India UnInc - The Small People

In the past I have recommended a few books I considered a good read. Beginning now I will sometimes write about good books that I come across that have concerns of India at heart. India UnInc is one such book.

Santa Claus is a much celebrated figure. He is the one who is dressed up and is seen all around during Christmas. But in his hometown somewhere in the North Pole, it’s the little ‘Elves’ who keep the wheels turning at his gift-factory. They’re the ones who also maintain his sled and reindeer. The story of elves is not going to be told as often. The story of Indian economy is somewhat similar. I believe there are two economies; one is the political economy and the other is the “real” economy. The political-economy pays a lot of attention to the corporate sector but the real economy comprises both the corporate and the unorganised sector as also the “unincorporated” sector. This is the story that “India UnInc” looks at in the just-released book by Prof R. Vaidyanathan (RV). The book looks at the whole UnInc industry with facts and figures and a narrative that is enjoyable to read.

There are organised and unorganised sectors in our economy which are recognised. Both sectors are usually registered under some Central or State legislations and maintain regular books of accounts and file returns. The UnInc constitutes all the other “small people”, partnerships or proprietors (P&P as RV calls it). This sector can include your corner-pan-shop, barbers, carpenters, plumbers, rickshaw-pullers and even CAs, architects, lawyers and so on. These are non-agricultural and non-governmental in nature. To give you an idea of how this sector keeps the wheels of Indian economy turning let me quote from the book:

The Unincorporated sector in India contributes about 45% of the national income, which, by far, surpasses the corporate sector’s contribution of about 15% and yet its contribution remains unacknowledged. Also, it is important to note that the estimates of this sector in manufacturing and services need to be more accurate.

RV hilariously tells us how national planners and economy-analysers sometimes use POTA in their studies or analysis of this sector and economy in general. No, this is not that POTA, this POTA is data “Pulled out of Thin Air”. He states: “We observe that the non-corporate service activities, which, in turn, constitutes nearly two thirds of our economy. These are also the fastest growing activities. So justifiably, it is the non-corporate sector that should be termed ‘the engine of our economic growth’ and the Indian economy be called the partnership and proprietorship economy (P&P economy)”.

Thus RV deals with some myths about our economy that have always surrounded us and led us to believe that the corporate sector is the great backbone of the Indian economy. The truth, as with all myths, is quite different. This is not in any way to dismiss the corporate sector or its deserved place, but to indicate that they get more attention than due. Known for his wit and research RV also makes some stunning points with a good sense of humour: “There is a witty saying in the Army, that to move up in the ranks what needs to be done is “Salute all things moving and paint all things standing”. In the same vein, governments attempt to control and regulate an economic activity if it does not understand it and tax it if it is growing fast”. 

RV also touches upon education concerns of these small people and also how they contribute to many causes; both social and religious for their own community. That they also make a great contribution to savings while managing their own expenses. He writes: “What is really important is that the educational expenses are, in a perverse way, inversely related to the level of education, like KG being more expensive than post-graduation”… Banks do not provide loans for school education but provide for IIM/IIT education”. This is an absurdity in our system. Narendra Modi in his last speech at a BJP meet outlined primary education in his vision statement. RV explains it as giving loans for constructing the second and third floor of a building but not the foundation. I would go further and suggest primary education should be free for all children no matter private or public schools. This freebie or burden is one that we should gladly bear.

Public and media discussions largely centre around macro-economics. This is a reason why you’ll find “eminent economists” like Sagarika Ghose quizzing Modi on US business interests or fiscal deficits. Our lives are related to micro-economics. Even on the issue of reservation in private sector, RV logically explains why SCs/STs would be better served by developing their skills to be entrepreneurs. Indians are gifted at enterprise. This is where govts should be investing energy instead of more and more doles and reservation.

I have met RV a few times and he is a keen observer of the economy and political policies. Apart from being a popular teacher at IIM Bangalore he conveys his messages with a lot of facts and figures and analogies. His articles feature in many newspapers and he often appears on TV as a panellist. We tend to discuss economics in casual conversations with issues that directly affect our everyday lives. This book takes it further for the country and will inevitably become a tool and resource for anyone seeking a deeper understanding and learning of Indian economics of the small people. You can get it as paperback or a Kindle version.

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