informal sector

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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 scholars have pointed out that it would be extremely limiting if the idea of ‘informality’ is restricted just to the economic sphere. The concept is much wider in its implication at the social and cultural levels and a purely economic interpretation leaves a significant part of our ‘informal’ reality beyond analysis. It is argued that ‘the category informal is only an overarching concept, which should group socially valuable work together that falls outside the formal monitoring and regulatory framework.’ For example, the unpaid household work, though not an economic category in itself, needs to be categorized under informal sector and appropriate policy measures designed keeping such activities in mind. They are no less important just because they are not economic in nature. According to NSSO data for 2009-10, more than 90 percent of the employment in the agricultural sector and close to 70 percent in the non-agricultural sector falls under the informal category. Clearly, the informal sector is not the residual sector of the economy. In reality, it is the dominant sector. Though, recently the growth rate of employment in the informal sector has not been quite satisfactory, it continues to be the most dynamic sector in the economy. Even while the organized sector has lagged behind, the informal sector has shown improvement in productivity, real wages and capital accumulation. It may be wrong to look down upon the informal sector as stagnant and underperforming. Empirical data underlines the fact that the informal sector has done better than its formal counterparts on economic parameters such as investment and accumulation of fixed assets, among others. We should not forget that this sector also encompasses ‘Loka- Vidya’, the traditional and indigenous knowledge that includes ancient

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Socio-economic analysis

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Page 1: Informal Sector

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 scholars have pointed out that it would be extremely limiting if the idea of ‘informality’ is restricted just to the economic sphere. The concept is much wider in its implication at the social and cultural levels and a purely economic interpretation leaves a significant part of our ‘informal’ reality beyond analysis. It is argued that ‘the category informal is only an overarching concept, which should group socially valuable work together that falls outside the formal monitoring and regulatory framework.’ For example, the unpaid household work, though not an economic category in itself, needs to be categorized under informal sector and appropriate policy measures designed keeping such activities in mind. They are no less important just because they are not economic in nature.

According to NSSO data for 2009-10, more than 90 percent of the employment in the agricultural sector and close to 70 percent in the non-agricultural sector falls under the informal category. Clearly, the informal sector is not the residual sector of the economy. In reality, it is the dominant sector. Though, recently the growth rate of employment in the informal sector has not been quite satisfactory, it continues to be the most dynamic sector in the economy. Even while the organized sector has lagged behind, the informal sector has shown improvement in productivity, real wages and capital accumulation. It may be wrong to look down upon the informal sector as stagnant and underperforming. Empirical data underlines the fact that the informal sector has done better than its formal counterparts on economic parameters such as investment and accumulation of fixed assets, among others. We should not forget that this sector also encompasses ‘Loka- Vidya’, the traditional and indigenous knowledge that includes ancient and well established, ‘institutions of knowledge production and transfer’ which is under a big strain now.

It seems more logical to take the informal economy of India as the mainstream which requires a proper regulatory framework to ensure that those who drive this sector are provided the opportunity to contribute to the well being of the nation while enjoying a life of dignity and an environment of ‘decent work’. It is a matter of great concern that the informal sector has largely remained outside the realm of social security. People working in this sector suffer fluctuating

Page 2: Informal Sector

income and absence of basic rights as workers. Quite often ‘self-employment’, which constitutes a major part of informal sector, is a euphemism for the ‘distress sale of one’s own labour.’ In order that we realize the call of ‘make in India’, to turn India into a great manufacturing nation, we simply cannot ignore the people who are the real ‘makers of India’.