Social Identities and Structural Transformation in India

In 75 years since its independence, India has made significant progress in almost every socio-economic indicator. The task that lies ahead is to build on this progress and bring about a society that is not only prosperous but also just, equitable and sustainable. 

Unfortunately, despite years of rapid economic growth, India’s structural transformation remains slow. The problems ailing the system including employment, inequality etc. are compounded by the fact that one’s social identity continues to play a crucial role in determining one’s opportunities. 

Individuals identify themselves in multiple ways, including a personal identity or as a collective in the form of a social identity. 

Personal identity refers to the unique ways that people define themselves as individuals (the “I”). Personal Identity markers are often the things we choose to define us throughout our lives - team affiliation, musical tastes, style etc.

Social identity refers to people's self-categorizations in relation to their group memberships (the “we”). These categorizations are generally assigned to us or something we are born into. 

Structural transformation is defined as the transition of an economy from low productivity and labor-intensive economic activities to higher productivity, capital and skill-intensive activities. 

What are the indicators of Structural Transformation?

• Shift from agriculture: Process whereby the resources (labour, capital, and technology) in any economy are shifted out of low-productivity primary activities into modern, higher-productivity sectors. 
  • It is evident from the declining share of agriculture in GDP and employment. 
• Sectoral distribution: It entails the rise of a modern economy based on a higher share of manufacturing and service sectors. 
  • It is typically measured through employment distribution, value-added distribution and final consumption expenditure distribution. 
• Capital accumulation: Accumulation of physical and human capital, and changes in composition of demand, production, employment and trade.
• Migration: Rural-to-urban migration underpinned by rural and urban development.
• Demographic transition: A demographic transition from high rates of births and deaths (common in underdeveloped and rural areas) to low rates of births and deaths - associated with better health standards in developed and urban areas.

How Structural Transformation can be achieved?

• Diversification of economic activities: Encourage diversification by promoting the development of new industries and sectors.
• Investment in human capital: Enhance education and skill development programs to build a highly skilled and adaptable workforce.
• Infrastructure development: Improved infrastructure can lower production costs, facilitate trade, and attract investments, fostering economic development.
• Technology adoption: Institutions and policies that promote the development, adoption and use of technologies and innovations to change what an economy produces.
• Access to finance: Ensure access to finance for businesses, particularly small and medium-sized enterprises (SMEs).
• Trade policies: Develop and implement trade policies that promote international competitiveness, encourage specialization and improve access to new markets. 
• Knowledge: Knowledge has emerged as the main driver of sustained structural transformation.

The relationship between structural change and social disparities is complex and multifaceted. 

• Dual relationship: 
  • Structural transformation creates new opportunities and one’s gender, caste, religious or ethnic identity plays a crucial role in exploiting these opportunities.
  • Conversely, social norms and hierarchies play a role in determining the nature of the structural transformation being experienced by a country.
  • For example, 
    • Patriarchal norms may prevent women from taking advantage of new jobs being created, by preventing them from leaving the home for employment. 
    • But equally, the presence of restricting gender norms changes the labour supply, it turn affecting the availability of labour, capital and types of industries in the economy. 
• Inequality and Marginalization: Structural transformations can impact different social groups unevenly. 
  • For example, certain marginalised groups like tribal populations may find it challenging to adapt to changes in the economy, contributing to disparities in wealth, income, and employment. 
• Political power: Social identities often come with power dynamics that influence individuals' and groups' access to resources, opportunities, and decision-making. Structural transformations can either reinforce existing power imbalances or create opportunities for marginalized groups to challenge and reshape these dynamics.
• Labour Market Dynamics: Changes in the economy, such as automation or globalization, can impact the demand for certain types of labour. This can affect different social groups differently, depending on factors like skill levels, education, and historical patterns of discrimination. 
• Cultural and Social Impacts: Economic transformations often bring about changes in cultural norms and social structures. 
  • For instance, traditional gender roles or cultural practices may either adapt to or resist economic transformations, shaping the overall societal response.
• Social Movements: Social identities can be a driving force behind social movements and activism advocating for economic justice and structural changes.

• Increase in upward mobility: Between 2004 and 2018, the labour movement can be seen from casual employment towards regular salaried jobs. 
  • In 2004 over 80% of sons of casual wage workers were themselves in casual employment. For non-SC/ST castes, this fell from 83% to 53% by 2018 and from 86% to 76% for SC/ST castes.
• Reduction in caste-based segregation: Caste-based industrial segregation decreased between 1983 and 2021. 
  • In the early 1980s, Scheduled Caste workers were more than 5 times over-represented in waste-related work and over 4 times in leather-related work. This has declined rapidly over time, though it is not eliminated as of 2021-22.

Negative Influence

• Overrepresentation in low-salary jobs: Marginalized identities tend to be overrepresented in low-paying occupations despite structural transformations.
  • For instance, SC workers are far more likely to be in casual employment as compared to Others.
• Lower caste entrepreneurs: SC and ST owners are barely represented among firms employing more than 20 workers. Correspondingly, upper caste overrepresentation increases with firm size.
• Sectoral structure and employment: Upper castes show the most diversified sectoral structure and the largest pace of structural change.
  • The decline in the proportion of self-employed workers among lower caste groups has been slow.
    
    What has been the relation between Women’s Employment and Structural Transformation?

Positive relation

• U-shaped relationship: U-shaped relationship is observed between women’s employment and economic growth. 
  • Structural transformation initially pushes women out of the workforce as demand for women’s labour in agriculture falls. As growth continues and female education levels rise, new employment opportunities and higher wages pull women into the workforce.
• Gender norms: Progressive norms on women’s autonomy correlate with higher likelihood of employment.
• Gender earnings gap: Raw gender earnings gaps have narrowed over time, but remain much higher than caste or religion-based gaps.
  • Disparity in earnings is widest in self-employment and for SC/ST women workers.
• Increase in regular wage employment: Significant increase in proportion of women workers who had regular wage jobs - going from just under 10% in 2004 to 25% in 2018.

Negative relation

• Declining rural female LFPR: Two major factors have been identified for the falling LFPR - a displacement of women workers due to mechanisation and rising household income combined with social norms that value women’s unpaid domestic work more than paid work.
• Gender norms: A common gender norm is the “male breadwinner” norm, i.e. husbands are considered the primary earners with wives contributing to household income only if necessary.
  • The PLFS data shows that in households where the husband’s earnings are high, the probability of the wife being employed is low. 
• Jobless Growth: It pushes women out of the workforce, raises female unemployment rates, or traps them in low-productivity informal work.

• Policy Interventions: Governments and institutions play a crucial role in shaping the relationship between social identities and economic transformation. 
  • Policies that address discrimination, and promote equal opportunities can help mitigate negative impacts on marginalized groups and promote more inclusive economic development.
• Social safety net: Implement social safety net programs to mitigate the potential negative effects of structural transformation on vulnerable populations. 
  • This can include unemployment benefits, skills training programs, and other support mechanisms.
  • For instance, Nordic countries provide affordable access to inclusive social services regardless of income or economic need. 
• Regional development: Foster balanced regional development to ensure that the benefits of structural transformation are distributed more evenly across different geographic areas. This can help reduce regional disparities and promote inclusive growth.
  • For instance, the Bavaria region of Germany has adopted flexible instruments such as city networks, innovative milieus and regional marketing as strategies for the development of the region.
• Monitoring: Establish mechanisms for monitoring and evaluating the progress of structural transformation initiatives. Regular assessments can help policymakers make informed decisions and adjust strategies as needed.
  • For instance, India’s PRAGATI initiative monitors and reviews important programmes of the Government of India. 
• Equitable access to Knowledge: Invest in education and training programs that provide equal opportunities for all segments of society.
  • For instance, the Community Integrated Education model in Israel promotes education for children with special needs. 
• Gender equality policies: Implement and enforce policies that promote gender equality in the workforce. Addressing gender disparities in employment, wages, and opportunities is essential for creating a more inclusive economy.
  • India’s Self-Help Groups (SHGs) movement is transforming the lives of marginalized women. 
• Financial Inclusion: Promote financial inclusion by ensuring banking access to all segments of society through technology and expansion of financial network. 
  • For instance, the Government of India’s JAM trinity (Jandhan Yojana, Aadhar, and Mobile). 

"The economic structure is not independent of the social and cultural context in which it is embedded. As such, any meaningful transformation in the economy must be accompanied by a corresponding shift in social identity." - Amartya Sen