Informal sector

The informal sector is now seen as the next engine of growth for India's economy. Nearly 81% of all employed persons in India make a living by working in the informal sector, with only 6.5% in the formal sector and 0.8% in the household sector, according to a new ILO (International Labour Organisation) report "Women and Men in the Informal Economy – A Statistical Picture (Third edition) 2018 ."A majority of women in India are informal workers. The statistics of the ILO report indicates that 95% of work force is in the informal sector. , the transition to formality is increasingly seen as a central goal in national employment policies (ILO, 2014a).
This paper will study the challenges imposed by the in formalization of the economy and how detrimental can that be for the economic development in general.
Key words: Informal Economy, Dual burden of work, unorganized sector

1. CONTRIBUTION OF INFORMAL SECTOR TO INDIAN ECONOMY: POTENTIAL AND CHALLENGES Dr.(Mrs) Anupma Srivastava Associate Professor/Head, Department of Economics Isabella Thoburn College Ms Amita Marwha Faculty Department of Economics Isabella Thoburn College

2. Informal Sector- The Engine Of Growth The Informal sector is now seen as the next engine of growth for India's economy.  Nearly 81% of all employed persons in India make a living by working in the informal sector, with only 6.5% in the formal sector and 0.8% in the household sector, according to a new ILO (International Labour Organisation) report "Women and Men in the Informal Economy – A Statistical Picture (Third edition) 2018 .“

3. Informal Sector -Background The term 'informal sector' was first used by John Keith Hart in 1973 in the study of employment pattern in urban Ghana.‘ its further elaboration and elucidation was made by the ILO's Employment Mission to Kenya under the auspices of the World Employment Programme in 1972

4. Key Question In Hart’s Study key question:  does the “reserve army of urban unemployed and underemployed” constitute a  passive exploited majority  OR do their informal economy activities “possess some  autonomous capacity for generating incomes ”? answer:  both - external constraints/capitalist domination  +  autonomous capacity

5. National Commission for Enterprises in the Unorganised Sector (NCEUS) The Government of India, constituted a National Commission for Enterprises in the Unorganised Sector (NCEUS) vide Ministry of Small Scale Industries Resolution No. 5(2)/2004-ICC dated 20th September, 2004, to act as an advisory body and watchdog for the informal sector

6. Definition Given By NCEUS "The unorganised sector consists of all unincorporated private enterprises owned by individuals or households engaged in the sale and production of goods and services operated on a proprietary or partnership basis and with less than ten total workers". Definition given by NCEUS (National Commission For Enterprises In The Unorganized Sector)

7. Informal Sector -Lack In Conceptual Clarity National Accounts Statistics (NAS) defines the unorganised sector in addition to the unincorporated proprieties or partnership enterprises, includes enterprises run by cooperative societies, trust, private and limited companies. The informal sector can therefore, be considered as a sub-set of the unorganised sector.

8. Shortcoming Of The Definition The definition is, therefore, in terms of characteristics of the enterprise rather than in terms of the characteristics of the worker. Thus a large number of workers with informal job status were excluded.

9. Define Unorganised Employment Employment in the unorganised sector has hitherto been derived as a residual of the total workers minus workers in the organised sector as Reported by the Directorate General of Employment and Training (DGET).

10. Features Of Informal Sector Low level of organization; small in scale usually employing fewer than ten workers and often from the immediate family; Heterogeneity in activities; Easier entry and exit than in the formal sector; Usually minimal capital investment; little or no division between labour and capital; Mostly labour intensive work, requiring low-level skills; there is usually no formal training as workers learn on the job ;

11. Features Of Informal Sector Labour relations based on casual employment and or social relationships as opposed to formal contracts; employer and employee relationship is often unwritten and informal with little or no rights; Due to their isolation and invisibility, workers in the informal sector are often largely unaware of their rights, cannot organise them and have little negotiating power with their employers and intermediaries (ILO 2000).

12. Segments of Informal Economy Wage work for informal enterprises Domestic work without a regular contract Casual day labour without a fixed employer Unregistered or undeclared work for formal or informal firms Temporary and part-time work for formal firms EXAMPLES (total = 106 activities): Agriculture: landless labourers , small farmers, traditional artisans, animal husbandry Industry: workers in brick-kilns, construction, beedi -making, incense stick Services: workers in local transport, shops, domestic servants, community services like street cleaning, street vendors, garbage collectors Small Workshops: shoe makers, garment makers and embroiderers At Home: garment workers artisans or craft producers On Rivers, Ponds, Lakes, and Oceans: fishermen, shippers

13. Most labour has moved from agriculture to the informal non-agricultural sector and this has boosted productivity. However, at the same time, labour has moved out of the highest-productivity sector – the formal sector. The proportionate fall in formal employment was greatest in the public sector and, even in the most productive formal private sector, the share of employment has fallen slightly High capital intensity in the organised sector – despite low labour costs – and an extraordinarily large share of overall manufacturing employment in micro-enterprises, most of which are in the informal sector are the potential reasons why industrial /manufacturing sector is lagging behind. Employment Status in Informal sector-A Bleak Picture

14. Employment Status in Informal sector-A Bleak Picture Construction, manufacturing and wholesale and retail trade activities together was the main providers of employment for the informal sector enterprises and ‘all’ enterprises in both the rural and urban areas. Out of all workers in the non-agriculture informal sector, 76 per cent in the rural areas and 72 per cent in urban areas belonged to construction, manufacturing and wholesale and retail trade. The corresponding figures for all workers in non-agriculture sector in rural and urban areas were nearly 69 per cent and 59 per cent, respectively.

15. Proportions of informal sector workers in the activities which provided majority of employment in informal sector INDUSTRY SECTIONS RURAL URBAN WHOLESALE OR RETAIL TRADE, ETC. 91 92 MANUFACTURING 86 78 TRANSPORT, STORAGE AND COMMUNICATION 82 68 CONSTRUCTION 64 72

16. Why study of Urban Informal sector Economic activities in the informal sector play an important role in developing countries, especially in urban areas where its income opportunities have been increasing rapidly with economic development.

17. Categories Of Urban Informal Sector workers

18. First Category Of Workers are Home Based Workers

19. Second category of workers are Street vendors 

20. Third categories of workers are Waste pickers

21. various laws which apply to all section of Unorganized section of the labour  

22. Various Laws Which Apply To Some Section Of Unorganized Section Of The Labour

23. Profile of Women Workers In The Informal Sector Variables category Reasons for the particular profession Terms and condition of Job Wages Discrimination on the basis of wages Domestic Workers Only job available near their residence Economic compulsion No other skill No defined rules Increment in wages/fringe benefits only when they work for longer hours Negotiable No discrimination More preferred over Men for house hold job Construction workers No land No other skills Depend on local contractor for work No regularity or security of job Disparity in wages and in the nature of work. Ill treatment and harassment at the hand of contractors

24. Profile of Women Workers In The Informal Sector Variables category Reasons for the particular profession Terms and condition of Job Wages Discrimination on the basis of wages Garment workers Low middle class who wants white collar jobs Can work from home No significant information Work based commission Arbitrary No incidence reported Petty traders /Vendors Self employed Sales Persons Economic compulsions Very tedious Long working hours involves risk of personal assault Mostly work based Arbitrary and low

25. Challenges In Formalization   Restrictive labour laws- which promotes ad - hocism and contract hiring in the labour market to circumvent the rigid labour laws.  Predominance of services-sector led growth Absence of thrust on manufacturing 

26. Challenges In Formalization Lack of an exit mechanism such as insolvency and bankruptcy laws has led to firms remaining small, barely breaking even, and not scaling up. Such small firms can circumvent formal sector laws such as mandatory registrations with the EPFO etc. rendering them informal. The advent of the Fourth Industrial Revolution and automation poses even more dangers to present formal sector jobs since workers with current skills will be rendered obsolete unless they undergo skill reorientation.

27. Conclusion Clearly, the informal sector is not the residual sector of the economy. In reality, it is the dominant sector. The informal sector may not contribute much to the national income but its dominance in employment is likely to continue for some more time as informal sector has the major role to play in expanding the capacity of Non agriculture sector to absorb labour. Government can play both direct and indirect role in providing formalization to the large section of the population engaged in informal sector through the better measures of contribution of the informal sector in the GDP of the country and to provide labour productivity, capital productivity and capital output ratio to measure the efficiency in the informal sector.

28. Thank You