The document summarizes literature on the growth of informal industries. It discusses how the informal sector is defined and provides examples of informal work. It then analyzes data on employment and GDP in organized vs unorganized sectors. Key reasons for the growth of informal industries are limited formal sector job absorption and high regulatory barriers. In India, the informal sector contributes nearly half of NDP and employs the vast majority in manufacturing, construction, and mining. However, the informal sector receives little government support.

1. REVIEW LITERATURE ON THE
GROWTH OF INFORMAL INDUSTRIES

2. INTRODUCTION
The Informal sector is that part of an economy that is not taxed,
monitored by any form of Government unlike the formal sector.
Regardless, it is included in GNP1 .
 Keith Hart was the first person to introduce the term “Informal
Sector” .
 He describes informal sector as that part of the urban labour
force which falls outside the organised labour market.
1. GNP= Gross National Product

3. Lady making brick Man working in handloom industry
Barbers under shade trees
Carpenters
Bicycle repairs at the side of the road
Bidi manufacturers

4. FORMAL AND INFORMAL EMPLOYMENT BY
SECTOR
2008-09 BY ESTIMATES
Source:

5. INFORMAL INDUSTRY
 An informal industry is an extra-legal enterprise
 It is not normally required to keep financial records.
 It may pay for a license, but does not normally pay
corporation tax [but may pay informal taxation e.g.
bribes to local officials and police].
 Informal Activity- It is highly diversified: success rate in
the informal sector is pretty diversified. Some firms
flourish while others are not so well off. People prefer to
work in this sector; but it is quite marginal and
employment is precarious.

6. CHARACTERISTICS OF ENTERPRISES IN
THE INFORMAL INDUSTRY
 There are low set up costs and entry requirements,
which are presented requirements, which are
presented above as key factors behind
informalization.
 Operations are typically on a small scale with only a
few workers.
 Skills required for the business activities are usually
gained outside formal education.
 The production of goods and services is labour
intensive.

7. Share of Informal Sector in NDP 1 :2001-02
Industry
Group
(In percentage)
Informal Others Unorganised Organised Total
Manufacturing 1.6 3.4 5.0 8.4 13.4
Construction 3.9 3.9 2.5 6.4
Electricity, gas
and water
supply
0.1 0.1 1.0 1.0
Mining 0.2 0.2 1.8 2.0
1.NDP: Net Domestic product
Source: National Commission for Enterprises in the Unorganised Sector

8. GDP1 Estimates at 1999-2000 prices and growth rates
(Figures in crores at 1999-2000 prices)
Industry Group Unorganised Sector
1999-2000 2004-05 Growth rate(%)
Manufacturing 77579 98605 4.91
Electricity, Gas
and Water
1781 1636 -1.69
Construction 45559 72014 9.59
Mining 12478 9405 -5.05
1.G.D.P: Gross Domestic Product
Source: National Commission for Enterprises in the Unorganised Sector

9. Share of Labour Input in Unorganized Sector (%)
Tabulation Category / Description 2004-2005
Share of Unorganized Sector
Manufacturing 87.7
Electricity ,Gas & Water Supply 12.4
Construction 92.4
Mining 64.4
Source: National Statistical Commission ,GOI ,February 2012

10. Source: C.P Chandrasekhar, Jayati Ghosh, India still a vast informal economy, The Business Line
,October 28, 2013

12. REASON FOR THE GROWTH OF THE
INFORMAL INDUSTRIES IN THE 20TH
CENTURY
 Limited absorption of labour, particularly in countries
with high rate of population or urbanisation
 Excessive cost and regulatory barriers of entry into the
formal industries of few motivated by corruption.
 Weak institutions ,limiting education and training
opportunities as well as infrastructure development
 Increasing demand for low – cost goods and services
 Migration motivated by economic hardship and poverty
 Difficulties faced by women in gaining formal
employment.
 Family labour – much of it unpaid.

13. STATE OF INFORMAL SECTOR IN INDIA
 The Expert Group on Informal Sector Statistics, commonly known as the
“Delhi Group” was set up in 1997 as one of the city groups of the United
Nations Statistical Commission to address various methodological issues
involved in the treatment of the informal sector.
 The NCEUS1 was set up by the GOI2 in 2004 ,to “review the status of
informal sector in India including the nature of enterprises, their size,
spread, scope and magnitude of employment.”
 According to Economic Survey 2002-03,the total number of units in the
SSI sector is 33.12 lakh consisting of 26.14 lakh registered and 6.98 lakh
unregistered units.
1. NCEUS – National commission for enterprises in the unorganised sector
2. GOI- Government of India

14. MAJOR DATA SOURCES
 Central Statistical Organisation(CSO)
 National Sample Survey Organisation(NSSO)
 Annual Survey of Industries(ASI)
 Small Industries Development Organisation(SIDO)
 Economic Census(EC)
 Economic Survey(ES)
 National Statistical Commission(NSC)
 National Commission for Enterprises in the Unorganised
Sector(NCEUS)
 National Statistical Commission(NSC)
 Micro, Small and Medium Enterprises(MSME)
 National Accounts Statistics(NAS)
 Ministry of Statistics and Programme
Implementation(MOSPI)

15. FINDINGS
 The growth of informal sector could not be checked
primarily because the employment opportunities
generated in the formal sector did not expand in
the same proportion to the population.
 Informal Industry are economically better and
profitable, free entry and exit is possible hence it
attracts a lot of interest .
 It attributes to about 47.7% toward NDP according
to recent date.
 The Informal Sector does not receive any kind of
support from the government.

16. REFERENCES
 Contribution of the Unorganised sector to GDP Report of the
Sub Committee of a NCEUS Task Force , Working paper no
2(2008)
 C.P Chandrasekhar, Jayati Ghosh, India still a vast informal
economy, The Business Line ,October 28, 2013
 G. Parthasarathy, INDIAN ECONOMY UPDATE volume-4,
 M R SALUJA, Industrial Statistics in India Sources,
Limitations and Data Gaps, Economic and Political Weekly
November 27, 2004
 Wikipedia, the free encyclopedia

17. Thank You