act, and at the operational level it is MGNREGS (Mahatma Gandhi National Rural Employment Guarantee Scheme). MGNREGS is used as the name of the program implemented at the state level.

These initial 200 districts out of 27 Indian states are identified as “backward” districts or socioeconomically the most challenging areas in the country.

Government of India (2005) National Employment Guarantee Act, no. 42of 2005, Gazette of India, Extraordinary Part II, Section 1, no. 48, New Delhi.

Wage payments are made after an assessment of work done instead of a being based on a fixed daily wage.

The author conducted a primary survey in the state of West Bengal during the initial year of implementation and subsequently followed up with the relevant stakeholders in the program.

This is drawn from the extensive literature on modern money theory. See Bell (2000), Bell and Wray (2002–3), and Wray (1998) for a detailed analysis of the institutional mechanism of government finance in the United States; see Bougrine and Seccareccia (2002) for a thorough analysis of the Canadian system.

Additional information

Notes on contributors

Shakuntala Das

Shakuntala Das is an assistant professor of economics at the State University of New York, Potsdam. The author sincerely thanks Mario Seccareccia and Eugenia Correa for their valuable comments and suggestions. Any remaining shortcomings and errors are solely the author’s responsibility.