Indian Journal of Agriculture Business Volume 6 Number 1, January - June 2020 DOI: http://dx.doi.org/10.21088/ijab.2454.7964.6120.5 Orignal Article Death of Firms: A Qualitative Study of Gaya District (Bihar) Rinky Kumari1, Kumar Ankur Karan2 How to cite this article: Rinky Kumari, Kumar Ankur Karan. Death of Firms: A Qualitative Study of Gaya District (Bihar). Indian Journal of Agriculture Business 2020;6(1):39–47. Author’s Af liation Abstract 1Research Scholar, Department of Economics Patna University, Patna 800005, Bihar, 2Student, Central university The objective of this study is to examine the reason for closure of of South Bihar, India. the business in Bihar’s Gaya district, since it plays an important role in Bihar’s economy to generating the employment. While this study is Coressponding Author: based on primary data. Which is collected by schedule and interviews. Rinky Kumari, Research Scholar, Department of Economics Patna University, Observation method has played crucial role in this study. Moreover Patna 800005, Bihar, India. this study discusses the reason of chosen that occupation and also the reason for leaving that firm. This study also find that there is lack of E-mail: [email protected] official data on death of firm in government of India. The study also find that age is determining factor behind the death of firm because as age decline their health is also not supporting and lack of helping hand they are keen to shut down their firm. Despite of that due to lack of managerial and analytical capacity many firm closed. Keywords: Informal Sector; Self-Employment; Death of Firm. Introduction lack of reliable statistics on the size, distribution and economic contribution of the sector has been a major Despite the presence of a large number of rms in constraint in providing a realistic understanding of the informal sector in India, very little is known the signi cance of the Indian economy, leading to about their characteristics and evolution over time. its neglect in planning. Keeping in mind the above Indian economy has preponderance of informal facts, the particular study, ‘Death of rms’, attempts and unorganized sector both in terms of number of to take a small step ahead towards focusing on the workers and enterprises. This segment of economy informal sector and one of its concerns “death” or has vulnerabilities, and the study of unorganized closure. It implies closure of a small establishment sector based on reliable data is desirable for or proprietorship owing to reasons not under important decision making and addressing control of the proprietor. These reasons may be the problems faced. Unorganized or informal market oriented or idiosyncratic. Such reasons sector constitutes an important part of the Indian or factors may be inevitable further depending economy. More than 90% of workforce and about on the managerial capabilities of the rm owner. 50% of the national product are accounted for by However, there are many other determinants the informal economy(NCEUS). And this informal which need to be explored through this study.The sector comprises high proportion of socially and further importance of this study can be revealed economically underprivileged sections of society. through a comparison with labor regulations There are also growing interlinkages between formal like The Factories Act, 1934. This act applies to and informal economy. For inclusive growth of this establishments employing 10 or more persons with sector to be guaranteed, it needs special attention. power use or 20 or more persons. It aims to improve A balanced growth requires that the needs of the the working conditions in factories; its scope also sector in terms of credit, skills, technology, etc. are extends to include welfare, health of workers. addressed. However, it is increasingly realized that Similarly, legislation like The Minimum wages Act © Red Flower Publication Pvt. Ltd. 40 Rinky Kumari, Kumar Ankur Karan. Death of Firms: A Qualitative Study of Gaya District (Bihar) ensures minimum wages for the workers working poverty (Porta and Shleifer, 2014) in a developing both in formal and informal establishments. country like India, and formalizing it would be a But discrimination and exploitation of informal tedious task. So, at this juncture, it can be said that workers is apparent. All the legislations are focused informal sector requires extra attention in policy mainly towards formal workers. But what about making, for example, making formalization easy, so the workers working in informal establishments? that the demerits of informalization to the economy In spite of the predominance of informal workers, can be checked. And studies like this particular one there is no proper legislation regarding the welfare is a little drop to the ocean which would serve the of those workers. Attention needs to be provided above purpose. not only in terms of government intervention, but The Table 1 re ects the predominance of informal also in form of research activities. It is a well–known sector in the Indian economy, and as such the fact that much of research activities ultimately go relevance of the topic is acknowledged. In 2004–05, into government planning and decision–making. 92.3% of total workers lied in informal sector in As far as this particular topic is concerned, comparison to a minimal 7.7% of formal sector. “Death of rms”, causes threat to the livelihood of the proprietors. Proprietors may include small Informal Sector vendors, shop owners etc who have ‘hand to mouth’ existence. Closure of such businesses goes “Informal Sector” refers to the activities in which unregistered and unnoticed. It is urgent that such many, if not most, urban workers regularly engage activities get due recognition and acclaim so that as full participants in the existing economic order the livelihood of such marginal people may be (Peattie, 1980: Davies, 1979). As a social stratum, secured through relevant government programs. “informal sector refers to the most deprived Informal sector provides livelihood to millions sectors of the population, primarily in urban of people, yet their contribution to economic areas. Deprivation is variously de ned in terms of development is negligible. It consists of typically access to and quality of employment, earnings and small inef cient rms run by poorly educated consumption. (Raczynski, 1977). entrepreneurs. They produce low–quality products According to an ILO sponsored study, the for low–income consumers using little capital de ning characteristic of informal enterprise is and adding little value. Informal rms enjoy ease of entry, determined by low capital and skill advantage like avoidance of tax and regulations. requirements. Street vending, domestic service, However, they do not threaten formal rms; the minor household repairs, custodial duties can be increase in value that informal entrepreneurs performed by anyone without special training or would achieve by operating formally is too small resources. This sector has workers with low levels to offset the additional costs that would arise from of education and such segments of the population taxes and regulations. Thus, the giant informal as women, children and aged and recent urban sector competes unfairly with law–abiding formal migrants. Their earnings are lower than workers rms (Farrell 2004). Supporting this view, one of formal sector and their opportunities for must understand that informal sector needs to be advancement out of informal activities are severely monitored and studied so that they can be brought limited. (Gerry, 1978; Tokman, 1978). Informal sector under the purview of government and the hidden has other characteristics like reliance on indigenous entrepreneurial abilities be tapped. However, it also resources, family ownership of enterprises, small cannot be denied that informality is a byproduct of scale of operation, labour–intensive and adaptive Table 1: Estimated Number of Informal/Formal Sector Workers in 1999–2000 and 2004–05 (in millions). 2004–05 Category of workers Informal Sector Formal Sector Total Informal Workers 391.73 (99.6) 28.91 (46.2) 420.67 (92.3) Formal Worker 1.42 (0.4) 33.65 (53.8) 35.03 (7.7) Total 393.15 (100.0) 62.56 (100.0) 455.7 (100.0) 1999–2000 Informal Workers 339.71 (99.5) 23.04 (42.0) 362.76 (91.5) Formal Worker 1.79 (0.5) 31.85 (58.00) 33.64 (8.5) Total 341.50 (100.0) 54.89 (100.0) 396.4 (100.0) Source: Report of the Committee on Unorganized Sector Statistics, National Statistical Commission, Government of India, February 2012. Indian Journal of Agriculture Business / Volume 6 Number 1 / January – June 2020 41 Rinky Kumari, Kumar Ankur Karan. Death of Firms: A Qualitative Study of Gaya District (Bihar) technology, skills acquired outside the formal use for their physical and nancial capital. The school systems, and unregulated and competitive reasons that attracted them to the industry are no markets. Urban growth in India can be attributed longer suf cient for them to stay. They may have to migration from the rural areas. The motivation got attracted to some other industry. Firms may behind such migration is economic in nature. The also be driven out due to high costs which make so called ‘modern sector’ in manufacturing and it dif cult to compete with the market. Excessive social establishments has failed to cause an increase competition caused by existing rms, new entrants in labour demand owing to its capital–intensive or import competition may snatch opportunities nature. However, the excess labour supply caused from the existing rms. Noboyuki Harada, (2007) in by migration is generally found to be absorbed by his paper examined small rm exit behaviors, on rest of the urban economy loosely termed as the the basis of a large scale questionnaire survey. He ‘informal sector. divided his ndings into ‘economic–forced exit’ and ‘non–economic forced exit’.