What is Informal Sector?
Historical Background
Key Points
10 points- 1.
Dominant employment source: Accounts for over 80% of India's non-agricultural workforce.
- 2.
Lack of regulation: Not governed by labor laws or social security regulations.
- 3.
No formal contracts: Workers often operate without written employment contracts.
- 4.
Low wages and job insecurity: Characterized by low pay, irregular income, and lack of job security.
- 5.
Absence of social security: Workers typically do not have access to provident fund, gratuity, health insurance, or pension schemes.
- 6.
Low productivity: Often associated with lower productivity compared to the formal sector due to limited capital, technology, and skills.
- 7.
Contribution to GDP: Contributes significantly to the national GDP, though often underestimated.
- 8.
Vulnerability: Workers are highly vulnerable to economic shocks, health crises, and exploitation.
- 9.
Diverse activities: Includes agriculture, construction, street vending, domestic work, small manufacturing, and increasingly, parts of the gig economy.
- 10.
Difficult to tax: Challenges in tax collection due to lack of formal records and small scale of operations.
Recent Developments
5 developmentsLaunch of the e-Shram portal in 2021 to create a national database of unorganised workers for targeted welfare schemes.
The Code on Social Security 2020 seeks to consolidate and expand social security provisions for unorganised workers.
Government initiatives for formalization, such as promoting digital payments and MSME registration.
The gig economy is increasingly seen as a new segment within or overlapping with the informal sector, bringing new challenges and opportunities.
Focus on skill development and financial inclusion to improve the conditions of informal sector workers.