Giving India’s Poor Control Over Choice and Dignity
There are 1.2 billion citizens of the world trapped in cycles of extreme poverty and surviving on less than $1.25 a day; a third of whom live in India. For most of these individuals, their standing as poor is not a reflection of their will, effort and drive, but rather a reflection of the poor conditions they are born into, the poor education and training they receive, or the poorly functioning and inefficient market systems in place. While there are many ways to address these challenges, livelihood sector solutions provide dignity by approaching the poor as the customer (rather than the poor) so they can take control of (rather than receiving) their lives and incomes by choosing how to invest their will, effort and drive to benefit the lives of themselves and their families.
This is the first of 10 posts on India’s livelihood sector in which we explore:
The first four articles provide a big picture of challenges and opportunities in the space while the fifth article identifies the key trend, hot areas of innovation and potential game changers. The final articles look at some of the areas we found to be particularly interesting in the near term: training & placement, disrupting the producer supply chain, and how mCommerce is creating marketplaces.
Understanding India’s Livelihood Sector & Taxonomy
Before diving into the livelihood sector taxonomy, it is important to nail down what making an impact on a person’s livelihood looks like.
Defining poverty and dignity impacts the approach to livelihoods
India is home to a third of the world’s poor using the $1.25 a-day World Bank and Millennium Development Goals benchmark for extreme poverty. While India has cut their official poverty level in half since 1990 from 45% to 22%, 270M remain in extreme poverty based on the Indian Government’s controversial and often criticized use of $0.65 a-day as a benchmark. When the benchmark is raised to $2 a-day, our research demonstrates India has one billion BoP customers (or 5 out of 6 Indians). In lieu of a pure cost-of-basic-needs approach, we found the McKinsey Global Institute’s From Poverty to Empowerment approach based on the “simple premise that every household in India should be able to attain a fundamental sense of economic security, opportunity, and dignity” to be particularly enlightening and insightful.
Instead of using a baseline for survival metric, by estimating the “cost of fulfilling eight basic household needs…at a sufficient level,” they developed an Empowerment Line approach to determine what a “decent, if modest, standard of living” would look like in lieu of a poverty line focusing on “bare subsistence.” This approach found 680 million, or 56% of India’s population, lack the minimum acceptable standards of living necessary to meet their essential needs, which is more than two-and-a-half times the official poverty count. Following an exhaustive look into i) the 8 areas identified, ii) different development approaches to empowerment and iii) historical precedent, McKinsey concluded that, “as in the past, almost three-quarters of the potential impact of raising people above the level of the Empowerment Line depends on unlocking investment, job growth, and productivity.” We call the three-quarters of the potential impact to enable 680M Indians hinging on job creation and investment the Livelihood sector, and approach it in two main ways:
- By filling the education and training gap necessary to provide a modern high quality goods or services to facilitate employment.
- By disrupting inefficient and exploitive markets via the market access and linkages necessary to connect and compete in today’s economy.
Two approaches to impacting livelihoods
The first and most common approach in the livelihood space is Vocational Education & Skills Training (VEST), which is addressing a modernizing economy’s need for a job-ready workforce via skilling/up-skilling labor through market-linked training and placement into formal or organized sector jobs. While skills training and formal employment is important, the organized sector is only expected to create less than a quarter of India’s jobs in the coming decade while the number of Indians employed in the informal or unorganized sector is expected to rise from today’s 92% to 95%. Because of this, there needs to be an equal if not greater emphasis placed on job creation by enabling Small, Medium, or Micro-Sized Enterprises (SMMEs), Co-Op’s and self-employed individual producers of goods or services to compete. For this, the focus shifts from training for employability alone towards addressing the key variables supporting the cycles of poverty individuals and small businesses are caught in: monopolistic markets, exploitive supply chains and the inability to adapt and therefore compete within a modernizing customer-centric economy. To break these cycles, we see a multitude of opportunities and start-ups with innovative and scalable approaches which reintroduce competition to the market while aiding B2B and B2C connections through: marketplace creation, supply chain disruption and enabling individuals and SMMEs with the tools and platforms necessary to compete.
Unlike sectors like Education or Agriculture, Livelihoods does not have a single cohesive supply or value chain, which makes creating an taxonomy or overview challenging. After reviewing over 100+ companies in the Livelihood space that are working either to train & place for employment, or, to enable SMEEs & individuals via marketplaces, platforms or supply chain disruption—we found the following four sub-categories make the most sense:
2) Job Creators – Direct inclusive employment like: Vindhya, Mirakle Couriers, Srujna, Sakha and Black Shop Textiles, or by facilitating transactional or contract services via Labor as a Service, such as Get Domestic Help, Jack On Block and Time Saverz.
3) Marketplaces & Matchmakers – Connecting job seekers to better opportunities, and, Connecting consumers to low-income providers, such as: Babajob, Just Rojgar, 10GenJobs, CraftsVilla, Indian Artisans Online, Nethaat and Langhar.
4) Platforms & Supply Chain Enhancers – The ventures creating the platforms, distribution channels & enhanced supply chains helping SMME’s compete. For Example: MART, Frontier Markets, Tinker Tank, eKutir, GoCoop, Ecokargha, PrimaSeller, Delhivery, Jiffstore and OneKirana
In our research we also came across the following areas of impact that are often associated with livelihoods. These areas have been excluded for the following reasons:
- There is potentially overlap between Education and Livelihoods, so we used formal regulation to distinguish between the two. Through focusing on individuals who are out of formal school—Pre-K through University—due to either graduation or dropping out, companies providing current students with counseling, additional training, and employment assistance services are not included (like Mera Career Guide and iSTAR)
- Banking & Financial Inclusion (BFI): BFI generally focuses on enabling a person to send, receive, or save money. While this ability to transact impacts livelihoods in a significant way, much has been research and written on the BFSI sector. So for the purposes of this discussion we are choosing not to explore BFI or companies like: SABRAS, Swabhimaanya, Aajeevika Bureau or Bhartiya Samruddu
- Micro-Finance (MFI) – While MFIs significantly impacts livelihoods, for the purposes of this discussion we have chosen not to look in that area because others have done so for some years.
- Agriculture: Due to the unique challenges and conditions in Agricultural livelihoods, this vertical is explored as its own sector. Learn more in our Agriculture Sector Overview or about 50 Venture Backed Companies Transforming Ag.
India’s Future Will Be Defined by How Well It Enables Its Next Generation.
Moving forward, India’s future will be defined how well it is able to absorb a growing working population and the extent to which it can enable a generation for productive and gainful employment on a sufficient scale. While India’s Government has acknowledged these needs and embarked to skill and train 500M by 2022, it’s the innovative companies training, employing, and connecting India’s giant BoP population that have the most opportunity to respond to this need.
By adding 13M first time job seekers annually during the next decade and a half, India will have more than quarter of the world’s workforce—with a workforce of 1 billion people—by 2030. In our next article of this series on Realizing India’s Demographic Dividend: Gainfully Employing a Billion Person Workforce, we will explore India’s potential demographic dividend and the current state of India’s training and job creation ecosystems which are each respectively only able to train a third and employ less than half of India’s 13M new job market entrants per year.