Strengthening India’s Informal Sector

India’s informal sector contributes immensely in strengthening the country’s economy. It employs about 80 per cent of the nation’s workforce and contributions nearly 50 per cent of the GDP. The existence of such a strong informal sector helped India to survive many crises including the 2008 worldwide recession. While countries like the United States of America (USA), England and other European countries were badly affected by the said recession, India’s economic growth continued unabated during that period. The creditable performance by the informal sector helped the Indian economy to grow faster than any other economy in the world in the first and second decade of the 21st century.

But that very sector is not in good health at present due to the ongoing pandemic. It is now suffering from job and wage loss. The situation is alarming for both the economy as well as for for the labourers whose livelihoods are severely impacted. They keep the sector healthy. A weak informal sector will mean lower GDP, higher inflation, etc. At the same time wage loss will make the labour force financially vulnerable, which may create further economic disparity. So, the problems that the informal sector is facing at present, should not be ignored. Already, around 2.5 per cent wage loss has been reported along with significant rise in unemployment. It should also be kept in mind that workers in the informal sector have suffered more than those who are employed in the formal sector.

An estimated 384 million people were employed in the informal sector before the pandemic broke out. This work force is spread across both rural and urban areas of the country. While the informal sector workers present in the rural area work mainly in the agriculture sector, workers settled in urban areas are engaged in various fields. Amongst these two, the workforce that is engaged in the urban area are the worst affected in the present situation. Small scale industries, real estate and other odd jobs are not available in urban areas nowadays. Lack of opportunities have forced the workforce to go back to their native villages and at present many have no source of income. As a result, the country’s economic progress may not be able to reach the desired level.

To prevent such a possibility, it is high time that the government intervenes and put an end to the work crisis currently being faced in the informal sector. Providing free rations to those who have lost their jobs due to pandemic is no answer to this crisis as the dole does not create any new assets. So to get rid of the situation, the best option is to make the MGNREGA more effective. Though INR 935 crore has been misappropriated in the last four years, the rural guarantee has not lost its relevance as yet. The scheme has all the necessary ingredients to change the economic scenario in rural India, and proper implementation can help India become one the world’s top five economies.