Vivek Rai summarizes R. Vaidyanathan’s India Uninc., a cogent overview of the oft ignored unincorporated sector which contributes upto 45% of India’s GDP, hailing it as a much needed insight into a less written about area.
Title: India Uninc.
Author: Prof R. Vaidyanathan
Year Published: 2014
In India, as you walk through the streets and the lanes, you can easily witness a thriving informal sector. Wherever you look, you can find street vendors as an indispensable part of business activities. Contrary to the previous predictions of eventual demise, such unregistered entities have emerged in new guises where sole proprietorship is dominating the pie. Starting a proprietorship firm is the easiest way to generate income and self-employment in rural areas as well as urban areas. The most striking features of such entities are that they require a limited investment and minimum paperwork and families conducted a range of activities related to the occupation. Today, many people are turning towards starting their own ventures. Such entities are collectively known as the unincorporated sector and they notably have very flexible organizational structures.
Sadly, the entire unincorporated sector is far from the gaze of mainstream media as well as academia and their contribution to the economy is largely unnoticed. In this backdrop, India Uninc. is a story of the unincorporated sector in India and the various aspects that have played an important role in forming the sector into what it is today. The book is divided into eight sections and each section deals with various aspects of the unincorporated sector. It is an informative read, where each argument is adequately backed by data and evidence and yet the style of writing is easy and informal.
The first section begins by describing what constitutes the unincorporated sector and its contribution to the national income. Early in the book, the author mentions, “The unincorporated sector in India contributes about 45% of the national income, which by far surpass the corporate sector’s contribution of around 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 made more accurate.”
In the second section, Vaidyanathan sheds light on the much-hyped economic reform (which was initiated in the early nineties) which was followed by sustained economic growth in India. This section widens the horizon of the economy and underlines the contribution of the unincorporated sector in the economic growth. It points out the insufficiencies under the formal financial framework where credit delivery to entities like partnership and proprietorship firms are not adequate. Continuing in the same vein, in the third section, Prof Vaidyanathan sheds light on the credit delivery mechanism in India and the role of the non-banking financial entities in the unorganised sector.
The fourth section focuses on issues regarding the perception of taxation and its coverage in India. He highlights the issues of corruption in the tax avoidance and collection system and how these impact small proprietorships. There exists a conflict in records of tax payment and actual targets of tax collection. In the opening chapter, the author emphatically states, “The perception that India is an under-taxed economy is a myth, if one takes into account the endemic issue of under-coverage as well as corruption in the system.”
Various flagship programmes in India are beset with irregularities where intended beneficiaries are unable to reap benefits of such programmes. In this backdrop, the fifth section deals with issue of social security nets in India and how a large section of deserving population is excluded from them.
Further, the book emphasizes how people in India are investing in gold as a safety deposit in order to avert unforeseen challenges. He writes, “It is important to note that gold ornaments are used as collateral in the credit markets by the unincorporated sector. Hence gold is a highly liquid asset, portable and easy to transfer, which acts as social security and insurance for the middle and lower class woman as well as collateral for trade.”
Several economists, financial planners and many more assume that the stock market is a barometer of Indian economy. But Vaidyanathan questions such assumptions in the sixth section of his book to point out the disparities and the lack of recognition to the unincorporated sector in India. He aptly quips “The stock market is important to 10 % of the economy and it cannot be categorised as a barometer of the economy. Unfortunately, the focus of media and experts is on the stock market only. Perhaps it is more ‘attractive’ compared to dhoti-clad English-ignorant pan chewing India Uninc.!”
Similarly in the seventh section, he argues, “Caste has played an important role in the consolidation of business and entrepreneurship in India particularly in the last fifty years. The economic development that has taken place in India Uninc. or the partnership and proprietorship activities has been financed by domestic savings and facilitated by clusters and caste and community networks.” Such enterprising entrepreneurs are creating a better life for themselves and their families to come out of a challenging environment.
In the eighth section, the author sheds light on various entities like NGOs, Indian philanthropy, Bollywood, Indian cricket and their association with India Uninc. Quoting from the book, “The Indian ethos of giving has been much misunderstood and not stressed on sufficiently enough. Bill Gates and Warren Buffet have been the recipients of much praise, while Indian pioneers like Dayal Singh Majithia are sadly forgotten.”
This book is true to its title and it provides a treasure trove of data from various sources in order to substantiate his arguments. India Uninc. is a valuable account which is challenging conventional economic wisdom in various ways. In other words, one can say that it is the untold story of economic change in India which has been largely ignored or overlooked. That is more than mere rhetoric. This book has the potential to stimulate a wider discussion about the contribution of the unincorporated entities in India. Many readers may identify with the familiar arguments made by the author but the book has enough to excite the reader’s curiosity about unincorporated India.
Vivek Rai is presently working with Indian Institute of Management, Lucknow (Noida Campus) as a research associate in the domain of business sustainability. Prior to that, he worked with the news media as a reporter and wrote extensively on policy issues. His areas of interest include public policy, solution innovation and the informal economy.