Providing social welfare to informal sector
Dronacharya group of Institutions, Mohit Valecha
Greater Noida Shrey Sharma
Informal Sector in India
• It is well known that a major part of the workforce in India and other developing countries work
in informal sector.
• Types of enterprises in informal sector:
(i) proprietary (ii) partnership (iii) registered under Companies Act as companies (iv) co-
operative societies registered under Societies Registration Act and (v) Government or
Public Sector Undertakings
• It has been seen by the Task Force that the appropriate employment size in the context of India is
• The overwhelming majority of workers in India belong to the informal sector, “of the working
population of 317 million, over 290 million, i.e., over 92 percent are in the unorganised sector.
Persons involved in Informal Sectors are unable to reach Government schemes
• Problem: The persons engaged in very small-scale or causal self-employment activities may not
report in statistical surveys that they are self employed, or employed at all, although their activity
falls within the enterprise-based definition.
Solution: The persons engaged in informal sector should report in statistical survey and for that
more awareness programs should be conducted in every area.
• Problem: Certain groups of persons such as out-workers, sub-contractors, free-lancers or other
workers whose activity is at the borderline between self-employment and wage employment are
likely to be missed or wrongly classified.
Solution: The National Commission for Enterprises in the Unorganised Sector (NCEUS) should
maintain a special task force to classify the different workers in informal sector.
Growth of Informal Sector and comparsion between organised sector
The informal sector in the country has also been
expanding, engulfing more and more workers
in its fold. Additionally, increasing flexibilisation
and informalisation in employment and working
conditions has affected both men and women,
increasing risks and vulnerability. “The NSS data
from 1999-00, 2004-05 & 2009-10 employment
surveys show that: (a) the percentage of informal
workers among paid workers in the non-agricultural
sector has steadily increased. (b) The percentage
of such workers with access to social security has
declined. (c) Informalisation has grown even in the
organised sector, and even in the public sector and in
public ltd. companies.
Social Welfare of Informal Sector
• Social protection measures are critical for informal workers, particularly for women workers, to
protect them from contingencies and deprivation. Yet, there are only a few social protection
measures in place for informal workers in India that hardly address the vast number of
insecurities faced by them.
• Social protection measures that benefit the informal sector include, crèches for children of
working women implemented by the Central Social Welfare Board.
• Monetary assistance of Rs. 300 under the National Maternity Benefit Scheme to pregnant women
for first two childbirths, in the situation of death of the breadwinner of the family a lump sum
amount of Rs. 5000 is given to BPL families under the Family Benefit Scheme. Old-age Pension
• Under National Scheme men and women who are 65 years and above are paid a monthly
• Problem statement: The welfare funds arranged by the government does not reach the small
areas and to the people of informal sectors who are not well aware of these schemes.
Proposed Solution: Several new programs, task force and schemes should be developed by the
government so that the maximum of the funds can be reached to the
informal sector workers.
• Despite the criticality of social protection measures for the informal economy workers, especially
women, the social security coverage is actually low and declining. According to the NCEUS, only
about 7% of the total workforce in India has any form of social security.
• With increased flexibility, even among wage employees in non-agricultural establishments, social
security coverage is declining.
• Furthermore, ‘findings of the NCEUS on protective social coverage shows that, only 6 percent of
unorganised workers are estimated as receiving protective social security through governmental
or non-governmental interventions.
Major areas of vulnerability identified from work
• Illness requiring hospitalization
• Untimely death of bread winner
• Maternity episodes
• Retirement from work
Proposed solution: The proper funding system should be proposed and should be audited and the
care has to be taken that the funds has been reached to the Informal Sector workers.
The funds can be generated from any welfare fund like, the centrally administered Bidi Workers
Welfare fund, a cess of about Rs 0.50 is charged on 1000 bidis. Similarly there are welfare funds for
Magnitude of workforce engaged in the unorganised/informal sector.
• The National Sample Survey Organisation (NSSO) carried out a sample survey in 1999-2000 and
its results showed that out of total workforce of 397 million, only 28 million workers are
employed in the organised sector and remaining in the unorganised sector.
• It reveals that over a decade, the employment in the organised sector has been almost stagnant
or slightly declined.
• As per survey, there were 44.35 million enterprises and 79.71 million workers employed thereof
in the non-agricultural informal sector of the economy.
• Among these 25.01 million enterprises employing 39.74 million workers were in rural areas
whereas 19.34 million enterprises with 39.97 million workers in the urban area. Among the
workers engaged in the informal sector, 70.21 million are full time and 9.5 million part times.
Percentage of female workers to the total workers is 20.2 percent
Major problem is that the Informal sectors has no Trade Union
• Scope: With the Trade Union of Informal sectors the persons will be able to meet their demands.
The Trade Union will have a Union leader.
• Role of union leader will be of making reports and presenting it to the Government and
demanding the welfare of the workers.
• The workers will not have to know about any newly launched Government schemes, workers will
only deal with the Union leader and Union leader can will deal with schemes and also let the
workers khow about any new scheme.