Informal sector

Informal sector

Subject : Economy

Context:

ILO’s recent policy brief titled ‘Skills development and lifelong learning in India- challenges for trade unions’ expresses concern over high informal employment in India.

Details:

• For workers aged 65 and older, the proportion in informal employment is in excess of 96 per cent, the highest among age groups.
• In general, the rates of informal employment tend to be higher among youths (aged 15–24) than for other age groups, except those older than 65 years.
• Since 2010, the proportion of informal employment among male youths has remained at more than 90 per cent.
• There has been a sharpest fall in informal employment for female youths led to the overall decline in for all youth workers.
• India has one of the lowest labour force participation rates in the world and the lack of formal employment opportunities.
• Discouragement of people from entering the workforce because of a perceived lack of opportunities will lead to a vicious cycle.
• Out of nine in ten workers in India are employed in the informal economy-such workers are often invisible to the system and are at increased risk of exploitation.
• While unemployment rates have remained relatively stable, India suffers from chronic youth unemployment– the youth unemployment rate increased to 25 per cent.
• The hardest hit by unemployment are youths with advanced educational qualifications highlights the crisis with job creation in the Indian economy
• Nearly one-third of youths in India are not in employment, education or training (NEET).
• The gender difference among youth NEET is also one of the widest in the world.
• The increase in employment under the two  plans (9th and 10th five year Plan) had been due to growth in informal employment.

Informal Sector:

• NSSO defines the informal sector enterprises comprising all unincorporated proprietary and partnership enterprises.
• ‘Informal economy’ represents enterprises that are not registered, where employers do not provide social security to employees.
• Example-It includes farmers, agricultural labourers, owners of small enterprises and people working in those enterprises and also the self-employed who do not have any hired workers.
• The informal sector can, therefore, be considered as a subset of the unorganised sector.
  • National Accounts Statistics (NAS) defines the ‘unorganised sector’ in addition to the unincorporated proprietary or partnership enterprises, including enterprises run by cooperative societies, trust, private and limited companies.

The Government has taken a number of measures to formalise the informal sector:

• Pradhan Mantri RojgarProtsahan Yojana (PMRPY):-
  • Its objective is to incentivise employers for creation of new employment and also aimed to bring informal workers to the formal workforce.
  • Under the scheme, Government of India is paying Employer’s full contribution i.e. 12% towards Employees’ Provident Fund (EPF) and Employees’ Pension Scheme (EPS) both (as admissible from time to time) for a period of three years to the new employees through Employees’ Provident Fund Organisation (EPFO).
  • The terminal date for registration of beneficiary through establishment was 31 st March 2019.
• Aatmanirbhar Bharat RozgarYojana (ABRY):-
  • It aims to incentivize employers for creation of new employment along with social security benefits and restoration of loss of employment during COVID-19 pandemic.
  • This scheme is being implemented through the Employees’ Provident Fund Organisation (EPFO).
  • Under ABRY, Government of India will credit for a period of two years, both the employees’ share (12% of wages) and employers’ share (12% of wages) of contribution payable or only the employees’ share, depending on employment strength of the EPFO registered establishments.
• The Unorganised Workers’ Social Security Act, 2008 mandates the government to formulate suitable welfare schemes for unorganised workers on matters relating to: (i) life and disability cover, (ii) health and maternity benefits, (iii) old age protection and (iv) any other benefit as may be determined by the Central Government.
• The Life and disability cover is provided through Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri SurkshaBima Yojana (PMSBY). 
• The health and maternity benefits are provided through Ayushman Bharat- Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) which is a universal health scheme.
• For old age protection to unorganised sector workers including traders, shopkeepers and self- employed persons, the Government has launched two flagship schemes namely Pradhan Mantri Shram Yogi Maan-DhanYojana (PM-SYM) and National Pension Scheme for Traders, Shopkeeper and Self-Employed Persons (NPS- Traders).
• Skill India Mission aims to empower the Indian youth through skill development.
  • Under the Skill India Mission, the Ministry of Skill Development and Entrepreneurship (MSDE) is implementing its flagship scheme Pradhan Mantra Kaushal Vikas Yojana (PMKVY). PMKVY has two components namely
    • Short-Term Training (STT) and
    • Recognition of Prior Learning (RPL)
• Apart from these schemes following are also available to the unorganised workers depending upon their eligibility criteria. 
  • Atal Pension Yojana,
  • Public Distribution System under National Food Security Act,
  • Mahatma Gandhi National Rural Employment Guarantee Act,
  • DeenDayal Upadhyay Gramin Kaushal Yojana,
  • Pradhan Mantri Awas Yojana,
  • National Social Assistance Programme,
  • Gareeb Kalyan Rojgar Yojana,
  • Mahatma Gandhi BunkarBima Yojana,
  • DeenDayal Upadhyay Antyodaya Yojana,
  • PMSVA Nidhi