The recent data reveals that approximately 27.69 crore workers from the informal sector have registered on the e-Shram portal. Launched in 2021, the e-Shram portal aims to create an extensive National Database of Unorganised Workers (NDUW) in India. The primary objective is to register unorganised workers, including construction labourers, migrant workforce, street vendors, and domestic workers, among others. Upon registration, these workers will be issued an e-Shram card with a unique 12-digit number. In case of an accident, a registered worker is eligible for financial assistance. The formation of the e-Shram portal came after a directive from the Supreme Court to facilitate registration of unorganised workers for availing welfare benefits under various government schemes.
2. Demographic Analysis of Informal Sector Workers in India
Over 94% of the 27.69 crore informal sector workers registered on the e-Shram portal earn a monthly income of Rs 10,000 or less, and more than 74% of the enrolled workforce belongs to Scheduled Castes (SC), Scheduled Tribes (ST) and Other Backward Classes (OBC). Age-wise, 61.72% of the registered workers are between 18 and 40 years of age, while 22.12% are between 40 and 50 years of age. Women constitute 52.81% of registered workers, with men making up the remaining 47.19%.
3. Overview of India’s Informal Economy
Informal economy consists of unregistered enterprises failing to provide social security to employees. Despite rapid economic growth over the last two decades, about 90% of workers in India are still informally employed. This informal employment contributes to roughly half of India’s Gross Domestic Product (GDP). As per the official Periodic Labor Force Survey (PLFS) data, 75% of informal workers are self-employed or casual wage workers with average earnings below those of regular salaried workers.
4. Challenges Faced by Informal Sector Workers
Despite their significant numbers, workers in the informal sector frequently face issues including long working hours, low pay, difficult working conditions, low job security, inadequate social security regulation, and difficulty in exercising rights. The informal sector comprises largely of Micro, Small and Medium Enterprises (MSMEs) and household businesses, which are unable to take advantage of economies of scale because of their small size.
5. Tax and Regulatory Challenges with the Informal Sector
As informal sector businesses are not directly regulated, they often avoid taxes by concealing income and expenses from the regulatory framework. This situation poses a challenge for the government as major portions of the economy remain outside of the tax net. Moreover, the lack of control and surveillance over the informal sector makes it difficult for the government to form policies due to the absence of accurate data representing the state of the economy.
6. Quality and Productivity Concerns in the Informal Sector
Despite employing more than 75% of the Indian population, the value-addition per employee in the informal sector is very low, indicating under-utilisation of human resources. This issue often leads to the production of low-quality products.
7. Initiatives Related to the Informal Sector
Several initiatives have been introduced to address these challenges and improve conditions within the informal sector. Some of them include Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM), Labour Code, Pradhan Mantri Rojgar Protsahan Yojana (PMRPY), PM SVANidhi: Micro Credit Scheme for Street Vendors, Atmanirbhar Bharat Abhiyan, Deendayal Antyodaya Yojana National Urban Livelihoods Mission, PM Garib Kalyan Ann Yojana (PMGKAY), One Nation One Ration Card, Atmanirbhar Bharat Rozgar Yojana, Pradhan Mantri Kisan Samman Nidhi, and World Bank Support to India’s Informal Working Class.
8. The Way Forward
To aid the transition of the informal sector to the formal sector, a simpler regulatory framework is essential. The burden of regulatory compliance should be reduced, and sufficient time should be given to adjust with the modern, digitised formal system. Implementing financial support measures, such as MUDRA loans and Start-up India, is vital to help small-scale industries become part of the organised sector.