Six Routes

The informal economy collides with India’s boom

David Weinberg Mar 5, 2015
Six Routes

The informal economy collides with India’s boom

David Weinberg Mar 5, 2015

It’s just before dawn and a light rain is falling in a parking lot in Delhi. Slowly, one after another, motorcycles pull into the lot. By the time the sun rises, more than 100 bikers have arrived, including 20-year-old Vandit Hura. He’s a law student from Noida, a satellite city of Delhi. He rides a Royal Enfield, known for its unique sound. “When I was young, I used to run outside my house and listen to that sound: ‘dug dug dug dug dug,’” he says, impersonating the chug of a single-cylinder Enfield motor.

You may not have heard of the Royal Enfield brand, but it’s a classic — one of the first motorcycle companies in the world. Founded in the United Kingdom at the turn of the century, Royal Enfield is now an Indian company. And these days, Royal Enfield outsells Harley Davidson around the world. The success of the company is due largely to sales in India, and it’s one sign of the growing economy here.

Another sign of India’s rising economy is the growth of motorcycle clubs like this one. The leader of today’s ride, Mohit Ahuja, gathers everyone for a short speech. He welcomes the crowd and explains the route they will be taking. He’s tall, with a dark beard, a red-and-black bikers’ jacket and camouflage pants. “Good morning,” he says. The crowd yells back enthusiastically, “‘Good morning!” The rain hasn’t dampened anyone’s excitement.

“Let’s have some brotherhood happening today and let’s hope the gods have mercy on us and stop the rains,” he yells. “Lets get geared up, guys. And let’s ride!”

The bikes head out of the city in a double-file formation, merging into the chaotic Delhi roads. Rickshaws, bicycles, people pulling carts and now the bikes all converge into a river of traffic.

They pass huge malls and the towering glass office buildings of companies like Google and Panasonic. They also drive by slums flooded by muddy water, and piles of trash being picked at by wild pigs.

The ride ends with a party in the rural outskirts of town where men play drums in a field and rev their motorcycles to the beat.

While these partying bikers are one example of India’s growing middle class, the fact is a huge portion of the population has been left out of the country’s economic rise. India is home to one-third of the world’s poor.

Historically, the key to pulling millions of people out of poverty has been industrialization — the kind of factory jobs that turned China into the world’s second-biggest economy. The success of Royal Enfield is one example of successful Indian manufacturing, but manufacturing only makes up 16 percent of the country’s economy.

In India, as in much of the developing world, there has been a migration of people from rural villages to the city. Only 68 percent of rural Indians can read. So when they arrive in cities, few are qualified for the jobs that are available.

Many of them end up as street vendors. These low-level entrepreneurs make up a big portion of the informal economy, which accounts for a staggering 92 percent of India’s population.

Take the neighborhood called Mayur Vihar in East Delhi. Vendors offer kids’ backpacks, pots and pans, clothing, toys, fabric and lots of street food.

Lalchand Kashyap is a vendor. He sells a kind of street food, called Chaat. Every night he sets up his equipment in the same spot he’s had for the past 23 years. He has a couple of tables and a big metal cooking surface shaped like large satellite dish. In the center, potatoes are frying in a shallow pool of ghee, clarified butter oil that glistens under the battery-powered LED light he uses to cook by. 

One of his most popular dishes is aloo tikki, fried mashed potato patties smothered in masala, tamarind and coriander chutney, garnished with shredded cabbage, beets, radish, ginger and carrots and finished with a squeeze of lemon. Kashyap charges 40 rupees, about $0.37. It’s a dish that takes a lot of work to make.

Kashyup starts his day at 8:00 a.m. doing prep work at home with his family, boiling potatoes making chutney, chopping vegetables. Then he brings everything to the street and opens up shop at 6 p.m. He sells until about 10:30.

He makes about $8 a day and works seven days a week, making just enough to cover his living expenses, food and rent in a two-room apartment where he lives with nine other family members.

$8 a day puts Kashyup’s income at six times the global poverty line set by the World Bank, $1.25 per day. So he’s not poor by that standard. But if we use the basic definition of middle class as having some amount of leisure time and disposable income, Kashyup is clearly not middle class either.

Arvind Singh is the head of head of NASVI, The National Association of Street Vendors in India.

“When you talk about urban poor, most are entrepreneurs, street vendors. A big part of the problem is stopping the drain of income. Because there are many extortion rackets,” Singh says.

One of the biggest obstacles to bringing these informal workers into the middle class is stopping corruption. “In any category of informal worker, real wage is not real wage,” Singh says. “They give to police municipality, shopkeeper traffic, whoever gets an opportunity extracts money.”

NASVI’s strength is in its numbers. There are 888 affiliates with 553,000 dues-paying members across India. They lobby for legislation, offer free legal services and training to improve hygiene and they help vendors access financial services.

If efforts like this succeed in bringing the huge numbers of informal workers into the middle class, economist Jayshree Sengupta believes they could be an internal economic engine that drives India’s growth.

“I think China’s going that way because China has realized that the export-led growth has led to pollution where people are suffocating,” Sengupta says. “We’re also experiencing that in Delhi. There’s no point depending on the export growth. We have a huge market of 1.2 billion people, so get money in their pockets so they can buy our own things.”

Much of the focus of NASVI’s work is to prevent income drain from extortion. But actually raising the income of street vendors is a more difficult task. One way they do that is by organizing street food festivals to improve the image of street vendors, make them more appealing to locals and tourists.

Kashyup worked one of those festivals. His food was so popular; he was invited to represent India at a street-food festival in Singapore, a burgeoning foodie world capital. The event takes place on April 6. It will be Kashyup’s first trip outside of India.

Click on the audio above to hear BBC’s Justin Rowlatt profile the growing tech sector in India.

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