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•Providing social welfare to informal
The First Indian National Commission on Labour (1966-69) defined „unorganised
sector workforce as –“those workers who have not been able to organize
themselves in pursuit of their common interest due to certain constraints like
casual nature of employment, ignorance and illiteracy, small and scattered size of
Over 94 percent of India's working
population is part of the unorganised
sector.In local terms, organised sector or
formal sector in India refers to licensed
organisations, that is, those who are
registered and pay sales tax, income tax,
etc. These include the publicly traded
companies, incorporated or formally
registered entities, corporations, factories,
shopping malls, hotels, and large
businesses. Unorganised sector, also known
as informal sector or own account
enterprises, refers to all unlicensed, self-
employed or unregistered economic activity
such as owner manned general stores,
handicrafts and handloom workers, rural
traders, farmers, etc.
•Enterprises in the informal economy are facing obstacles that are
sometimes similar to those experienced by formal enterprises.
However, informal enterprises are much more vulnerable in
relation to these problems.
– Poor infrastructure
such as transport,
– Lack of working
– Poorly developed
– No access to formal training and, as a
result, lack of skills in particular as regards
basic economic skills and managerial
– Lack of formal schooling sometimes even
resulting in illiteracy.
– Limited access to land and property
– Limited access to formal finance and
– Too restrictive or cumbersome taxation
systems and labour laws.
– Excessive government regulations in areas
such as business startup, in particular as
regards cumbersome, time demanding and
costly procedures for business registration.
– Lack of access to official social security
– Lack of information on prices, viability of
– Fewer market opportunities due for
instance to non-compliance to
– Excessive registration
and transaction costs of
starting or operating
– Lack of opportunities
for bulk purchase of
– Low incomes or lack
of regular income as
competes for the use of
– Lack of working
capital: credit has to be
obtained from informal
sources such as friends
or relatives or non-
– Insufficient funds do
not allow for further
Suggesting Policy reforms
- Reducing the number of business licenses,
- Streamlining administrative processes.
- Adopting uniform taxes.
- Enhancing access to capital.
Policy Reforms continued…….
Cities in India see a major influx of rural labor in
search of jobs (rural labor is primarily dependent
on agriculture which is seasonal in nature in
most parts of the country) , those who don’t find
themselves jobs in the formal sector end up in the informal sector
Potential of the backward regions from where out-migration takes place should
be tapped. Investment in the development of the region in areas such as irrigation
facilities, dry land farming with emphasis on horticulture and allied activities which
would create employment.
Formalizing the practice of Contractual Labour.
•Compare the compensation structures of the dispatched workers and the
formal employees and adjust any discrepancies in compensations and benefits,
if necessary, to meet the “equal pay for same work” rule.
•Review the existing labor dispatching contracts and prepare new labor
contracts for those dispatched workers who need to be converted
into regular hires when their dispatching contracts expire.
Protection of Domestic workers
Domestic workers are among the most abused and exploited workers in India.
Domestic Workers Convention 2011 as adopted by ILO sets minimum standards for
domestic workers, India should ratify to them. According to us, RWAs can maintain
records of the domestic workers in each locality, which will be the first step
towards their minimum security ( as registered workers), and these workers can
pool in a certain percentage of their wages to avail loans whenever required.
Health, medical benefits can beextended to them by transferring funds to their
bank accounts using their adhaar card number.
The root causes of the informal economy are multifaceted, legalization
alone is not enough to promote decent work. Strong and effective
judicial, political, economic and other market and non-market
institutions and equitable access to these institutions are essential.
Informal workers and enterprises also need access to resources,
information, markets, technology, public infrastructure and social
services; they need a "level playing field" (similar rights, facilities and
access) vis-à-vis those in the formal economy. Those who are
particularly disadvantaged or discriminated against may need special
measures. For the poor without property rights, measures to ensure that
the legal system records property and titles assets of the poor in
standardized, simple and cost-effective ways would enable them to
transform their assets into productive capital and investments. Most
importantly, those in the informal economy need representation and
voice as a fundamental right and an enabling right to enhance their
access to a range of other rights at work. It is also important to promote
good governance and to reduce the costs to governments of informality
and informalization. Often, informal workers and entrepreneurs are
subject to harassment, bribery and extortion practiced by corrupt
officials and face prohibitive costs and complexity of bureaucratic
procedures for setting up and operating enterprises.
Formalising informal sector (Contract Labour) entails huge
amount of capital as well as time investment.
High degree of decentralization in the administrative units
of political institutes in India leading to delayed decision-
On-going debate and lack of consensus on which
categories of workers should be included within the ambit
of the unorganised sector.
Almost next to impossible to determine the extent of black
market as it is pervasive on the Indian economy
Social security is not applicable for informal sector workers
cause of their exclusion from banking systems.
The amount of black money injected every year in our
Indian Economy is unaccounted for and is too pervasive as
we know it. Thus, reforming the informal sector is a task
that will require persistent efforts and revised intellectual
engagement in coming up with sustainable solutions.
More than 90% of our economy is thriving on the informal
sector ( vice-versa the informal sector is parasitic to our
economy), and hence a radical approach will not work,
neither will a slow approach suffice. Macro Solutions have
to be figured out no matter how impossible it may seem, it
has to be figured out in a way that the effects trickle down
to the micro levels.