INDIA UNINC. Praise for India Uninc. This book provides a much needed analysis of India’s vast non-corporate sector. Vaidyanathan offers an excellent overview of previous debates, and writes with clarity and insight on the trends and reforms that have touched this sector, how people within it cope, and what more needs to be done. Nandan Nilekani, Chairman, UIDAI Although, the Non-Corporate sector occupies a large space in our Economy, it receives little attention. This book brings out the travails of this sector in terms of poor credit availability and dealing with corrupt government agencies. It provides a new perspective to experts who are otherwise focussed on capital markets and those with access to organised banking. Sucheta Dalal, Editor, Money Life magazine At a time when Finance Ministers seem to think that attracting foreign investment is the only required reform, Prof Vaidyanathan’s book is a breath of fresh air. He is absolutely right in saying that the non- coporate sector in India is among the most dynamic, yet least known and most neglected of sectors. It urgently needs faster clearances, less red tape and more credit. Swaminathan S. Anklesaria Aiyar, Consulting Editor, The Times of India The beam of a searchlight on a sector we hardly look at—a sector that, Professor Vaidyanathan teaches us, has been and can be one of the most powerful sources of growth in our country. Arun Shourie, Former Minister, Government of India The Non-corporate sector high share in national income, in savings, GDCF, in manufacturing in service sectorin taxation, in credit off take etc. makes it an engine of our economic growth and hence regrettably not adequately focused… Therefore, Professor Vaidyanathan has done yeoman service to the intellectual community by providing a recipe for rectifying the situation and this is timely. Dr. Subramaniam Swamy, Former Commerce Minister, Government of India Non-Corporate India makes up around 45% of our GDP and provides employment for the majority of our population. Sadly they are not part of any policy, left to fend for themselves and most often at the receiving end of the inspector raj and State tyranny! For the first time Prof Vaidyanathan has explained their existence in a lucid manner pointing out the need for good policy to enable their growth and contribution to employment. T.V. Mohandas Pai, Chairman, Aarin Capital Partners This book is from the other India perspective—or the real India, the unknown India and the India that sustains the Indian economy and providing employment and livelihood to ten times the employment that organised private sector provides. S. Gurumurthy, Senior Journalist I would choose India’s next tryst with destiny is about the non-corporate sector. This book wonderfully synthesizes the puzzle. Manish Sabharwal, Chairman, Teamlease Services R. Vai dyanathan has established with surgical precision that the most dynamic elements in our society are small entrepreneurs who remain unsung heroes. Jaithirth (Jerry) Rao Too often, private enterprise is equated with the corporate sector. Numbers will show this isn’t true and much of industry and service sector growth since 1991 has been driven by the MSME sector…. India’s growth story is about unincorporated India…. Professor Vaidyanathan should be complimented for bringing this sector and its three kinds of problems, entry, functioning and exit, into the discourse. Bibek Debroy, Economist INDIA UNINC. Prof. R. Vaidyanathan westland ltd 61 Silverline Building, 2nd floor, Alapakkam Main Road, Maduravoyal, Chennai 600 095 No. 38/10 (New No.5), Raghava Nagar, New Timber Yard Layout, Bengaluru 560 026 93, 1st Floor, Sham Lal Road, New Delhi 110 002 First published by westland ltd 2014 First ebook edition: 2013 Copyright © Prof. R. Vaidyanathan 2014 All rights reserved ISBN 978-93-83260-56-0 Typeset by Ram Das Lal This book is sold subject to the condition that it shall not by way of trade or otherwise, be lent, resold, hired out, circulated, and no reproduction in any form, in whole or in part (except for brief quotations in critical articles or reviews) may be made without written permission of the publishers. Dedicated to the memory of my parents Shri. S. Ramamurthy and Shrimathi R. Balambal who imparted knowledge and culture to me Contents 	 Foreword 	 	 An Introductory Note 	 	 Introduction 	 Section 1 — India Uninc.: Dominant Role in the Economy 1.& I#N9D; IA UNINC.: Understanding the Terminology 	 2.& L#9ar;gest Contributor to the National Income 	 3.& S#i9g;nificant Role in the Service Sector 	 4.& L#9o;w Profile, Big Savers 	 5.& P#r9e;datory State, Pauper Households 	 6.& I#n9d;ia Uninc. and Capital Formation 	 Section 2 — Travails of the India Uninc. 7.& G#9ro;wth Drivers without benefit of reforms 	 8.& F#D9;I in Retail Trade: Fact and Fiction 	 9.& T#9h;e Bias against the Self-Employed 	 10. &T#h9e ;Sorry Saga of Contract Enforcement 	 Section 3 — Credit Delivery to India Uninc. 11. &B#a9n;k Lending and Non-corporate Sector 	 12. &T#h9e ;Critical Role of the Non-Banking Financial Sector [NBFS] 	 Section 4 — Taxation and Bribery 13. &T#ax9a;tion: Coverage Issues 	 14. &B#ri9b;ery and Corruption 	 Section 5 — Social Security for the Self Employed and the Role of Gold 15. &Fo#o9l;ish Governments and Smart Women — Role of Gold in our economy 	 16. &D#e9m;ography is Destiny 	 17. &R#e9v;erse Mortgage as Old Age Security 	 18. &Sa#v9i;ngs or Consumption Driven Society 	 Section 6 — Stock Markets: Role in our Economy 19. &St#o9c;k Markets: Are they Barometers? 	 20. &T#h9e ;Indian Financial Markets: A Cul-De-Sac? 	 Section 7 — Caste and India Uninc. 21. &R#e9se;rvations: Strong Policy and Weak Database 	 22. &Jo#b9 ;reservations: Make them Entrepreneurs instead 	 23. &In#d9i;a Growth: The untold story — Caste as social capital 	 Section 8 — Miscellaneous Musings & Conclusions 24. &T#h9e ;NGO Sector 	 25. &D#e9c;line of the West 	 26. &A#rt9 ;of Giving: Warren Buffet to be told 	 27. &L#ev9e;raging on the Mobile Phone Revolution 	 28. &T#im9;e to Say Goodbye to the World Bank 	 29. &Sp#o9r;ts in India — BCCI the largest Uninc. 	 30. &B#o9ll;ywood as Uninc. 	 31. &C#o9n;clusion 	 	 Acknowledgements 	 	 References 	 	 Index