Productivity and Employment Patterns in the Informal Manufacturing Sector: A comparison between the Subcontracting and Non-Subcontracting Firms

INTRODUCTION: Concerning the characteristics of Indian society as well as economy it is often arguable that small scale enterprises can emerge as a major instrument in Industrial development which in turn will be resulted into a broader perspective of regional development as an integrated development operation of thousands of villages, rural crafts, small and medium enterprises and other micro activities. This mechanism is effective for countrys economic development, prospects and prosperity in the sense that it has its impact on upgrading working condition, employment security, income gains and poverty reduction as well. Thus being a developing country, India has a potential of capital deepening and growing value added in the small scale industrial sector with the adoption of proper management mechanisms and policy implications. Sub-contracting is however such a mechanism which can provide social and economic efficiency through the small scale sector in terms of more employment and capital productivity. Many advanced economically developed countries have used small enterprises in a wide range of their modern industries through the practice of subcontracting to take advantages from the division of labour and specialised technology and to overcome the marketing deficiencies faced by the small enterprises. Thus of course as a developing economy where there lies a profuse need of industrial up-gradation in relation to develop the economic threshold, India has to have take advantages of its cheap raw materials available, abundant unskilled and skilled labour force and the already established large firms.

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However, subcontracting involves a field of competition of global trade market and also the labour force which possibly can be expressed through the theory of Global Production Network (GPN) and Global Value Chain/ Commodity Chain (GVC/GCC). These theories talks about regulatory policies and issues of competition in relation to industrial transformation and inequality reduction which can further lead to the achievement of local companies what ILO refers to as sustainable development through decent works. However

consequences may be in favour of or against the cause depending upon a series of factors such as flow of capital, knowledge, technology and most importantly governance as well as management system which largely controls power relations between firms, skill enhancements etc. Theories have always focused on how does the insertion in the global value chain or global production network affect the up-gradation in industrial clusters and has talked very little about labour processes which has always been just an incentive to the shift of production mechanisms to small sectors in terms of the cost factor. However, besides strategic mechanism like subcontracting, labours role in shaping the economic landscape is also vital to denote economic as well as regional development. Thus economic geography should also be analysed in the light of social and spatial practices of Labour- force in the field which involves unfair poor wages, long hours of work under deeply oppressive conditions, health problems, lack in security and also union repression. LITERATURE REVIEW: Subcontracting involves complex network of suppliers who produced in globally dispersed location in accordance with the demand of the leading firms who dominates the market. This phenomenon of transitional dimension in the field of economic development has been expressed as Global in the Local and Local in the Global by Henderson who while defining Global Value Chain as a consequence of economic Globalization, mentioned it as an alternatives for economic enhancement of any region. He also identifies that outcome of Global Production Network (GPN) depends not merely on the nature of input-output linkages across the network but on where and under what circumstances, value is generated and captured.( Henderson, 2005) . However, Palpacuer and Parisotto mentioned that GVC approach is a fundamental tool to understand global production. While talking about GCC, Peter Gibbon thus rightly seen it as a precise perspective on LDCs upgrading possibilities and options. Economic literatures thus recognizes subcontracting as a major instrument to industrial development where examples of positive responses are many in different industrial sector e.g. electronics, automobiles, textile, wine industry etc. Watanabe has used the example of Japan comparing with US and Europe underlines the fact that Hitachi Manufacturing, which started as the repair shop for a copper mine, is now among the 10 largest companies outside US. Donaghu M. Tand and Bardd. R showed that Nikes subcontracting system allows the

company a higher degree of versatility in dynamic global market. Similarly Henderson has mentioned the effect of subcontracting of wine industry in South Asia ad electronics industry of Malaysia in his paper on subcontracting. However, there exist a lot of literatures which has been found to define the very strategy and also to discuss its fruitfulness in the awake of economic globalization. Nagaraj defines subcontracting as a strategy which is associated with 'job-work' where a 'parent' firm provides the necessary raw materials to small firms which return these materials after turning them into the required form (as per the technical specification), at a pre-determined rate. Watanabe explained subcontracting as an ideal approach to employment generation and industrialization in the labour surplus developing countries, like India and also it can help small entrepreneurs to establish, survive and flourish in the global economic platform while Lawson sees subcontracting as one strategy to maintain profitability through changing relation of power and autonomy between the owner and workers. Partho Pratim Sahu (2010) has also agreed to the formers by again highlighting the very fact that how subcontracting linkages are vital not only to functioning and growth of an enterprise but also regional development in terms of employment generation and poverty reduction. However, according to the analysis of Nagaraj (1985) sub-contracting seems to acquire a much greater significance under different capital and labour market conditions with rigidities in labour market and scarcity of capital appear to provide new arguments for its growth. Besides in bringing about the fact of the nature of the use of labour in the context of subcontracting in the unorganized sector question emerges of how does sub-contracting leads to diffusion of technical skills, managerial practices and entrepreneurial talents(Nagaraj, 1985). Though increasing informalisation tends to the creation of jobs in the market, competition tends to raise the causality in employment. Andrew Herod thus has correctly pointed out that instead of the making of economic geography through the eyes of capital, it is necessary to understand how workers actively shape the economic space. Thus social security of the labour force, fair wages and proper recognition is also a matter of concern along with strategic operations like subcontracting. However we have to remember that there are no one royal root to development and prosperity, but a multiplicity of possibilities (Henderson) Thus to define regional development not only regulatory operations or policy can be taken into account, other factors e.g. market, demand, governance as well as labour processes also has to be kept in mind.

RESEARCH QUESTION: The present study tries to explore the effectiveness of subcontracting in Indian context. Whether subcontracting is a sector-specific feature in India or it is region-specific? In fact, can it be mixed functional approach in answering the question of productivity as well as generation of productive employment? Also here emerges the issue of regional development as after all subcontracting linkages is such an instrument which not only vital for functioning and growth of the enterprises but also generation of employment and providing a field for the up-gradation and flourishment of small scale economic activities which has a bulk share in Indian economy. However, it has often seen that networks take the form of isolated hierarchies which bring only marginal benefit to less powerful members of the chain and to the region in which they are located (Herod et al.) while the dominant firms are ultimately seen to be the drivers of the chain, thus portrays GPN/GVC as merely a system which further aggravating the already-existing inequalities in the distribution of value (Palpacuer 2008). From whom the value is extracted and who gets the profit and the place of small firm workers in relation to the larger ones are some important questions demanding immediate answers because if concerned about regional development one cannot ignore the core actors (the labour force of small economy) in the emergent of global production. OBJECTIVE: To examine region-specific growth of the unorganized sector in Indian economy and its economic efficiency in terms of labour as well as capital productivity and look into the differences within the subcontracting and non-sub-contracting firms. Empirically examine the differences in employment growths and labour processes between sub-contracting and non sub-contracting firms of unorganized manufacturing sector. Spatial mapping of important efficiency parameters would be another goal relating to the former. To relate this above findings to the broader framework of labour processes in relation to Global Production Network and Global Value chain. SOURCE OF DATA: The sources of data for various indicators are as follows: 1. National Sample Survey Organization. 56th round (2000-2001)

2. National Sample Survey Organization 62nd round (2005-2006) 3. Various reports on Unorganized Sector of Indian Economy by NSSO (National Sample Survey Organization) and also by NCEUS (National Commission for Enterprises in the Unorganized Sector). METHODOLOGY: Variables Output Measurement Gross-Value Added (Difference between annual receipts and annual expenses) by plant size. Relative Productivity by plant size. Labour No. of Workers engaged by sector as well as by region. Male-Female composition change in the composition over time and space. Type of work change in composition within gender. Sector composition (Urban-Rural) Variation in productivity and labour

composition across region as well as different sectors of unorganized manufacturing sector. Productivity and Development Rank correlation between Value added and human development Index. Incidence of Subcontracting by Source of Equipments, Raw Materials & design by type of Enterprises and Location. Incidence of subcontracting firms/ non-subcontracting firms and the rate of adoption of improved technology by them. Chi-Square Logistic Regression Univariate Analysis.

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