The Informal Sector in India: Shifting Employment Landscapes 

Despite seven decades of development planning in India with the objective of providing decent livelihoods, over half of the Indian workforce still relies on farming as their primary source of income.

It has been envisaged that the industrialisation strategy would bring surplus workers from agriculture to industry with better standard of living as in developed countries.

The observable trend within the Indian workforce indicates a notable rise in the proportion of casual laborers, signifying a substantial shift in the employment landscape.

Road side vending: an increasing variety of informal sector employment

 Exploring Disparities and Quality in Formal and Informal Sectors in India

• Challenges in Indian Employment Quality: Economists argue that the quality of employment in India has deteriorated over the years, leading to questions about, 
  • why some workers do not receive benefits like maternity leave, provident fund, gratuity, and pension, or 
  • why private sector workers earn less than their public sector counterparts.
• Protected Workforce with Trade Unions: 
  • A small section of the Indian workforce enjoys regular income and the protection of labor laws. 
  • These workers form trade unions and negotiate with employers for better wages and social security measures. 
• Indian Workforce Classification: The workforce can be classified into two categories: workers in the formal sector (organized sector) and workers in the informal sector (unorganized sector).
  • Formal Sector: 
    • It includes public sector establishments and private sector establishments with 10 or more hired workers. 
    • The workers enjoy social security benefits and generally earn higher wages.
  • Informal Sector In India: 
    • This sector encompasses a wide range of workers, including farmers, agricultural laborers, owners of small enterprises, self-employed individuals without hired workers, and non-farm casual wage laborers who work for multiple employers. 
    • Workers in the informal sector do not enjoy the same level of social security, and their income can be irregular.

• Challenges in Shifting the Workforce Despite Developmental Planning: Development planning aimed to shift more workers into the formal sector as the economy grew. 
  • However, in reality, a large proportion of the workforce remains in the informal sector (Refer Figure). 
  • In 2011-12, only about 6% of the total workforce in India was employed in the formal sector, while the rest, around 94%, belonged to the informal sector.
  • Gender Disparities: Gender-wise data for the same year showed that approximately 20% of formal sector workers and 30% of informal sector workers were women.
  • Problems Faced by Informal Sectors:
    • The informal sector in India  faces various challenges, including outdated technology, lack of government regulation, and the absence of social security measures. 
  • Vulnerabilities of Workers: Workers in this sector often live in impoverished conditions and can be easily dismissed without compensation.
• Initiatives to Modernize the Informal Sector: Efforts have been made to modernize informal sector enterprises and provide social security measures for these workers, with the support of organizations like the International Labour Organization (ILO) and the Indian government.

DOWNLOAD PDF