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Very Poor on the ‘Bottom of the Pyramid’ Need Upgraded
Skills - An interview with Reema Nanavaty, Director, Economic and Rural
Development, SEWA. |
 SEWA (Self
Employed Women’s Association) is the largest labour union of informal sector
workers in India. Founded in 1972, SEWA operates in 14 districts of Gujarat
where its 500,000 members of poor, self-employed women are primarily small
farmers, agricultural and forestry workers, and artisans. SEWA’s goal is to
achieve full employment and self reliance for its members. Reema Nanavaty is
manager of economic and rural development for SEWA. She manages more than $6
million in SEWA economic activities, including a federation of 100 cooperatives
and a direct marketing outlet for 12,000 artisans. She was instrumental in
launching SEWA’s Trade
Facilitation Centre, a partnership between SEWA and the International
Finance Corporation, and its Global Grassroots Entrepreneurs Trading Network, a global network of
initiatives and individuals aimed at making women’s voices and contributions
central to world trade decisions. |
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 In what sectors do multinational corporations impact the informal
economy in India? |
There
are several sectors where foreign investment in India impacts industries where
the very poor work in the informal economy, such as forestry and agriculture,
textiles and garments, and health. Most of the impact is felt when
multinationals set up plants and factories or when smaller farms or companies
enter into partnerships with large corporations, sometimes leading to shutting
down smaller businesses. We are actually seeing growth in the informal sector as
multinationals diversify which can lead to the loss of jobs, forcing workers to
drop out of the formal economy and into the casual workforce. Another example
can be seen in the impact of multinational agribusiness on small farmers in
India. Since most multinationals are now involved with sharecropping, small
farmers have to rent land from large land owners which does not benefit marginal
farmers. There is the additional problem of multinational agribusiness entering
into monocultivation of crops for short-term benefit. Multicropping balances the
environment and nature, particularly in areas where there are several
agriclimates. In two or three years time, multinational agribusiness will
diversify but, in the long-term, monocultivation will damage the land and has
dire implications for small and marginal farmers in India.
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| What would an ideal scenario be for a multinational
corporation coming into India’s agriculture sector to work with informal
economy? |
| Small and marginal farmers make up 54 percent of SEWA’s
membership of 530,000 workers in the informal economy in India. We have a large
agricultural campaign to organize small farmers so that they can enter directly
into agreements with multinationals for the procurement of agricultural products
like sesame seeds, cumin, soya, wheat, and certain fruit. Through SEWA’s Trade
Facilitation Center, supported by the International Finance Corporation, we
facilitate partnerships with multinationals so that they buy directly from our
farmer networks. Transaction costs are reduced and small farmers are ensured
access to a diverse market, without changing the structure of local
farming. |
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| How does the presence of multinational corporations impact
the need for upgrading skills? |
| This is a big problem, for instance, in the textile and
garment sector. With current multifiber agreements and quota systems now on
textiles in India, many multinational textile manufacturers want to come into
India. Larger manufacturers in India are adopting more corporate practices, but
small garment producers are losing out on the market they once had because they
have no way of upgrading their skills to meet the new demand. SEWA members
cannot compete at all with larger manufacturers who are able to enter into
partnerships with multinationals like Wal-Mart, Nike, or Gap. The informal
sector never gets job in these big multinationals, because the poor have no
access to skill upgrading, or to tools and machinery. Skill upgrading is
severely lacking in our country, and multinationals take on no responsibility to
provide training, which puts the informal sector at major disadvantage to enter
the formal economy in the garment industry. Because of this, SEWA now offers
skill upgrading courses at the Trade Facilitation Center, providing training in
garment production with sophisticated machinery so that our members can enter
directly into agreements with multinationals. |
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| What is the government’s role in this? Should government
step in to improve the situation? |
| The government plays a major role in three areas. In skill
upgrading, India’s government runs lots of industrial technical institutes but
their technical resources need to be continuously upgraded to respond to
employer demands in the marketplace. The institutes need to constantly upgrade
the kind of training courses they offer. This is happening at a very slow pace.
Secondly, the government needs to disseminate information about training
opportunities. Thirdly, the government should become involved in research and
development about the informal sector. There is absolutely no research happening
about upgrading skills or investment in infrastructure to help the informal
sector. |
| What about government regulations on foreign
investments? |
| Our government is really opening up to foreign investments
in industries such as insurance, telecommunications and banking. But regulations
governing these industries are not taking into consideration the needs of the
poor and the informal sector. For instance, anyone who would like to set up an
insurance company would have to set aside a certain percentage for rural poor.
But, there is no mechanism to regulate and monitor that and, as a result, the
poor are not benefiting. |
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| What’s being done by the government to build up the domestic
sector to bring the informal sector into the formal sector? |
| This will be a very slow process and, unless the government
is willing to invest heavily in this, formalization will not take place easily.
Basically, more is being done to attract foreign investment than to formalize
and provide opportunities for domestic growth since this takes so much longer to
build up.. |
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| What do you think about the idea of the bottom of the
pyramid, and that the poor's purchasing power has been underestimated? |
| I definitely believe that the poor have purchasing power.
For example, SEWA was approached by a Unilever subsidiary in India called
Hindustan Lever. They wanted to sell their products to our members in the rural
areas at the bottom of the pyramid. We asked why poor rural women should borrow
money to sell Unilever products, such as sugar, incense sticks, spices, cotton
material, etc. Instead we negotiated a partnership with Unilever to help us set
up a rural distribution network that covered 530,000 households in 11 districts
in Gujarat. With just a purchasing power of $2 per month, our turnover to
Unilever has been about $7-8 million. The system has stimulated employment for
21,000 households. If you look at the volume, the bottom of the pyramid has
enormous purchasing power. |
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| Who benefits from this arrangement with Unilever? |
| Unilever is helping us by designing the entire network,
managing the information system, providing training, and building up in-house
managers. This allows us to provide training in quality control, packaging,
processing and employment for our members. Goods produced locally are also sold
through the network, further strengthening the rural economy. For Unilever, it’s
a kind of R&D and market-testing. It allows them access to a large consumer
base. If the entire system works well with local producers, then they already
have a basis to capitalize on for future marketing. |
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| What do you think about the prospects of the impact of
foreign corporate investment in India on the informal sector? |
| Unless and until major investment is made in upgrading
skills of workers in the informal sector, foreign corporate investment will not
benefit the very poor in India. |
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Do you agree or disagree with Ms. Nanavaty?
Share your
comments here
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