Tue. Jun 25th, 2024

India and the world have passed a difficult time since the 2020’s beginning.

While the people battled for their lives, government struggled to keep things afloat, the healthcare was performing strenuous job, both physically and psychologically, the banks tried to maintain the liquidity and disburse the benefits to be trickled down.

The nationwide lockdown mandated every other service except the essential ones, to be suspended for a considerable time.

While the Billionaires flourished with an earning of even 90 crores an hour, corporates could sustain and allowed for work from home, politicians could thrive with their populist agendas and startups could spring up based on the vacancies created in Indian Market.

India’s Gross Domestic Product (GDP) in the first quarter of FY 2020-21, got slashed by a delimiting 23.9 percent but if analyzed in complete depth, it shows a grim picture of the informal sector through the chinks of Indian Economy.

It has been assessed and reported that nearly 80 percent of workers engaged in the informal sector like daily wage earners, small vendors etc., lost their jobs during the pandemic.

This, in collaboration with the forced distress migration from one part of the country barefooted, mostly, to another gave birth to a bigger tragedy.

Though the overall economy recovered in the next quarter, the miserable conditions of Informal sector workers witnessed no such change.

What is an informal sector? What gave birth to it in the long run?

The unorganized or informal sector, has always been a growing concern for any developing country.

There is a difference between formal and informal sector. The former represents all jobs which are to be performed within well-defined working hours, specific working conditions, regular wages and the job remains assured.

Conversely, the latter provides no regular working hours or defined wages and even remain exempted from the taxes.

Since the liberalization of Indian economy, the ever growing competition for employment opportunity combined with the limited resources led to the emergence of an informal economy.

In India, the Informality is pervasive not only on the country’s classes of labor but also its classes of capital.

It extends through a wide range of occupations –bonded labor, begar to unheeded family labor cost while agricultural production, family businesses – goods and services production or trade done through sub-contracts with smaller business units.

Why is informal economy bad?

The entities operating in the informal sector do not add to the country’s existing tax base and continue to remain small.

They tend to sustain with limited access to finance and therefore, low productivity.

Informal workers end up being poorer than the workers in the formal sector, because of dual reasons: lack of formal contracts enforcing rules and social protection and because they tend to be less educated.

International Labor Organization (ILO) reports this about informal workers: “They have low productivity, low rates of savings and investment, and negligible capital accumulation”.

This does not only have profound negative impact on micro level but on macro economy as well.

Because of inconclusive growth, the economic prospects in regions or countries with large informal sectors remains strained and below their actual potential.

Informal genre of work has also been known for inculcating high inequality in a fragile society running towards countable growth.

With these dearth of savings, bleak capital formation and rising Inflation leaves these battered informal workers with no other civil option except borrowing.

This has been well illustrated by the survey conducted under Action Aid Association of India that has calculated nearly 58 percent of these workers to have borrowed money to meet their expenses during the lockdown.

Another study claims how about as high as 63 percent of the respondents reported to have consumed merely two meals a day during the same times of crisis.

With more than 80 percent of India’s population depending on the informal sector, a reliable study has estimated that the share of the informal economy in the country’s GDP has fallen to a mere one-fifth.

Though there are several provisions in this light like Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), collateral-free loans, PM Street Vendor’s AtmaNirbhar Nidhi (SVA Nidhi) etc., to help sustain the informal economy but the real work at grassroots remain unfulfilled.

The recent COVID-19 pandemic and an upcoming danger reinforces the sense of urgency to address the perils of Informal sector.

The livelihoods lost and staggered informal activities worldwide ask for greater consideration by the world governments and deeper inclusion into the country’s fabric by consolidating the existing social protection programs.

Regulating and above all, simplifying the numerous labor laws into discrete four codes has helped attain some stability in this sector.

The country has a very weird combination of liberal and regulated gamut of legalizations as these petty firms may be registered and licensed or possess bank accounts or have the land under their names.

But the other assets like warehouses or work places defy the necessary regulations, their waste disposal mechanism disregards the environmental law of the land.

There is a bigger chance that they may draw electricity illegally, from telegraph poles or power lines directly, give unrealized and unreasonable wages, unnecessarily evade wealth, property taxes or the Goods and Services Tax (GST).

Informal Sector and Climate change: a dangerous combination

With the advent of Climate change, there will be unseen facets of threats and challenges of all sorts those will engulf the world in upcoming time.

Though the major polluting industries composing the formal sector, such as energy, aluminum, iron and steel, cement, fertilizer etc., accounts for nearly 70 per cent of GHGs, yet the quantities of greenhouse gases (GHGs) generated and emitted by the informal economy remains much discreet from the worldly affair.

However, these too are far greater than many can imagine and are significant and many such enterprises continue to flout rules and circumvent the environmental as well as labor laws.

Agriculture, black coal (criminal as well as social deformities are involved) and even untended wastes releasing the infamous gases like carbon di oxide, methane and oxides of Nitrogen cannot be easily neglected.

With an upcoming decade where warming planet will cause several migrations to urban areas or safer places, this scenario will only intensify.

A Professor explains: “If a country such as India wished to ‘go green’ and make the first moves towards a low carbon transition, then the fact that most economic activity is currently unregistered and taking place in the informal economy would make it difficult for government to implement its policies in the way intended”.

Without these much needed policy changes and holistic development, the urban economies worldwide, especially in the developing world, in search of more food, job, shelter, safety or survival, would rapidly grind to a halt.

Hence, there is a greater need to involve and integrate the informal sector within the climate change dynamics.

Better studies and data can help diagnose ways of reducing CO2 emissions involved in the sector along with simultaneous improvement in jobs.

Ignoring the informal sector is equivalent to not taking into account a significant proportion of Indian economy and disregarding the very changes happening in it.

For instance, there is an ongoing study wherein the researchers aim to compare the environmental measures, with the number of jobs created for the population engaged in farming and the wide technologies used in rice cultivation and their impacts rendered on the environment.

This will be done through analyzing the amounts of water, energy and carbon dioxide emissions throughout the life cycle of rice.

The social perspective to this damage of climate change:

With an advancement in climate change, there will be increased insecurities, which may give birth to criminality. Our history and even fictions have preferred to transform chaos into crime, for instance, the illegal coal syndicates operating in Jharkhand.

They are not only responsible for choking innocent lives into ores, rather greater unwilling factors may creep in.

Like the devastation of land surfaces, denigrating even their productive uses, encroaching commons, taking lives to sustain, disturbing the transport networks, irreparable damage to non-renewable resources; contaminating the scarcely available water bodies which could be used for irrigation or other uses.

While the formal and informal economies work in their own dominions, yet they are extremely intertwined.

But when policy makers, bureaucracy and its subjects lack coordination, mediators and fixers may crop up who may form their own jurisdictions within the state’s territory.


Undoubtedly, the delays, red-tapism and corruption add to the incoherence of the formal-informal state.

If this happens, exploitation will be abound, poverty will continue to rise, inequality will expand. In simple terms, the rate at which the National poverty will wane off will not be at the same pace of its growth.

At present, the Indian economy stands at crossroads for simultaneously securing the future of labor force as well as nourishing the economic growth through greater technological adoption.

We, as a country, have an asset, of a new generation sprouting up in every arena.

But as per the current scenario, the semi-skilled labor force of the country will provide a major hindrance to the nation’s cumulative development as the country will use its resources for fulfilling its population’s consumption needs. Another wave and the impacts can be disastrous.

This gap in skilling needs to be abridged, at least for the willing working population and imparting the desired proficiency in markets to youngsters.

These probabilities reflect a grim world that needs to be reframed and invite greater perceptions about its impact on the aim of sustainable development.

By Alaina Ali Beg

I am a lover of all arts and therefore can dream myself in all places where the World takes me. I am an avid animal lover and firmly believes that Nature is the true sorcerer.

Leave a Reply

Your email address will not be published. Required fields are marked *