The Informal Sector in India

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In India, about 92% of the labour force or about 326 million persons work in the informal sector. As such, it can be well be termed as the “Informal Economy”.

The concept of the Informal Sector was first introduced by Keith Hart in a field study of urban workers in Ghana in 1971 for denoting the self – employed sector which provided a source of income to many new entrants to the labour force who were unable to secure jobs in the organized or formal sector.

The concept was first used in an official document of the ILO – UNDP (International Labour Organisation) with reference to their employment mission to Kenya in 1972. This mission identified the main characteristics of the informal sector as ease of entry, reliance on indigenous resources, family ownership, labour intensive technology, small scale of operations, non-institutional skills’ formation and unregulated but competitive markets (Anand, H). Moreover, workers in the informal sector do not enjoy the measure of protection afforded by the formal modern sector in terms of job security, decent working conditions, and old age pensions.

Though the term “informal sector” gained currency after ILO evolved a conceptual framework and guidelines for the collection of statistics on informal sector, there has not been any single definition of informal/unorganised sector in India. (Papola, 1981).

Generally the following definition of the Informal Sector is used,

“The informal 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”.

The definition of the unorganised enterprise constituting the unorganized sector given her is a generic one in the sense it has no legal personality of its own (other than the person who owns it); it is small in employment size and, more often than not, associated with low capital intensity and labour productivity. The diverse nature of these enterprises is often a response to the demand for a variety of low-price goods and services produced in different modes of self employment, unpaid family labour and wage work.(Sen Gupta, 2008)

The International employment situation is characterised by growing informalism. The labour market situation of women in developing countries is changing in as much as women are shifting out of agricultural into manufacturing services and commerce. According to Guy Standing “ while there has been an overall trend toward more flexible, informal forms of labour, women’s situation has probably become less informal, while men’s has become more so. Further, the international labour market is characterised by growing demand for skilled labour in certain areas; redundancy, outsourcing and sub-contracting in several areas; and the growing need for training and multi-jobbing.

It would now be useful to examine the Indian employment situation within the context of the foregoing international scenario. The Indian Labour force was estimated to be about 362 million (as 1.7.1997) thereby constituting about 12 % of the world’s labour force. The unorganised workers consist of about 92 percent of the total workforce that is about 457 million (as of 2004-2005) (Anand, H). At the end of 2004- 05, about 836 million or 77 % of the population were living below Rs. 20 per day and constituted most of India’s informal economy. About 79% of the informal or unorganized workers belong to this group.

The Indian Growth Strategy of the 1990s and this decade have led to an increased economic inequality. Several studies have pointed to increased distress in the agrarian sector in India. Agricultural growth has lagged far behind the growth in the other sectors such as services and manufacturing. This has been attributed to policies of economic liberalisation. However, the rural non-agricultural sector has seen impressive gains at a...
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