Republic of India Livelihoods in intermediate towns

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Report No: AUS7434


Republic of India

Livelihoods in intermediate towns

Social Dynamics of Non-farm Economy

A Study of Two “Rural” Settlements of Madhubani District, Bihar


August 27, 2015





Document of the World Bank

Executive Summary

This Report is based on a field study of two large settlements, Satghara (a Census Town) and Bhagwatipur (a rural cluster with 10,000 plus population) in the Madhubani district of Bihar. A large proportion of the working population in both the settlements is primarily employed in non-farm economic activities, more than 75 percent in Satghara and nearly 35 percent in Bhagwatipur.
The study explores the social dynamics of the “rural” non-farm economy by empirically mapping non-farm occupations in both the settlements. It examines the dynamics of caste, community and gender within the social organization of the non-farm economy in terms of their economic and social hierarchies and the differential incomes and status they provide. The study also looks at the relationship of the local non-farm economy with patterns of outmigration. It further attempts to understand the manner in which the changes in the regional structures of power and domination have influenced the local economic processes and are being influenced by them with a specific focus on the non-farm economy in the two setting. The study also attempts an assessment of the possible development and urbanizing effects of the rather rapid growth of non-farm economy in rural Madhubani.
Fieldwork for the study was completed during the second half of 2014. It included a survey of 300 respondents engaged in non-farm occupations, qualitative interviews with relevant informants and case studies of localities in the two settlements and of different occupations. For the purpose of this study, we treated all those economic activities that did not primarily involve direct employment in agriculture, i.e. cultivation of land, as ‘non-farm’.
As is the case with most rural settlements in India, the households across both the settlements are divided into a wide range of caste groups and communities.

Caste based communities mostly live in their own localities, known as tolas or paras. The tolas are also named after the titles of the community. While some localities do have mixed-caste inhabitant populations, they are few. This was particularly so with the Dalit and Muslim localities.

We were able to identify a total of 1,680 individuals employed in different categories of non-farm activities, of which 1,384 were in Satghara and another 296 in Bhagwatipur. A large majority of the non-farm activities are typically individual centric and self-owned enterprises. Those engaged in these activities are relatively young men, below the age of 45 (76%) and many of them have had the experience of working outside the state as migrant workers (48%). The main findings of the report are summarized below.

Non-farm preferred to on-farm occupations. The growing density of population in the region, fragmented land holdings and the uncertainty caused by frequent floods and drought, abetted by a lack of investments in building agricultural infrastructure by the state, has resulted in agriculture no longer being a viable occupation for a large majority of the rural population. Agriculture has also declined socially. As is the case with most other regions of the country, younger generations, even in families where the land holdings are large, no longer view agriculture as an aspirational occupation. The political churning that the region has experienced over the last three decades has also made agriculturally dominant groups marginal to the local politics and power structure.
More than 60 percent of those who reported being currently engaged in a non-farm activity are first generation workers, i.e. their fathers and other members of the family from the generation prior to them were either employed in agriculture or in a traditional caste based occupation. Only 10 percent of survey respondents wanted their children to take up agricultural cultivation as an occupation with 90 percent expressing a preference for non-farm occupations.
A wide range of different non-farm occupations - more than 50 - were identified. Appendix 1 gives a detailed listing of non-farm occupations identified across both settlements and Appendix 2 gives a descriptive account of such occupations. A large majority of the non-farm activities are typically individual centric and self-owned enterprises with only 3 percent of respondents reporting their status as employed workers. A majority (51 percent) of them work from rented premises, with 24 percent owning the establishment premises they work from and the rest (25 percent) working from temporary structures with no formal title or ownership.
Most of the respondents reported starting a non-farm activity because it made sense to them as a possible source of employment. Many of them did so either because it was their family business (30 percent) or they had been exposed to it during their work outside the village (nearly 15 percent) and many others reported assessing that they simply had no other options for employment (12.3 percent) or that there was a local need for the business they initiated (28.7 percent).
The recent expansion of road and communication networks, mostly after the turn of the century, has played an important role in the growth of the local non-farm economy. Not only are towns like Madhubani well connected to the state capital and other towns of the region through good quality highways, rural settlements in the region are also well connected through pucca roads. Cell phones and digital networks have also reached the interiors of Bihar. Besides making physical movement and communication possible, they also make migration convenient and easier.
But non-farm occupations observed continue to be informal and subsistent in nature and scale. A large majority of our respondent across communities and caste reported near subsistence level incomes from their enterprises. From the total sample, only 12 percent reported earning more than 10,000 rupees per month, which diminishes for specific caste/community groups. 70 percent of the SC respondents and 61.6 percent of the Muslim respondents reported a monthly income of less than Rs. 7,500 per month (See Table 22). 75 percent of respondents do not want their children to take up the same occupation as them.
The local non-farm economy is not based on modern technology, except where technology itself is a source of employment, such as cell phone repair shops. Even in such cases, their social organization remains low-skill based and almost universally informal. Even those dealing with sectors like modern medicine are likely to be working without any formal qualifications and licenses from the relevant departments.
Modern manufacturing is completely absent in both settlements. Manufacturing establishments, where they exist (bhuja-puffed rice, jewelry, brick kiln, trunk making) are traditional and small-scale activities that mostly use manual labor and only occasionally mechanical and do not use electric power. They neither generate a significant volume of employment nor require a high volume of investment. By the way of their appearance and configuration too, the operation of these non-farm activities in rural Madhubani retain the semblance of the ‘rural’ i.e. a site for the reproduction and sustenance of cheap labour, largely catering to local requirements. This is in keeping with state-level data showing minimal industrial growth industrial growth in the state over the past three decades while the rural non-farm economy has grown almost at par with the pace at the national level.
Non-farm economy is largely a male enterprise, with women making for a miniscule proportion of the total employment in the category. Women engaged in the non-farm economy tend to be employed in low-income occupations and reported lower income levels than men. The number of women owning and managing a non-farm enterprise on their own is not more than 4 percent of the entire universe (we expanded our sample of women respondents). Those women engaged in non-farm economy tend to work in occupations that are either traditionally identified with women, such as bangle making, or in occupations that involve serving exclusively or primarily women, such as tailoring or running a beauty parlor for women or vegetable vending. Some of them also “help” their men but they tend to be “invisible”.
The income levels reported by women tend to be lower than men. Nearly one fourth (22.2 percent) of total women respondents report a monthly income of less than Rs. 2,500 as compared to only 8 percent of male respondents. None of the women respondents in either of the markets reported a monthly income higher than Rs. 10,000 per month whereas 13.6 percent of the male respondents did. On the whole, of the women reporting participation in the non-farm economy, 45 percent report earning less than Rs. 5,000 per month
Caste and community affiliations still play a determining factor in types of non-farm occupations of respondents. Community-specific exclusions can be observed in specific non-farm categories. Active discrimination in relation to certain occupations and differentials across non-farm occupations on key indicators such as amount invested in enterprise, monthly income and ownership of assets were also observed. One of the obvious underlying assumptions about the social dimension of economic change in the process of a shift from farm to non-farm economic activity is the process of “secularization” or “modernization” of occupational identities. While the traditional agrarian economy is structured around caste, non-farm economy is usually seen as more likely to be a matter of individual choice and ability.
This, however, does not seem to be the case. The social organization of different occupations largely remains structured around caste and community. Community and caste diversity exists only in certain categories of non-farm occupations. These include activities such as cell phone repair, modern electronic and communication related services, vehicle repair, medicine-related occupations, vegetable and fruit sellers and drivers/transport. Here too, we can easily observe community specific exclusions in some of the occupational categories. For example, there is no SC respondent in information technology, cell phones or communication related occupations. Similarly, we find very few Muslims, SCs or women in relatively modern categories or high investment oriented occupations, such as those related to medicine and health, education or construction and hardware. Even though a range of communities own grocery and other utility shops, they are dominated by relatively upper and trading castes that have been traditionally involved with such work. The same holds good for food related outlets, which tended to be owned by individuals from specific castes and communities. Apart from visible and not so visible divisions and differences of non-farm activities in accordance with the logic of traditional hierarchies of caste and communities, we also observed active discrimination against some communities (Muslims and Dalits) in relation to certain occupations.
There were also clear disparities between different communities on key indicators such as ownership of business premises and monthly income. 80 percent of SC respondents reported operating from temporary structures with no formal title, as opposed to 50 percent of all respondents.
Migration plays a critical role in the rise of the local non-farm economy through remittances and skills of return migrants. Migration is also, in a sense, the main non-farm activity with nearly three-fourth of households in the district having a male member working outside. There has been the growing outmigration from Bihar. Motivated or compelled by the “push” of the local economic situation, young men began to move out, sometime in the 1970s to far off places for work. Initially a small proportion of them went to places like Punjab and Calcutta, the trend continuing into the decades of the 1980s and 1990s. By turn of the century nearly three-fourths of the rural households in districts like Madhubani had at least one of its male members of working outside the village, mostly in far off cities and towns and some even abroad.
Unlike the usual process of migration, which tends to be one way with people moving from rural to urban centres, resulting in a steady process of urbanization, most of the migration from Madhubani district and much of rural Bihar tends to be circular in nature. Consequently, despite such high rates of migration, Bihar has seen no spurt in its urban population or desertion of it rural settlements. However, the seasonal and circular out-migration of labour from Bihar is changing many dimensions and dynamics of the region. The rise of the rural non-farm economy is one such change.
The circular migration of working Biharis means that while the young men go out for work, their parents and wives stay back in the village. A direct implication of this is that not only do they regularly come back to the village to visit their families every few months (generally twice in a year), most of them also return for good at the end of their working life, when they are 45 to 50 years of age and can no longer bear the hardships of life as a migrant worker. In the interim, they send regular remittances to support their families. A share of these remittances is invested in the land being cultivated by the family left behind; the rest is available for meeting the consumption needs of the family.
The incoming remittances create a demand for a variety of goods and services, from groceries for domestic consumption to medical stores and educational centers, schools and tuition centers. The local entrepreneurs, many of whom have themselves been migrants, open shops and other outlets to fulfill these needs. Nearly half of our respondents (48 percent) currently engaged in non-farm economy have been migrant workers at least some time in their working life, before they started working locally or set-up their own enterprise.

In terms of assessing development and urbanizing effects of the growing non-farm economy in rural Madhubani, our assessment is not very encouraging. Even though non-farm economic activity is seen as a desirable economic enterprise over being completely dependent on agriculture, it does not seems to stimulating any kind of local level economic dynamism that has the potential of urbanizing the region or pushing it to the path of economic growth. As mentioned above, our survey and close qualitative observations demonstrate that much of the local non-farm economy, which has been growing steadily over the past three decades, remains subsistent in nature and scale. It generates very little surpluses or savings, and thus no possibility of capital accumulation. Its expansion is mostly horizontal with little or no evidence of it acquiring a future beyond its current form of low-end commercial enterprises.
Most of the enterprises are self-owned and appear to be temporary in nature. A large majority of our respondents do not see their current occupations taking them very far. Those who have economic surpluses prefer going out, to Madhubani and other urban centres. Even though the 2011 Census of India has classified Satghara as Census Town, the quality of its non-farm economy is not very different from that of the rural cluster of Madhubani. The story is not very different when we look at the quality of its infrastructure in the two settlements.
Even though the traditional jajmani type relations have disintegrated, a good proportion of occupational categories continue to be structured around caste lines. Many of these caste related occupations also happen to be low-income and low-value occupations. More importantly, those from the traditionally “low” status communities, the SCs and the lower OBCs, are more likely to be working in the low value non-farm activities than the “others”. In other words, within the non-farm sector, their occupations are often located at the lower end of the occupational hierarchy. They also tend to work from temporary premises, which adds to their vulnerability. The activities that generate higher income and carry superior status tend to be the monopolies of the traditionally upper castes or the upper OBC, the trading caste.
The decline of agriculture and the disintegration of traditional power structure do not seem to be giving way to a dynamic market driven economy of a modern democratic society. The expansion of the non-farm economy has meant a growing economic dominance of the trading castes, such as the Suris in Bhagwatipur. Money lending businesses, which too are controlled by the traditional goldsmiths and those from the trading castes, seems to be flourishing in the two settlements. The poor often borrow money at high interest rates, ranging from 3 to 10 percent monthly interest rates, which keep them trapped in the subsistence economy, even when they go out for work or have their own petty business in the village.

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