Hindu Editorial Analysis : 14-December-2023

The unorganised or informal sector in India is characterized by small, scattered units that operate largely outside government control, with rules and regulations often disregarded. This sector encompasses a substantial portion of the workforce engaged in various activities such as street vending, repair work, and independent farming.

Scale of Employment: Dominance of the Informal Sector

Approximately 80% of India’s labor force is employed in the informal sector, with half engaged in agriculture and the remaining in non-agricultural activities. Unfortunately, jobs in this sector are often low-paid, irregular, and lack essential social security benefits, creating vulnerabilities for workers.

Challenges and Concerns: Issues Plaguing the Informal Sector
  1. Job Insecurity and Lack of Benefits
    • Jobs in the informal sector lack security, with no provisions for overtime, paid leave, or holidays.
    • Workers can be terminated without reason, contributing to a precarious work environment.
  2. Structural Disadvantage
    • The informal sector faces a structural disadvantage in terms of literacy and skills, making workers more susceptible to exploitation.
    • Economic shocks disproportionately affect this sector, exacerbating vulnerabilities.
  3. Government Failure
    • Government initiatives to reduce wage inequality and ensure a minimum wage for urban informal workers during normal times have fallen short.
    • The impact of national lockdowns, such as those in 2020, has disproportionately affected informal sector workers.

GDP Estimates and the Role of the Informal Sector

  1. Resilience Amidst Decline
    • The recently released provisional GDP estimates for 2022-23 suggest that the informal sector may be contributing more to the economy than predicted.
    • Resilience in agriculture and certain non-agricultural sectors, including trade, hotels, transport, and communications, has played a crucial role.
  2. Criticism of GDP Estimates
    • Long-standing criticism points out that official GDP estimates fail to capture the substantial informal sector, a major source of employment for the majority of India’s labor force.
    • The contribution of the organised sector is viewed as inflated, masking the challenges faced by the informal sector.
  3. Treating Organised and Unorganised Sectors Equally
    • Lead indicators for GDP statistics, sourced from the organised sector, perpetuate a bias by treating the performance of the unorganised sector as equivalent, which is not the case.
    • Real wages and earnings of informal sector workers have stagnated or fallen relative to pre-pandemic levels.
Government Initiatives: Addressing Challenges in the Informal Sector
  1. MGNREGA
    • The Mahatma Gandhi National Rural Employment Guarantee Act provides employment opportunities in rural areas.
  2. PMRPY and ABRY
    • Pradhan Mantri Rojgar Protsahan Yojana incentivizes employers to create new employment, bringing informal workers into the formal workforce.
    • Aatmanirbhar Bharat Rozgar Yojana encourages new employment creation with social security benefits.
  3. Unorganised Workers’ Social Security Act, 2008
    • Empowers the government to provide social security benefits to unorganised sector workers through welfare schemes.
  4. e-Shram Portal
    • Aims to create a national database of unorganised workers, providing a single-point reference for authorities to track and offer welfare during crises.
  5. Insurance Schemes
    • Pradhan Mantri Jeevan Jyoti Yojana and Pradhan Mantri Suraksha Bima Yojana provide life and disability cover.
    • Pradhan Mantri Shram Yogi Maan-Dhan Yojana and National Pension Scheme cater to the social security needs of workers.
  6. PM-GKAY
    • The Pradhan Mantri Garib Kalyan Anna Yojana, announced in 2020, aims to provide food security to vulnerable populations.
Why In News

India’s informal sector may be adding more value to its economy than what is predicted, challenging conventional assessments and underscoring the need for a comprehensive reevaluation of its economic landscape.

MCQs about Elevating India’s Informal Sector

  1. What percentage of India’s labor force is employed in the informal sector?
    A. 20%
    B. 40%
    C. 60%
    D. 80%
    Correct Answer: D. 80%
    Explanation: approximately 80% of India’s labor force is employed in the informal sector.
  2. What is a structural disadvantage faced by workers in the informal sector?
    A. High wages
    B. Lack of job security
    C. Adequate social security benefits
    D. Government control
    Correct Answer: B. Lack of job security
    Explanation: The informal sector faces a structural disadvantage, including low job security for workers.
  3. Which sector displayed resilience in the face of economic challenges, contributing to India’s GDP?
    A. Manufacturing
    B. Agriculture
    C. Information Technology
    D. Healthcare
    Correct Answer: B. Agriculture
    Explanation: The agriculture, including forestry and fishing, displayed resilience, contributing to India’s GDP.
  4. Which government initiative aims to incentivize employers for the creation of new employment in the formal workforce?
    A. Pradhan Mantri Jeevan Jyoti Yojana
    B. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)
    C. Aatmanirbhar Bharat Rozgar Yojana (ABRY)
    D. Pradhan Mantri Shram Yogi Maan-Dhan Yojana
    Correct Answer: C. Aatmanirbhar Bharat Rozgar Yojana (ABRY)
    Explanation: ABRY as a government initiative to incentivize employers for creating new employment and providing social security benefits.

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