Parallel economy in Dharavi slums: Economic output estimated to be more than $1 billion-29 Dec, 2011

29 Dec, 2011, 10.17AM IST, New York Times

Parallel economy in Dharavi slums: Economic output estimated to be more than $1 billion


MUMBAI: At the edge of India's greatest slum, Shaikh Mobin's decrepit shanty is cleaved like a wedding cake, four layers high and sliced down the middle. The missing half has been demolished. What remains appears ready for demolition, too, with temporary walls and a rickety corrugated roof.

Yet inside, carpenters are assembling furniture on the ground floor. One floor up, men are busily cutting and stitching blue jeans. Upstairs from them, workers are crouched over sewing machines, making blouses. And at the top, still more workers are fashioning men's suits and wedding apparel. One crumbling shanty. Four businesses.

In the labyrinthine slum known as Dharavi are 60,000 structures, many of them shanties, and as many as 1 million people living and working on a triangle of land barely two-thirds the size of Central Park in Manhattan. Dharavi is one of the world's most infamous slums, a cliche of Indian misery. It is also a churning hive of workshops with an annual economic output estimated to be $600 million to more than $1 billion.

"This is a parallel economy," said Mobin, whose family is involved in several businesses in Dharavi. "In most developed countries, there is only one economy. But in India, there are two."

India is a rising economic power, even as huge portions of its economy operate in the shadows. Its "formal" economy consists of businesses that pay taxes, adhere to labor regulations and burnish the country's global image. India's "informal" economy is everything else: the hundreds of millions of shopkeepers, farmers, construction workers, taxi drivers, street vendors, rag pickers, tailors, repairmen, middlemen, black marketeers and more.

This divide exists in other developing countries, but it is a chasm in India: Experts estimate that the informal sector is responsible for the overwhelming majority of India's annual economic growth and as much as 90 percent of all employment. The informal economy exists largely outside government oversight and, in the case of slums like Dharavi, without government help or encouragement.

For years, India's government has tried with mixed success to increase industrial output by developing special economic zones to lure major manufacturers. Dharavi, by contrast, could be called a self-created special economic zone for the poor. It is a visual eyesore, a symbol of raw inequality that epitomizes the failure of policy makers to accommodate the millions of rural migrants searching for opportunity in Indian cities. It also underscores the determination of those migrants to come anyway.

"Economic opportunity in India still lies, to a large extent, in urban areas," said Eswar Prasad, a leading economist. "The problem is that government hasn't provided easy channels to be employed in the formal sector. So the informal sector is where the activity lies."