The formal economy – and not just the informal sector – is in distress

 

Ishan Bakshi writes: Between April 2020 and September 2021, 23 per cent of India’s formal labour force availed of an advance from EPFO to meet Covid-19 expenses

The dominant narrative in public discussion is that much of the persisting economic distress is concentrated in the informal or unorganised parts of the economy. That enterprises in the organised sector and the formal labour force have emerged relatively unscarred is a view that resonates widely. However, contrary to this notion, there are signs that the distress not only envelops the informal economy, but also that large parts of the formal economy continue to face considerable financial hardship.

Take the formal labour force. Since the onset of the pandemic, the Employees’ Provident Fund Organisation (EPFO) has allowed members to avail of an advance to deal with expenses arising from Covid-19. Data from EPFO shows that between April 2020 to September 2021, 1.5 crore such claims were received. This implies that 23 per cent of India’s formal labour force (an upper limit, based on those contributing to EPFO) has availed of this facility. (Members were allowed to do so twice from June 2021).

Of these 1.5 crore claims, 87.2 lakh were received in 2020-21. This works out to an average of 7.26 lakh claims per month. In comparison, in just the first six months of 2021-22 (April-September), 63.4 lakh such claims were received, at an average of 10.5 lakh per month. This suggests that not only has the formal labour force continued to face economic hardship, but also that it has been of a similar if not higher magnitude in the ongoing financial year.

For the informal labour force with no such safety net, dealing with the economic fallout would have undoubtedly been far more difficult. While there are no firm estimates, it is possible to arrive at some understanding of the extent of the distress using data of individuals seeking work under MGNREGA.

In the pre-Covid year of 2019-20, 7.88 crore individuals obtained work under NREGA. In 2020-21, the first year of the pandemic, this rose to 11.19 crore. In just the first nine months of 2021-22, this figure has touched 9.33 crore. Considering that work demanded by households under the scheme tends to rise during the lean season of January-March, the final number for this year may end up being closer to last year’s number.

This persisting and heightened demand for work signals either the continuing absence of other forms of employment, or the need to rebuild buffers, or the need to supplement incomes because wages in other jobs remain depressed. It also implies that the distress in the informal labour market, at least in rural areas, is yet to recede, and is similar to levels observed last year. It is possible that in the weeks ahead, with constraints on budgets, states begin to curtail registration of households demanding work, in which case, work demanded under NREGA will cease to be a proxy for labour market distress.

At the enterprise level, the distress amongst the smaller formal firms has been severe. Data on the Emergency Credit Line Guarantee Scheme (ECLGS) which was designed to extend credit facilities to firms provides some understanding.

According to the RBI, the total number of guarantees extended to MSMEs under this facility stands at around 1.10 crore, amounting to Rs 1.7 lakh crore. As this facility was extended upto 20 per cent of the loan outstanding, it implies that these entities had a loan exposure of roughly Rs 8.5 lakh crore (upper limit). To put this in perspective — as per RBI, the total credit flow to MSMEs by banks (assuming a congruence in definitions) stood at Rs 17.8 lakh crore across 4.2 crore accounts at the end of 2020-21. Roughly 85 per cent of disbursals under ECLGS are through banks.

This provides a sense of the extent of the financial distress among formal MSMEs, and how extensively this facility was used during this period. However, unlike the data on the labour force, these numbers are skewed towards the initial period of the pandemic. Over time, the distress at the firm level, at least among the formal ones, is showing signs of easing.

Of the 1.10 crore guarantees, 95.3 lakh were issued in 2020-21, while only 20.6 lakh were issued in 2021-22, despite the scope for more. Similarly, under the RBI’s restructuring schemes, while 9.29 per cent of eligible MSME accounts were restructured under the February 11, 2020 scheme, this fell to 7.19 per cent under the August 2020 scheme, and to 5.8 per cent under the May 2021 scheme. This indicates that at least some of the formal MSMEs are witnessing an improvement in their operating climate, and are able to meet their obligations.

The second quarter results of 2,000-odd companies point to a similar trend. Among the smaller firms (those with net sales of 0-25 crore which account for 40 per cent of the sample), 50 per cent had surpassed their pre-Covid sales at the end of the second quarter of 2021-22, up from 37 per cent in the first quarter. While the corresponding numbers for the bigger firms are 80 per cent and 53 per cent respectively, these numbers, nonetheless, do suggest that smaller firms are recovering to their pre-pandemic levels, even if at a glacial pace.

But if this is the pace and extent of the recovery among formal MSMEs, considering that the relief package was largely disbursed through formal monetary channels, to what extent the stress among the millions of unregistered or informal MSMEs would have abated is difficult to ascertain. As only entities with reserves would have been able to survive during this period, it is likely that firm death rates in the informal sector would have risen dramatically. But the question is, have birth rates also picked up? Among the informal MSMEs that did survive, those with stronger linkages to the formal economy would probably recover faster than the informal ones.

Naturally, the pace at which unorganised enterprises, and the smaller formal firms recover, will have a bearing on how quickly the labour market distress eases, and how India exits from this pandemic. Considering this the upcoming Union budget must continue to provide support to the economy, nurture the recovery.

Written by Ishan Bakshi

Source: The Indian Express, 21/01/22

Database of unorganised workers is a welcome step towards creating a robust social security architecture

 

The absence of credible data on the migrant workforce, the inability to identify them quickly enough, meant that little policy support could be extended to this section during a period of acute economic distress.

The migrant labour crisis that played out during the Covid-induced national lockdown last year exposed the gaping holes in the social security architecture in India. The absence of credible data on the migrant workforce, the inability to identify them quickly enough, meant that little policy support could be extended to this section during a period of acute economic distress. But this absence of comprehensive, granular data extends well beyond the migrant workers, and encompasses the entire unorganised labour, which accounts for roughly 90 per cent of the entire labour force in the country. In its absence, it is difficult not only to design appropriate policy support, but also to ensure delivery of benefits during times of need. To address this glaring gap, the government has launched the e-Shram portal — a database of unorganised workers. This is a welcome and long overdue step. The identification and registration of these workers marks the first stage in a long journey towards creating a social security structure for this part of the labour force.

As reported in this paper, roughly a fifth of the estimated unorganised workers in the country are now registered on the database — the government hopes to register 38 crore unorganised workers. Odisha leads the coverage with around 87 per cent of its unorganised workers registered on the portal, followed by West Bengal, Chhattisgarh, Jharkhand and Bihar. Preliminary snapshots of the database reveal that 40.5 per cent of unorganised workers belong to the OBC category, 27.4 per cent are from the general category, 23.7 per cent are Scheduled Castes, while 8.3 per cent are Scheduled Tribes. The portal also gathers information on the occupations the workers are engaged in. As reported in this paper, maximum registrations have been in the agriculture sector (53.6 per cent), followed by construction (12.2 per cent), and domestic and household workers (8.71 per cent). Considering that some sectors/occupations have been hit worse by the pandemic, this is vital information. Governments could tailor specific schemes to help those sections of the unorganised labour force who have faced the brunt of the economic dislocation. Reportedly, the database will also be linked to Unnati — the proposed labour matching platform.

There are several issues that require greater government attention. For one, the information gathered on workers, especially on migrants, will need to be regularly updated. The states of origin and destination will need to do this and keep track of circular migration. Second, registration for those unwilling to do so will need to be incentivised. Third, eligibility criteria for schemes that depend on information that is not collected by the e-Shram portal will also need to be integrated. There is also the issue of portability of benefits, extended at both the central and state level, that will need to be examined. Merely creating a database of workers is not enough, but identifying them, registering them, is a step towards including them in social security schemes, and creating a more comprehensive and robust social security architecture.

Source: Indian Express, 23/11/21

e-Shram: 70% informal workers SC, ST, OBCs

 On India’s first centralised database of unorganised workers, e-Shram portal, more than 7.86 crore registrations have been done till date. Out of this number, 40.5 percent belong to Other Backward Classes (OBCs), 27.4 percent general category, 23.7 percent scheduled castes (SCs) and 8.3 percent to scheduled tribes (STs)

Highlights

• These estimations are significant as they offer an indicator of social profile of informal sector workers in India.
• As per 2011 census, population share of SCs was 16.2 per cent and that for STs was 8.2 per cent.
• The count of OBCs is not detailed in 2011 Census. However, as per a survey conducted in 2007 by National Sample Survey Organisation (NSSO) had estimated the population share of OBCs as 40.9 per cent.
• Population share of general category population was around 34 per cent.

Occupation-wise registration data

• Maximum registrations (53.6 percent) have been seen in agriculture sector.
• It is followed by construction sector (12.2 per cent) and domestic & household workers (8.71 per cent).
• The e-Shram portal has been recording primary as well as secondary occupation of unorganised sector workers. Workers in rural areas are routinely recording two occupations.

Registration across states

• In agriculture sector, West Bengal is at the top slot with 13.38 per cent share. It is followed by Odisha (10.5 per cent), Uttar Pradesh (9.15 per cent), Bihar (5.71 per cent) and Jharkhand (3.03 per cent). Highest registrations were seen for crop & farm labourers and field crop & vegetable growers.
• In construction, top four countries with highest number of registrations are- West Bengal, Uttar Pradesh, Bihar and Odisha. Highest registrations were recorded for building and construction workers.

Understanding why the informal sector really shrank during the pandemic

 

R Nagaraj, Radhicka Kapoor write: It was not because of micro and small informal firms’ transition to formality, but because they were squeezed out by large formal enterprises

In 2017-18, as per the latest official statistics, India’s informal sector accounted for approximately 52 per cent of its GDP, employing 82 per cent of the total workforce. These ratios have broadly remained unchanged over the last decade. A recent study by SBI has reported that the Indian economy witnessed accelerated formalisation under the distressed conditions of the pandemic and the lockdown last year. The study estimates that the share of the informal economy has fallen to a mere one-fifth of GDP — a figure comparable to many advanced economies.

As the informal (unorganised) sector bore much of the brunt of the economic contraction during 2020-21, a decline in its share in GDP is unsurprising. The sector had neither the financial strength nor the technical wherewithal to face the Covid shock. Additionally, policy support, mostly supply-side measures, was mainly focused on firms in the formal sector, with the informal sector left to fend for itselfIn the absence of official data, one can only speculate the extent of the decline in the share of the informal sector in GDP. Whether the decline is as sharp as the SBI report has suggested — to 20 per cent of GDP in 2020-21 from around 50 per cent over a two-year period — is anyone’s guess. A pertinent question that arises is whether the decline in the informal sector’s share in GDP represents a temporary one-time shock or a long-term (desirable) structural shift towards a more productive sector.

Before examining this issue, it is essential to understand the concept of informality. The ILO’s globally accepted framework for definitions is as follows: Informal sector enterprises are defined as private unincorporated enterprises owned by individuals (or households) that are not constituted as separate legal entities independently of their owners. And for which no complete accounts are available that would permit a financial separation of the enterprise’s production activities from its owner’s other activities. They are not registered under specific national legislation (such as Factories’ or Commercial Acts). Formal workers in India, on the other hand, are defined as those having access to at least one social security benefit such as a provident fund or healthcare benefits.

Transitioning to formality requires a reduction in dualism in production and an improvement in employment quality. Undeniably, the informal sector’s share in GDP is likely to have shrunk due to the Covid shock. However, alarmingly, the purported decline in the informal sector’s share in GDP has not been accompanied by an expected reduction in its employment share. Data from the official annual Period Labour Force Survey (PLFS) 2017-18 and 2019-20, where the latter includes the period of the Covid shock from April to June 2020, shows the following. The employment share in non-agricultural informal enterprises has increased from 68 per cent in 2017-18 to 69.5 per cent in 2019-20. These figures do not include the agricultural sector, where employment is almost entirely in the informal sector. The increasing share of the formal sector in terms of GDP but declining share in employment only widens the schism (or dualism) between the two sectors.

What is more, if the informal sector is producing as small a share of GDP as suggested by the SBI report, but employing as significant a share as suggested by PLFS data, it means that much of India’s workforce is engaged in low productivity and low-paying work. The lack of remunerative jobs for the vast majority of Indian consumers implies that eventually the lack of growth in demand will adversely impact investment and economic growth. After all, a mere 17-18 per cent of the workforce in the organised sector cannot sustain growth of the economy in the long run.

The increase in the formal sector’s share in GDP due to Covid-19 is a result of large, formal enterprises squeezing out informal enterprises. Many of them have ceased production, weighed down by Covid and lockdown effects, albeit temporarily. It is important to note here that the increase in formalisation is not a consequence of micro and small informal firms transitioning to formality. Further, as formal sector firms have rationalised their workforce, laid-off workers have found themselves seeking employment in the informal sector, resulting in a rise in the share of informal employment.

Over the last five years, the economy has officially witnessed a significant drive towards formalisation. This push has entailed significant efforts to register firms under relevant laws and obtain a tax number. However, it is crucial to recognise that firms exist in the informal sector for various reasons and not simply to evade regulations and taxation. Many own account enterprises and MSMEs cannot afford to survive in the formal sector due to their low productivity. For such enterprises, formalisation is not simply about legal considerations. Importantly, it is about increasing their productivity to enable an organic path to formality. Hence, it is essential to view the process of formalisation as a development strategy that requires stepping up investment in physical and human capital to boost productivity and the extension of social security benefits for all workers, not just a registration strategy on myriad portals.

Formalisation is indeed a desirable process both for enterprises and workers in the Indian economy. The final objective of formalisation is to improve the working and living conditions of those in the informal economy. The supposed formalisation that happened during the pandemic is mainly an outcome of shrinkage of the informal sector under extreme duress. The informal sector will come back to life as much of it represents the survival efforts of the working poor. Celebrating formalisation based on the misery and devastation of poor informal workers (and their meagre productive assets) is not just misplaced but also callous.

Source: Indian Express, 18/11/21

Are we listening to the lessons taught in the first year of Covid-19?

 

The pandemic revealed the precarious state of India’s informal sector. Localised production, trade and markets offer a better alternative to existing paradigm of development.

Another wave of COVID, another round of lockdowns, another long journey back home for migrant workers. If there is one lesson we are learning after a year of COVID-19, it is that we have not learnt any lessons, at least not the crucial ones.

2020 exposed the abysmal flaws of an economic system that drives tens of millions of people into insecure jobs that they can lose overnight, with no alternative or safety net. This is the fate of a majority of the 90 per cent of India’s workforce that is in the unorganised sector. Over the last few decades of “development”, economic policies have created a massive pool of cheap labour for the state-dominated or capitalist industrial class, adding to the already large numbers of landless agricultural labourers caught in traditional caste, class and gender discrimination. Since 1991, about 15 million farmers have moved out of agriculture, many because the economic system simply does not make farming (including pastoralism, fisheries and forestry) remunerative enough. And 60 million people have been physically displaced by dams, mining, expressways, ports, statues, industries, with mostly poor or no rehabilitation. Meanwhile, exploiting such people desperate for any kind of job, and also nature, a minority becomes wealthier by the second. The richest 5 per cent of Indians now earn as much as the remaining 95 per cent.

As Aseem Shrivastava and I showed in Churning the Earth, the Indian government’s capitulation to global financial forces in 1991 significantly increased the vulnerability of hundreds of millions of people and caused irreversible damage to our environment. Of course, not all of India’s unorganised or informal workforce is necessarily insecure; farmers, fishers, pastoralists, forest-dwellers, craftspersons, entertainers, are relatively secure if their resource base (land, nature, tools, knowledge, clientele) is intact, or if they have guaranteed access to a security net like the MNREGA. But then they are not available as cheap labour, so they or their livelihoods must be displaced in the name of “development”. The three farm laws introduced by the government last year will further hand agricultural control to corporates, creating an even bigger pool of exploitable labour. Farmers realise this, which explains the intensity and resolve of their prolonged agitation.

It is true that agriculture alone cannot provide full employment in villages. And that the youth do not necessarily want to remain in traditional occupations, especially if they are also associated with caste and gender discrimination. But these realities result from our collective failure to tackle these issues at their roots. In any case, since 1991 there has been, for the most, “jobless growth” in the formal sector, meaning those leaving villages end up in some other informal work, mostly very insecure.

But there are alternatives to such a trajectory, and they provide clear lessons. Since mid-2020, we have compiled dozens of examples of what we call the Extraordinary Work of “Ordinary” People — Beyond Pandemics and Lockdowns. In the midst of COVID-19, several communities have had enough to eat, dignified livelihoods to sustain themselves, community solidarity systems to help the most vulnerable, collective health systems to ensure the virus does not run rampant, and alternative methods of learning their children could enjoy.

In Telangana and Nagaland, respectively, Dalit women of Deccan Development Society (DDS) and tribal women of North-East Network ensured complete food security for dozens of villages throughout 2020. Community health systems in Sittilingi panchayat, Tamil Nadu and in Kunariya panchayat, Kutch, denied COVID any chance of gaining a foothold. In Assam, Farm2Food worked with several thousand students to continue local food growing in schools and communities. In Kolkata, the youth group Pranthakatha created a local neighbourhood safety net for 32 widows who had been forced to beg for a living. In the western Himalaya, Titli Trust, Birds of Kashmir, CEDAR, and Snow Leopard Conservancy India Trust continued nature guided activities with local communities, to build capacity for when tourism returns. Beejotsav Nagpur, the Gurgaon Organic Farmers’ Market, village self-help groups facilitated by Navadarshanam in Tamil Nadu, Samaj Pragati Sahayog in MP, and Mahila Umang Samiti in Uttarakhand were able to ensure that farm produce reached a (mostly local) consumer base, averting economic collapse for thousands of farmers.

These and over a thousand other stories of alternatives (www.vikalpsangam.org), provide crucial lessons. The biggest is that local self-reliance for basic needs, and localised exchanges of products and services, are far more effective in securing people’s livelihoods than are long-distance markets and jobs. Rather than incentivise big industry to take over most production, virtually all household needs — soaps, footwear, furniture, utensils, clothes, energy, even housing, food, drinks — can be produced in a decentralised manner by thousands of communities. The shortage of purely agriculture-based livelihoods can be made up by crafts, small-scale manufacturing, and services needed by their own or surrounding populations. As Suresh Chhanga, sarpanch of Kunariya in Kutch told me when I visited in January, “if we can produce most of our household items locally, we not only save the Rs 40 lakh we spend every month buying these from outside companies, but we also create full local livelihood security.” The women’s collective Maati in Uttarakhand showed how farming and crafts must also continue along with community-led ecotourism so that there is a buffer, should one of these fail.

Unfortunately, the government’s most recent packages, ironically labelled “Atmanirbhar Bharat” (self-reliant India), are actually increasing the control of distant markets and companies over people’s lives, and increasing ecological damage (for example, coal mining in areas of central India where communities are still relatively self-reliant on land and forests). Where some government initiatives have learnt the lessons, as in the case of Kerala’s Kudumbashree programme that enables dignified livelihoods to several million women, we saw a visible difference in how COVID was dealt with. Many of these examples of rural revitalisation also display significant reduction in outmigration, and even the return of people from cities to villages.

Local self-reliance has to go along with worker control over the means of production, more direct forms of democracy (swaraj), and struggles to eliminate casteism and gender discrimination. Again, there are many examples of this. In central India, communities that have successfully claimed collective legal control over surrounding forests, and mobilised towards adivasi swasashan (self-rule), survived the COVID lockdown much better than those who did not have such control. In Spiti, as soon as COVID hit, a Committee for Preventive Measures and Sustainable Development was set up by local communities to ensure full health safety and encourage greater self-reliance in food and livelihoods. Dalit women farmers of DDS have shown how to resist gender and caste discrimination.

But governments have been most reluctant to enable such political and economic empowerment. It threatens their power, and their ability to hand over lands and resources to corporations as they please. Both the 73rd and 74th constitutional amendments, meant to empower village and city assemblies, or laws like the Forest Rights Act, have been only half-heartedly implemented. The current government has even tried weakening them or programmes like MGNREGA, which has been a life-saver for millions during the lockdown.

An economy that promotes mass vulnerability only increases social strife, creating an atmosphere ripe for communal, class and caste violence. This will eventually engulf all of us, other than the super-rich who will escape to some safer part of the world.

Many millions would not have to go back to insecure, undignified jobs in cities and industrial zones if they could have economic security in their own villages and towns. Alternative pathways that provide this are available, and have been demonstrated to work in the COVID crisis. But are we listening to their lessons?

Written by Ashish Kothari

This article first appeared in the print edition on April 23, 2021 under the title ‘Lessons Covid taught’. The writer is with Kalpavriksh, an environment research and advocacy group in Pune.

Source: Indian Express, 23/04/21

Informal jobs are the new norm, not the exception

We need to identify strategies to organise informal workers to increase their collective representative voice.

Over the last one year, those in the highest echelons of government have claimed that India is facing a jobs’ data crisis, not a jobs crisis. In the absence of any officially released employment-unemployment statistics since the Labour Bureau’s household survey of 2015-16, the lack of any recent data (barring that of the Centre for Monitoring Indian Economy, a private agency ) is certainly a problem. But the real issue, which is more deep rooted and structural than any data challenge and has attracted relatively little attention in the jobs debate, is that of the dominance of informal employment.

The National Sample Survey’s (NSS) last quinquennial employment-unemployment survey (2011-12) showed that 92% of India’s workforce is informally employed. More recently, the International Labour Organization (ILO) provided comparable estimates on the size of the informal economy at the global and regional levels for the first time (Women and men in the informal economy: A statistical picture, 2018). The report found that 88.2% of employment in India was informal, significantly higher than the global average of 60%. What is more, the prevalence of informal employment in India was comparable to that of sub-Saharan Africa (89.2%). With little job security and limited access to safety nets, most of the informally employed remain vulnerable to health hazards, economic downturns and natural catastrophes. It is no surprise that the ILO estimates that three out of four workers in India will fall in the category of vulnerable employment by 2019.

The extent and importance of the traditional informal sector has persisted in India over the decades and it has not been absorbed by the modern sector as expected with robust economic growth. Many attribute this to factors such as India’s labour regulatory environment and trends in trade and technology. However, it needs to be noted that India’s pattern of structural transformation where the GDP growth has been driven by sectors which are not employment intensive has generated limited productive formal job opportunities for the country’s low skilled and unskilled workforce. Consequently, the poor, who do not have the luxury to remain unemployed in their wait for formal jobs, resort to informal employment as a survival mechanism.

What is more, many of the new jobs being created in the platform economy (such as the often-cited success stories of taxi aggregators like Ola and Uber) are also non-standard in nature. In other words, they are outside the ambit of laws and regulations covering minimum wages and other benefits. While for some, these informal work arrangements may be a matter of choice and a way of supplementing their income, for most others they are associated with job insecurity, earnings volatility and reflect precarious work as they can no longer rely on an employer to pay their pension or cover their health care. Thus, as old forms of informal employment persist, new forms are also emerging. We need to confront the reality that the informal economy is increasingly the norm, not the exception. Informal workers are not the marginal or temporary entities depicted in early development theories.

There is no denying the importance of creating an enabling environment for productive enterprises to flourish and generate more formal jobs. It is another matter that this cannot be achieved by mandating a 10% quota in government jobs for economically weaker sections (defined generously by annual family income of less than Rs 8 lakhs), when the pool of government jobs is shrinking. But, the real policy challenge lies in how we can improve the quality of informal work and reduce the decent work deficit in the informal sector. This requires a multipronged approach.

In addition to providing social security benefits for informal workers, there is a need to rethink how social protection systems and labour market institutions need to adapt to a changing world of work where traditional employer-employee relationships are likely to erode. We need to identify strategies to organise informal workers (both the working poor and gig economy workers) to increase their collective representative voice and ensure that their fundamental rights at work are not violated. The lack of data cannot any longer be cited as an excuse to deny the enormity of these challenges.

Radhicka Kapoor is a fellow at ICRIER, and has worked with the Planning Commission and International Labour Organization

Source: Economic Times, 11/02/2019

Makers of India

Early in the morning, the door-bell rings. The paperwala throws the bundle of newspaper at our door-step and moves away hurriedly. Soon afterwards, we get ready and hop into a rickshaw, auto or bus to go to our offices, factories or shop. Reaching our work places we find the watchman respectfully securing our workplaces and the cleaning personnel doing their jobs. In a typical government office, we meet our personal staff and assistants working with us. The common element between all these kinds of workers- paperwala, auto-driver or bus driver, rickshaw puller, watchman, office boys, cleaners, computer operators etc. is that they all belong to the informal sector. In fact, our socio-economic space is overwhelmingly informal whether it is relating to employment or other aspects of our life. However we tend to overlook and underestimate the importance of this sector which is multi-dimensional in its structure. The concept of ‘Informal Sector’ owes its origin to the British anthropologist Keith Hart’s study in Ghana. Later on in 1970s ILO brought in the element of ‘decent work’ into this concept which ‘involved rights to work, at work, to labour organisation (or dialogue) and to social security’. But some scholarshave pointed out that it would be extremely limiting if the idea of ‘informality’ is restricted just to the economic sphere.

Urban Informal Sector in India
Arup Mitra

The urban urban informal sector plays a crucial role in providing sources of livelihood particularly to the rural migrants and several low income households residing in urban slums. This paper examines the relative size and composition of the informal sector and delineates the recent changes relating to contractualisation and ancillarisation and their impact on work practices and performance. Several studies on informal sector have been carried out in the Indian context in last thirty to twenty years or so – a brief review of which may be seen in Das (2011) and Mitra (2013). The rural labourers who are pushed out of the agricultural sector due to the lack of a productive source of livelihood and at the same time could not be absorbed in the rural non-farm sector or the high productivity manufacturing sector in the urban areas are likely to get residually absorbed in the low productivity urban informal sector (Mitra, 1994). Also, a rapid natural growth of population in the urban areas has been adding substantially to the urban labour supplies. Despite a rise in enrolment ratio, a large component of this labour force is either of unskilled or semi-skilled variety. Contrastingly, the growth process is becoming increasingly capital and skill intensive, forcing many to pick up petty activities in the informal sector.