Informal businesses in rural areas are a key part of the economy in many countries, like India. (Photo: Wikimedia Commons)
The informal sector — the unlicensed, unregistered small businesses that make up the bulk of economic life in many countries — is not all bad.
A recent article in the Economist analyzed the issue of informality in the Indian economy and drew out a range of excellent points regarding the size of the country’s informal economy and the energy and dynamism that undocumented economic activity has brought to rural India, as well as the difficulties that informality can bring. These include costs to the entrepreneurs themselves, in terms of accessing credit and problems achieving scale, among others, as well as costs to the overall economy in terms of lost tax revenue and the circulation of money outside of the financial system. Indeed, there has been no shortage of research on the challenges posed by informality around the world.
What this article gets wrong however, is its conclusion, regarding what India can do to promote the formalization of the informal sector. The author writes “The best way to speed up the process is to extend the reach of the financial system. In return for coming into the formal economy and paying taxes, firms would get access to capital.” This analysis misses an important point about informality.
Yesterday I wrote about how CIPE is helping women business leaders to break down barriers in South Asia – both barriers between countries and barriers that are keeping women out of the economic mainstream. CIPE’s third networking and training session for the heads of women’s chambers of commerce and business associations, held on September 18-20 in Lahore, Pakistan, was a resounding success, including a dinner at the Lahore Chamber of Commerce that drew the Governor of Punjab as a featured speaker.
But we also wanted to take some time to focus on the training program itself, and the results of the hard work that these women are putting in to building their organizations. There is no shortage of programs in South Asia to build links among women entrepreneurs – to encourage trade and business ties – but CIPE is focused on strengthening the capacity of the chambers and associations, both so they can better represent their members in the policy process, and help their members grow their own businesses.
Young people are pushing for systemic, democratic changes around the world through political and economic vehicles. In Cambodia last month, youth (who are frustrated with corruption of the current ruling party and the status quo) vocalized their desire for change before the national elections took place. In Sri Lanka, Youth Parliamentarians have been consulting with senior policy makers to make sure their opinions and inputs are heard. And in Jordan, young tech entrepreneurs are building a movement to reverse the controversial media censorship law through advocacy.
In this week’s Economic Reform Feature Service article, three winners from CIPE’s 2012 International Youth Essay Competition in the Social Transformation category discuss how youth entrepreneurs are helping build democratic societies. Want to make your voice heard? CIPE is accepting submissions from bloggers of all ages for our 2013 Blog Competition.
Hammad Siddiqui, Deputy Country Director for CIPE’s Pakistan field office, contributed to this report.
To begin addressing the issue of why some women’s business organizations thrive while others do not, CIPE recently launched a project to build links among women’s chambers and associations in South Asia.
CIPE identified 11 organizations, from Pakistan, Bangladesh, Nepal and Sri Lanka – and for the first time reached out to groups from India and Bhutan – to participate. With the assistance of long-time partner the Bangladesh Women’s Chamber of Commerce and Industry (BWCCI), conducted a diagnostic survey of these organizations’ governance, finances, membership, strategic planning, advocacy, services and other issues. The organizations were then invited to participate in a networking meeting held this February in Dhaka, Bangladesh. CIPE’s efforts complement a U.S. State Department program to build links among women entrepreneurs in the region, the South Asia Women Entrepreneurship Symposium.
Indians shop for televisions at a big-box store. (Photo: BusinessWeek)
The middle class in emerging markets has started to draw attention as a force to be reckoned with. Economically, the global middle class has new-found wherewithal and an appetite for consumption, and in many cases is the product of upward mobility out of poverty. Politically, this demographic may bring new demands to assert itself in politics and policy. On October 9-10, Instituto Fernando Henrique Cardoso hosted a pair of seminars on “Democracy, Development, and Emerging Middle Classes.” This distinctive event was a joint effort with the Centre for Development and Enterprise in South Africa and the Centre for Policy Research in India.
Now, what the middle class is and what it means proved hard to pin down – and also fertile ground for debate. Those who focus on median income observe a significant, possibly fragile, shift away from poverty in Brazil and India. Others observe a qualitative transformation among certain groups, such as the expansion of the black middle class in South Africa through public service employment or a highly educated, globally connected middle class in India. The complexion of the middle class shifts depending on whether its members rely on the state or the market for their livelihood, and whether they are new or old entrants to this segment of society.
A man cooks by candlelight at a small roadside shop. (Photo: AP)
For the last several days, half of India’s population — HALF — has been without electrical power. That’s 600 million people, twice the population of the United States, trying to keep on about their lives without lights, public transportation, or utilities. That’s tens of millions of businesses losing income, product, and potentially livelihoods.
Last month a powerful, fast-moving storm called a derecho disrupted power for hundreds of thousands of people in the Washington, DC area. We all complained mightily, but most suffered little more harm than some spoiled food and a few days without air conditioning. In many places around the world, including India, a few days without power is not at all unusual. In fact, daily brownouts or blackouts are sometimes the norm. Many established firms and wealthy individuals adapt by installing batteries or generators — a drain on the economy. But how can small and medium-sized businesses and entrepreneurs survive and thrive in such uncertainty?
When power is unreliable or inaccessible, businesses and businesspeople suffer. An appropriate, adaptable infrastructure is crucial for economic development and growth, and governments must make it a priority. Investing in infrastructure doesn’t mean simply that the lights stay on. It means that power is available for offices, factories, schools, and hospitals. It means that roads are clear and available to transport goods and services. It means that water is clean and accessible for public consumption, as well as for manufacturing and agriculture.
Infrastructure is not cheap, and many nations believe they have more pressing needs. As India swelters in the dark, however, it is worth remembering that investing in infrastructure is worth it.