Mains Marathon

Approach

Introduce by writing about informal sector in India. Discuss what is the influence of it on quality of employment. What measure could be taken to formalise the Indian economy. Conclude accordingly.

Answer:

The informal sector in India refers to a significant portion of economic activities and employment that operates outside the purview of formal regulations, often lacking legal recognition, social protections, and formal contracts.

• The Periodic Labour Force Survey (2019-20) revealed that around 93.4% of India's total workforce is employed in the informal sector.
• The Economic Survey 2019-20 highlighted that the informal sector accounts for about 70% of India's gross domestic product (GDP) and 80% of employment.

Informal sector influence on the quality of employment:

• Lack of Job Security: Informal sector jobs typically lack job security due to the absence of formal contracts and legal protections, leading to precarious employment.
  • The PLFS (2019-20) reported that over 90% of India's workforce is engaged in the informal sector.
• Limited Social Benefits: Informal sector workers often lack access to social benefits like health insurance, pension, and unemployment benefits, impacting their well-being.
  • AS per ILO, only about 12% of India's working-age population has access to social security benefits.
• Low Wages: Informal sector jobs typically offer lower wages compared to the formal sector, contributing to poverty and income inequality.
  • The Labour Bureau reported that the average daily wage for casual laborers in 2019-20 was around Rs 322.
• Limited Skill Enhancement: Informal sector jobs often lack opportunities for skill development and training, leading to a lack of skill enhancement and growth potential for workers.
• Unregulated Working Conditions: Informal sector workplaces often lack proper safety regulations, working conditions, and labor protections, exposing workers to health and safety risks.
• Vulnerability to Economic Shocks: Informal sector workers are more vulnerable to economic shocks, such as the COVID-19 pandemic, due to the lack of safety nets and job stability.
• Lack of Career Progression: Informal sector jobs typically offer limited opportunities for career advancement or skill diversification, hindering professional growth.

Measures to formalise the Indian economy:

• Digital Financial Inclusion: The Digital India campaign facilitated financial inclusion, with over 41 crore (410 million) Jan Dhan accounts opened by 2021.
• Skill Development Programs: The National Skill Development Corporation reported over 3.5 crore (35 million) people trained under various skill development initiatives.
• Access to Formal Credit: The Pradhan Mantri Mudra Yojana disbursed loans worth Rs. 22.8 lakh crore by 2021, aiding small businesses.
• Social Security Schemes: Pradhan Mantri Shram Yogi Maan-dhan (PMSYM) scheme covered over 44 lakh (4.4 million) unorganized sector workers by 2021.
• GST Implementation: Goods and Services Tax (GST) replaced multiple indirect taxes, promoting a formalized tax structure.
• E-Governance Initiatives: The Digital India initiative has digitized various government services, reducing bureaucratic hurdles.
• Formalization of MSMEs: The MSME sector contributes around 30% of India's GDP and employs a significant portion of the workforce.
  • The Udyam Registration portal simplifies the process of registering and formalizing micro, small, and medium enterprises.
• Financial Literacy Programs: The RBI's "Customer Awareness Campaign" educates people about various financial products and services.

The Economic Survey 2022-23 concludes that while the informal sector continues to be a significant contributor to India's economy and employment, its dominance highlights the need for comprehensive policy interventions. This shift towards formalization is crucial to enhance job quality, ensure social protection, and foster sustainable economic growth in India.