What Is It That Ails Our Informal Sector?

The Union government needs to define the informal sector properly and provide labour legislation to protect employment and wages

- Ashoke K Maitra

What was done to migrant labourers all over India during Covid-19 should never have happened. However, this is part of a larger malaise. We need to examine why it happened and what needs to be done if the industry and informal sector are to have a symbiotic relationship.

Let us dissect the problems of the informal sector. They effectively constitute 90% of the workforce and about 50% of the national product. As per Government of India statistics, the unorganised sector contributes almost 50% of the total GDP. We shall examine three aspects.

The definition and percentage of unorganised labour in the informal sector are blurry and confusing. The Economic Survey of 2018-19, released on 4 July 2019, said “almost 93%” of the total workforce is “informal”. But NITI Aayog’s Strategy for New India at 75, released in November 2018, said: “By some estimates, India’s informal sector employs approximately 85% of all workers.”

What is the source of such information? The Economic Survey of 2018-19 does not mention it. The NITI Aayog does, and cites a 2014 report, “OECD India Policy Brief: Education and Skills”, which, in turn, is silent on its source of information.