Poverty of cities and the phrase ‘urbanisation of poverty’ has drawn much recent scholarly and policy attention. The overall consensus and a shared concern seem to be that rural poverty is declining significantly, while the pace of reduction of urban poverty is slower. Beyond this broad consensus, however, the literature shows that there are very different approaches to understanding urban poverty. International policy agencies have mostly seen urban poverty as a spillover of rural poverty, caused by the process of migration of the rural poor. On the other hand, particularly in the Indian case, scholars have argued, on the basis of migration data, that the poorest do not migrate, and on this view, the roots of urban poverty lie in the structure of the urban and industrial political economy rather than in the poverty of migrants.

This political economy framework of analysis rests on three important dimensions of the urban context in India: first, the narrowness of urbanisation, as the number of small towns and cities, their developmental trajectories as well as their potential as providers of industrial employment remain stunted due to lack of policy attention; second, the absence of structural transformation in the economy, as large numbers remain tied to agriculture (disproportionate to agriculture's declining share in GDP) primarily because of lack of growth of jobs in the manufacturing sector; and third, work available to the unskilled or semi-skilled urban workforce, whether migrant or non-migrant, is in the informal sectors of manufacturing, construction, lower rungs of the services or in self-employment. Marked by low and irregular wages and income as well as lack of job security and social insurance, informal work underpins the poverty of large numbers of urban workers. In this context, some scholars have emphasised that state-sponsored social insurance can be an instrument of inclusion of poor informal workers into higher levels of access to health, education and other services, thus presenting formality–informality as a continuum, rather than as a binary. Contrarily, others have seen informality as structured exclusion, a result of globally competitive, high-technology production and services, naturally excluding the unskilled and underprivileged. The following sections provide information on some broad features of the Indian economy framed by the debates on migration, employment and informality.

Introduction

During the period of economic reforms in India, the crisis in manufacturing employment has manifested not only in terms of what is characterised variedly as jobless or job loss growth (falling labour intensity and even absolute decline in numbers) (Das, Sen and Das 2015; Mehrotra and Parida 2019) but also in certain trends which suggest a decline in the quality of employment. These include (a) a steady rise in contractual jobs in the so-called organised manufacturing (Srivastava 2016: 10–12), (b) a decline in the manufacturing employment elasticity at least since the turn of the century (Giri and Singh 2017: 9) and (c) the continued dominance of informality in both production and labour processes across sectors, or the low road syndrome, reflecting entrepreneurial immaturity (Tooze 2017; Das 2005, 2017).

Even as, historically, micro, small and medium enterprises (MSMEs) have been recognised as sources of large-scale job generation, accommodating a wide range of skills and age groups, firms adopt strategies that could reduce costs of production and compliance while they continue to identify and access echelons of markets. MSMEs have no intention of effecting numerical changes to employment, irrespective of what policy expects. MSMEs, even in the face of uncertain market demand and low resources (to invest in the expansion of production and acquiring new technology), have often displayed dynamism and resilience. Unlike integrated large plants constrained by the indivisibility of factors of production, MSMEs in a cluster have been mutually supportive, whether in sharing bulk orders through in-cluster subcontracting or through small-batch production to cater to niche markets or even by using workers from another factory. This has implied that business has thrived through a curious admixture of competition and cooperation in clusters with the munificent role played by the local industry association.

The study, based on both primary and secondary sources of information, aims at understanding what drives the growth and external orientation of MSMEs in the ceramic clusters of Morbi in the western Indian state of Gujarat. This is to unravel the nature of positive transformation, including unleashing the potential to generate jobs, that could be effected through proactive, responsive and symbiotic approaches to policy initiatives, including rescaling territory, infusing an innovative ethos and reaching out to wider markets.

Introduction

One of the bright-dark characteristics of the Indian economy has been the remarkable growth rates of output with a low level of employment elasticity; as a result, the Indian economy slipped into the course of jobless growth. For researchers and policymakers, this jobless growth has been the main motivation behind shifting the attention from large to small enterprises. The importance of small and medium enterprises (SMEs) is quite discernible in the policy documents because of their significant employment-generating potential (Das 2008). Not merely the employment-generating capacity but also the ability to produce custom-made goods to satisfy the ever-changing demands of the consumer makes this sector even more significant from the industrialisation perspective. Hence, SMEs are supposed to have the dual potential of absorbing significant workforce by using labour-intensive technologies and handling the ever-rising international competition through adaptive skills.

Along with adaptability and flexibilities, SMEs mainly draw benefits from the concentration of horizontally and vertically related firms at a particular location. This characteristic of SMEs was first explained by Marshall (1920) who denoted this as an industrial district. Later, various new terms were coined, such as innovative milieu, learning region and cluster, where significant literature focuses on the idea of the cluster. The existing literature on cluster emphasises that the growth and competitiveness of small firms in developed as well as developing countries have been sourced from cooperative learning and innovation. Porter (1990) analyses that the competitive advantage of a nation is derived from the local characteristics of its industrial cluster. Similarly, Schmitz and Nadvi (1999) study the industrial clusters located in developing countries and explain that firms draw their competitive capabilities mainly from the externalities arising out of the proximity of firms in a certain geography.

The success stories of clusters in European countries, particularly of Italy, and of developing countries such as India set up the examples that SMEs cater to the needs of not only the local market but also the international market. Many Indian clusters, such as the knitwear cluster of Tirupur, the ceramic cluster of Morbi, the leather cluster of Kanpur, the brass cluster of Moradabad and the garment cluster of the National Capital Region (NCR), and others, have emerged to be successful exporters in the international market over a period of time.

Introduction

The initiation of the Make in India programme is yet another statement of the desire of the government to increase employment in the country through the manufacturing route. Under this programme, the manufacturing sector is expected to contribute at least a quarter of India's gross domestic product (GDP) by 2020. However, recent events and discussions have brought to the fore the pessimism that not much employment possibilities emanate from the manufacturing sector due to its capital-intensive nature, which the sector had become for quite some time now. The worst fears on this issue have been accentuated with the increasing automation of manufacturing processes elsewhere in the world. Industrial automation is thought to have a deleterious effect on the creation of employment in different sectors of the economy, manufacturing included. This has given rise to an important debate, primarily in the context of developed countries where industrial automation has diffused manifold and that too over a much longer period of time. This debate, although originally in the popular press, has now been brought to the formal academic table by the publication of an influential and highly cited piece of research by Frey and Osborne (2013). Subsequently, one of the leading academic journals, namely the Journal of Economic Perspectives, organised a symposium on the theme of ‘automation and labour markets’ in its 2015 summer issue. Thereafter, there has been a series of studies by academic economists and multilateral institutions such as the Organisation for Economic Co-operation and Development (OECD 2016) as well.

In the context, the purpose of the chapter is to understand the extent of the diffusion of automation technologies in Indian manufacturing and then analyse its effects on manufacturing employment.

Concept of Automation

A range of technologies are involved in industrial automation which manifests itself as both hardware and software. Employment implications of these various automation technologies vary considerably. The specific automation technology that has the most direct impact on employment is the use of multipurpose industrial robots. The International Federation of Robotics – IFR for short – defines an industrial robot as ‘an automatically controlled, reprogrammable, and multipurpose [machine]’ (IFR 2014).

Introduction

The contemporary literature on industrial development and the manufacturing sector in India acknowledges that both manufacturing sector output and employment have witnessed stagnation in the recent past. We make this observation mainly in terms of manufacturing employment with the backdrop that manufacturing output has also not increased significantly during the period under study (Table 8A.1). At the all-India level, we find that the percentage of manufacturing workers in total employment declined from 11.6 per cent in 2001 to 10.1 per cent in 2011. In 1991, this share was 9.5 per cent; so over two decades, there was hardly any change in the share of manufacturing in total employment (Table 8A.2).

At the state level, most of the major states showed a decline in the share of manufacturing in total employment. For some of the major states, the share even went below the level in 1991. For West Bengal, the share of manufacturing workers as a percentage of total workers declined from 18 per cent in 2001 to 15.3 per cent in 2011, marginally below the 1991 level of 15.9 per cent (Table 8A.2). Alongside employment, West Bengal's ranking in terms of real per capita total manufacturing net state domestic product (NSDP) also consistently declined between 1990–91 and 2011–12 (Nagaraj 2016). In 1990–91, West Bengal ranked sixth amongst the 17 major states considered, and in 2011–12, it ranked 12th in terms of real per capita total manufacturing NSDP. The state ranked fourth in the year 1970–71. Therefore, there is enough evidence of industrial stagnation for the state of West Bengal in terms of both manufacturing employment and output.

In this chapter, we try to study an industrial cluster in the state and illustrate the macro stagnation by searching for similar evidence at the micro level and analyse a few reasons behind the stagnation of the chosen industrial cluster. We choose West Bengal as it was one of the leading states in the manufacturing sector but has over time failed to sustain its position. Within West Bengal, we choose Howrah district. With nearly 40 per cent of its workers in manufacturing, Howrah has remained one of the top industrialised districts in the state and in the country for more than two decades.

The debate on employment has been outlined in Chapter 3, and I briefly highlight here that while the increasing share of services in GDP has made this sector central to the current phase of growth, there remain concerns that the share of services in creating employment has been relatively lacklustre. In this context, the drying up of manufacturing sector employment has drawn much attention. As manufacturing industries turn increasingly towards globally competitive, capital-intensive, and high-technology production, the question that has been asked is whether this trajectory is appropriate in a country where the majority of the workforce is still unskilled and therefore unemployable in technology-embodying domains, whether in manufacturing or in services.

In this context, the emergence of apparel exports as a labour-intensive, growing industry rings a very optimistic tone. Apparel production was an exclusive domain of the industrially developed countries until the 1970s or 1980s, when the relocation of the industry to less-developed countries and China began primarily in search of cheaper labour costs in a predominantly labour-intensive industry. The significant contribution of the ready-made garment (RMG) sector in terms of development of exports as well as generation of employment notwithstanding, the use of a largely female workforce in highly irregular and insecure wage and working conditions has cast a long shadow on the RMG sector. A critical discourse emerging from researchers, NGOs and trade unions has increasingly framed this industry, forcing, to some extent, the attention of international brands on the unfair conditions in factories across the Global South which produce for global apparel retail. However, ground-level conditions, in terms of wages and working conditions, remain poor and particularly so in the absence of collective bargaining mechanisms, aided by the indifference of governments and political parties (Mezzadiri 2016).

My earlier work on garment workers in Bangalore provided ethnographic accounts of the lives of women workers, touching on socio-economic backgrounds, worker households, aspirations and mobility (RoyChowdhury 2010, 2015). This chapter draws upon recent field research, conducted in 2016 and in 2018. Garment factories in Bangalore are spread across the city, with some concentration in older industrial areas like Peenya and Yeshwantpur in north Bangalore and Mysore Road in the west of the city.

Introduction

Globally, the size of sports equipment market, by 2025, is expected to be US$89.22 billion. Though this growth will take place mainly in Europe and North America (USA and Canada), the Asian economies of China, India, Pakistan and Thailand will also be the major gainers (GVR 2018). It is considered that rapid technological advancements and continued innovations to keep pace with dynamic consumer preferences will work towards this end. Moreover, a variety of factors such as rising awareness about general health and fitness, easy purchases through e-commerce and m-commerce channels, building of sports infrastructure, better quality raw materials, growing commercialisation and media coverage of mega global sports events such as the Fédération Internationale de Football Association (FIFA) World Cup, Commonwealth Games, Olympic Games and Indian Premier League (IPL) matches may work as growth stimulants to this industry.

In such a situation, this study examines India's sports equipment manufacturing sector by focusing on the Jalandhar and Meerut clusters where this industry is mainly concentrated. In fact, this industry in India evolved during the pre-independence period when access to raw materials, cheap labour and craftsmanship of local people led to its emergence in Sialkot (now in Pakistan). India's partition in 1947 led to forced migration of Hindu entrepreneurs to Jalandhar where they strived to initiate their own micro enterprises (Chattha 2016). Soon after, the industry spread to Meerut and over time, there took place a major concentration of this industry at these two places. Nonetheless, various local conditions and favourable factors facilitated its evolution at other locations such as Jammu and Kashmir, Gurgaon, Delhi, Agra, Moradabad, Mumbai, Pune, Bangalore, Chennai, Tirupur, Kolkata, and so on (Nisar 2013: 84).

Two key questions continue to prevail: first, what sort of growth pattern is observed by this industry and what have been the growth and survival challenges and, second, what has been the plight of labour. Addressing these two questions, this study proceeds with examining the post-1990 state of this industry (the second section) which is followed by cluster specificities (the third section), firm-level operational dynamism (the fourth section), exporters’ concerns and approaches (the fifth section), labour-related issues (the sixth section) and policy framework (the final section).

Introduction

The last three decades or so have often been labelled as the decades of ‘jobless growth’ in India. The employment content of growth has decelerated over the years. It has been stark in the organised manufacturing sector (Papola 2014). The share of the manufacturing sector in gross domestic product (GDP) still hovers around 16 per cent, up merely by 0.57 per cent during the last 10 years. The slow growth was ascribed to the stifling and over-regulated policy framework. The political dispensation in the 1990s realised these constraints and started dismantling some of the archaic rules and regulations, though at a snail's pace.

Realising that the growth of the manufacturing sector is vital to generate sustainable and decent employment, the Government of India envisaged the manufacturing sector to contribute 25 per cent, up from the current 16.57 per cent, to the GDP and create 100 million jobs by 2022, under its ‘Make in India’ campaign, announced on 25 September 2014. As per the campaign, both domestic and foreign entrepreneurs are encouraged to set up their manufacturing facilities in India, produce and trade globally, besides catering to the vast Indian market. Such investments, it is envisioned, will create incomes and jobs for millions of youth, besides augmenting exports and foreign exchange earnings.

Within the manufacturing sector, the track record of organised large-scale industries in creating employment, as stated earlier, has been somewhat disappointing. The performance of the micro, small and medium enterprises (MSME) sector in this regard has been noteworthy (Gade 2018). MSMEs have continued to employ a larger number of semi-skilled and un-skilled workers, over the years, compared to the large-scale enterprises. Not only in India but elsewhere too, such as in the USA, small and medium enterprises (SMEs) have been generating more jobs than the large ones (Katua 2014; United Capital 2019). In India, a characteristic feature of the development of SMEs has been their emergence and growth in a clustered form (Awasthi 2004).

Industrial Clusters: A Road to Competitiveness

Both developed and developing countries have witnessed the congregated emergence of SMEs, widely known as ‘industrial clusters’. From Marshal (1974 [1890]) to Porter (1990), industrial clusters have travelled a long way.

This chapter presents a discussion of four slums, which are settlements of migrants who came to Bangalore not earlier than 2002. At the time of the study, the households had been in residence on an average of 8 to 10 years. Several households were found to be circular migrants, that is, they left the city to go back to their home villages regularly for several months of the year, typically during the harvest season.

The relationship between migration and urban poverty has engaged development scholars for a long time. As discussed in Chapter 3, and to briefly rehearse here, the spillover thesis (that urban poverty is mainly the reflection of rural poverty, carried over by poor migrants) continues to inform policy discourses mainly emerging from international organisations. In criticism, migration scholars in India have pointed out that the poorest do not migrate; the relatively better-off/better-informed among the rural population are those who are able to actually move to cities and towns (Kundu 2007, 2014). Mitra (2006, 2010) has suggested that while there is obviously a distinct association between rural and urban poverty, the total inflow of rural–urban migrants – and the percentage of migrants to total urban population – is not high enough to justify the spillover thesis; Mitra also points out that many of the urban poor have been residing in cities for several decades; thus the poverty of migrants may be related to urban poverty at the margin. Chapter 6 in this book shows that contrary to the claim that the urban poor are predominantly new rural– urban migrants who fail to take advantage of urban opportunities, old inner-city slums in Bengaluru combine limited opportunities for economic mobility with deep pockets of poverty and marginalisation of households that have been in urban residence for two or three generations. I have called this category the ‘old poor’. The discourse on urban poverty has in fact gone beyond the spillover thesis to recognising structural dimensions of the political economy of cities – decline in manufacturing jobs and an increasingly technological paradigm of development that marginalises the unskilled and semi-skilled urban workforce, whether migrant or non-migrant. In this sense, the poverty of migrants can be seen to be a symptom rather than a cause of urban poverty.

The Context

In 2017–18, the manufacturing sector (industry) accounted for 18 per cent (31.2 per cent) of India's gross domestic output (GDP) at constant prices. The corresponding ratio for employment is 12.1 per cent (27 per cent), as per the periodic labour force survey (PLFS) data. As the ratios have barely inched up for over 25 years (Figure 1.1), it is a sign of industrial stagnation (Nagaraj 2017). Moreover, after initiating the liberal (free-market) economic reforms in 1991, import and technological dependence have risen (Chaudhuri 2013; Mani 2018).

However, a boom in information technology (IT) services and their exports has more than compensated for industrial stagnation, as India's output growth accelerated. After joining the World Trade Organisation (WTO) in 2001, if China came to be known as the world's factory, many believed that India was on its way to becoming the world's back office. For a while, India seemed to be on course, catching up with China, but it faltered suddenly.

The global financial crisis in 2008, the great recession after that and the rising threats of a trade war have taken the sheen out of India's performance and put paid to its global ambition. Meanwhile, China has graduated from assembling low-quality consumer goods to a technologically dominant nation – for example, Huawei's pole position in the telecom technology market – with world-beating firms and brands, both in high-tech manufacturing and IT services.

Realising the limits to the growth of the new services without the backing of a sound manufacturing base, the National Manufacturing Policy, 2011, sought to raise the sector's share in GDP to 25 per cent and to create 100 million additional manufacturing sector jobs by 2025. Though the policy failed to take off, the document helped articulate the need for industrialisation – or re-industrialisation – as an imperative for long-term national development.

In 2015, the policy was recast as the ‘Make in India’ initiative, with the following objectives:

• 1. The target of an increase in manufacturing sector

• growth rate to 12–14 per cent per annum over the medium term.

• 2. An increase in the share of manufacturing in the country's GDP from 16 per cent to 25 per cent by 2022.

The dualities in the developmental trajectories of cities of the Global South have drawn much attention. Critical debates have been generated on processes which had earlier been assumed to be part of the normal stages in development. I highlight two themes here briefly: migration and technology. The positive links between migration, urbanisation and development shaped modernisation theory in the 1950s, advocating the replication of the western industrialisation/urbanisation model to developing countries. Modernisation theory, hegemonic for a long time, has perhaps been officially discarded in the social sciences. Nevertheless, the image of industrially advanced nations, which are predominantly urban societies in which the erstwhile rural communities became fully integrated into the structure of cities, continues to fuel the imagination of policymakers as well as development scholars and practitioners, located both in the west and in developing countries like India. On the other hand, continuing processes of cyclical movement of migrant labour have been seen to challenge the classical approaches linking migration and development. Patterns of circular migration suggest that points of rural origin left behind continue to provide, at least partially, not only the sustenance of those who stay back but also the security of those who migrate (discussed in Chapter 3), thus disrupting the universality/uniformity message of migration/ urbanisation theories. Nothing has illustrated this more than the massive exodus of migrant labour from cities in India back to their villages during the recent pandemic of 2020.

The issue of migration is closely linked to changing technologies of production and shifts in the structure of urban labour markets. Saskia Sassen, in her landmark work on global cities, underlined the proliferation of sweatshops in exploiting undocumented immigrant workers. Her broader point was that ‘even the most dynamic and technologically developed sectors of the economy generate jobs that can conceivably be held by unskilled foreign language workers’ (Sassen 2005). She highlighted the massive arrival of immigrants from low-wage countries to global cities of the west. Cities in the Global South too have recreated that space of exploitation, as a middle and upper class of professionals greatly benefit from the technologically driven wealth generation of globally connected cities like Bangalore and New Delhi while simultaneously a low-paid class of service providers, most often migrants from rural areas, appear as housekeepers and nannies, watchmen and waiters, drivers and app-based delivery boys.

Introduction

When the quota system for the global garment trade came to an end with the expiry of the multi-fibre arrangement (MFA) in 2005, questions arose on how the removal of quantitative restrictions on exports will impact different countries (Joshi 2002; Vijayabaskar 2002). China and, to a lesser extent, India were expected to be the biggest gainers in the new global trading regime given their better production capabilities. After more than a decade, while China has indeed gained considerably with a global market share of 37 per cent in 2015, India's share has only marginally increased from around 3.5 per cent to 4.2 per cent in 2015 (Ministry of Textiles 2018b). As garment manufacturing is the most labour-intensive segment within textiles, this stagnation in market has implications for expanding manufacturing employment in India. There are two dimensions of such employment generation. An increase in global market shares for garments through improved competitiveness can translate into expansion of employment opportunities. Second, literature suggests that it is important for producers to upgrade, that is, to move into more value-adding segments rather than to compete merely on the basis of low wage costs to ensure better returns to production (Gereffi 1999). Appropriation of more value also enables producers to improve the quality of employment, which is particularly important in the context of countries such as India characterised by a substantial presence of the ‘working poor’. This upgrading, particularly functional upgrading into downstream and upstream segments and diversification into related industries (Neffke, Henning and Boschma 2011), also generates additional employment linkages.

Despite stagnation in global market shares, expansion in output has been accompanied by shifts in product composition of garment production in India. Within apparels, there has been an increase in the share of knitted garments from about 17 per cent to 21 per cent during 2006–16 (Indian Institute of Foreign Trade 2018). Tiruppur, a cluster in southern India comprised of a dense network of over 5,000 small and medium firms specialising in different stages of garment production, is the biggest centre of the country's cotton knitwear exports. Firms in the cluster cater to several leading retail chains and supermarkets, particularly in Europe and USA.

Karnataka epitomises India's post-liberalisation developmental trajectory: high growth rates combining with continuing pockets of poverty and deprivation. These pockets are typically seen in terms of regional disparities, between the state's backward northern districts and the more advanced south, and between the urban and the rural. As discussed in this chapter, the state's glittering image as a leader in IT and ITES is at least partially darkened by slow progress on human development indicators and low levels of social sector expenditure. From the mid-1980s onwards, a growing, upwardly mobile, technical/professional middle class supported, as well as benefited from, the quick expansion of IT in Karnataka; on the other hand, large numbers of unskilled and semi-skilled workers remained outside of the technology-led growth. Even as successive agrarian crises caused dislocations from the farm sector, a declining rate of employment in manufacturing left them with little opportunities of absorption into the urban economy. These features of the state's political economy, presented below, foreground a discussion of the rise of Bangalore as India's Silicon Valley, where similar contradictions have played out.

Karnataka's growth rate (GSDP) increased from 5.3 per cent in 1980 to 7.3 per cent in the 1990s and stood at 8.3 per cent in the second half of the 1990s. During the latter part of the 1990s, Karnataka's agricultural, industrial and service sectors grew at average rates of 4.0 per cent, 9.2 per cent and 10.6 per cent respectively as compared to all-India averages of 3.6 per cent, 5.0 per cent and 8.7 per cent respectively. The growth rate of GSDP in Karnataka was 6.2 per cent in 2012 and 8.5 per cent in 2017–18. The growth rate of GDP for India was 5.5 per cent in 2012 and 6.5 per cent in 2017–18. Thus, the growth record in the state has been consistently higher than the all-India one.

As is well known, Karnataka's economic rise has been largely led by the service sector. The share of services in the state's GSDP was 65.15 per cent in 2018–19. The state has emerged as an IT hub, home to the fourth-largest technology cluster in the world, nineteen IT and ITES special economic zones (SEZs), five software-technology parks and dedicated IT investment regions.