INFORMAL SECTOR IN

INDIA

Workshop 7; 23 06
15.00-16.00pm
Informal/Unorganised Sector in
India

The First Indian National Commission

on Labour (1966-69) defined
unorganised sector workforce as
those workers who have not been
able to organize themselves in
pursuit of their common interest dues
to certain constraints like casual
nature of employment, ignorance and
illiteracy, small and scattered size of
establishments.
Concept of Informal Sector

Informal employment includes1:

Own-account workers working in their own informal

enterprise
Own-account worker producing goods exclusively for own
final use by their household.
Contributing family workers, irrespective of whether they
work in formal or informal sector enterprises
Members of informal producers cooperatives
Employees holding informal jobs, whether employed by
formal sector enterprises, informal sector enterprises or as
domestic worker employed by households and

1. International Conference of Labour Statistics (2003)

 Segments of Informal Economy
Wage work for informal enterprises
Domestic work without a regular contract
Casual day labour without a fixed employer
Unregistered or undeclared work for formal or informal firms
Temporary and part-time work for formal firms
EXAMPLES (total = 106 activities):
Agriculture: landless labourers, small farmers, traditional
artisans, animal husbandry
Industry: workers in brick-kilns, construction, beedi-making,
incense stick
Services: workers in local transport, shops, domestic servants,
community services like street cleaning, street vendors,
garbage collectors
Small Workshops: shoe makers, garment makers and
embroiderers
At Home: garment workers artisans or craft producers
On Rivers, Ponds, Lakes, and Oceans: fishermen, shippers
 Informal Employment

Employees are considered in informal employment

when
their employment relationship, in law or practice,
is not subject to:
National labour legislation
Income taxation
Social protection or
Entitlement to certain employment benefits,
e.g. paid annual leave, sick leave, etc.
Estimates of Employment in
India2
Industrial Category No. of persons (in millions)
Formal Sector Informal Sector
Agriculture 1.39 238.87
Non-Agriculture 26.68 131.5
Mining & Quarrying 1.01 1.25
Manufacturing 6.71 37.07
Electricity, Gas And Water 1 0.04
Construction 1.17 16.36
Trade, Hotels And Restaurants 0.49 40.37
Transport, Storage & Comm. 3.15 11.48
Financial Services 1.65 3.29
Community Services 11.49 21.64
All Sectors 28.07 (93%) 370.37

Year: 1999/00 (Total labour force: 406 million) (GDP share: 63%)
 Labour Force Characteristics3
Urban Share (in percentage) Rural Share (in percentage)
Male Female Total Male Female Total
1. Employed 51.8 13.9 33.7 1. Employed 53.1 29.9 41.9
2. Unemployed 2.4 0.8 1.6 2. Unemployed 0.9 0.3 0.6
3. Labour Force 3. Labour Force
(1+2) 54.2 14.7 35.3 (1+2) 54 30.2 42.5
4. Not counted in 4. Not counted in the
the labour force 32.8 71.7 51.4 labour force 30.3 53.9 41.7
5. Working age
population (3+4) 87 86.4 86.7 5. Working age
population (3+4) 84.3 84.1 84.2
6. Non-working age
population 13 13.6 13.3 6. Non-working age
population 15.7 15.9 15.8
7. Population (5+6) 100 100 100
7. Population (5+6) 100 100 100

Year: 1999/00
Regulatory support
No formal wage policy set by the government

Wages set by state governments as per some cost of living

calculation and central government directives on minimum
wages.

The Constitution of India (Article 41) laid down that the State
shall make effective provision for securing these rights
Article 41 Right to work, to education and to public
assistance in cases of unemployment, old age, sickness and
disablement
Article 42 Provision for just and humane conditions of work
and maternity relief. The Indian Government took several
steps in compliance of the constitutional requirements.

Indian Ministry of Labour set up from time to time Welfare

Funds for five specific category of unorganised workers. These
workers include Building and Other Construction Workers, Beedi
workers, Cine workers and certain categories of non-coal mine
workers.
 Researching informal
sector - The Wage
Indicator way

Possible issues of debate

Classifying the sector

Clustering according to occupation

Issues: more than one occupation at a

time, seasonal variation, variation

according to age and experience
No of occupation categories are large :

106
Typical clustering done according to
rural/urban or income level or gender
Or sometimes clustering done according to
household characteristics
Critical characteristics for
capture through the
questionnaire
Socio-economic conditions including illiteracy and level of
awareness in critical areas
Nature of work (seasonal, entails migration in search of jobs)
Payment:
Low/irregular wages or income
Delayed/no payment of wages
Generally piece rate basis or on daily basis
Social security (formal/govt. and informal/family/lender)
Formally organized as a union/association
Bargaining power (formal through association and informal
through expertise/caste/education level)
Working conditions health and safety
Harassment by police, govt. officials
Nature of child care and family support at home
Nature and intensity of problems in obtaining alternative
employment
Provision/non provision of reasonable capital/credit
Possible Methodologies
Purely work related analysis
primary survey of an localized area or industry (formal
or SSI) or gender or occupation based on the current
instrument
Socio-economic analysis
Include household data analysis includes parameters
like calorie intake, indirect or hidden wages
Sociological analysis
Simulating regional/occupational dynamics including
economics using instrument and household data will
give a complete scenario of barriers to transparency in
wages and possible ways to deal with it.
Possible data/information
sources

WI questionnaire: primary survey

customized, involves field work
Support from national surveys like the
decennial Population Census (conducts
surveys after every 10 years) or NSSO
(conducts the survey on regular interval of
five years) or enterprise surveys like The
Census of Small-Scale Industries (SSI)
Some more issues
Methodological issues
Monthly aggregation of data becomes difficult when
frequent movement of family member or job.
Direct and indirect wages and their sources
Data as mostly aggregates and guesses: no culture of
systematic data compilation or calculation either in
mind or paper: its an urbanized mind orientation
Sociological issues
Illiteracy
However, people open to questioning, receptive to
methodologies and ideas
Possible ways ?
Clustering: our own based on our objectives,
balancing certain sectors, gender and double
and single income individuals
Include number of opinion questions
Designing unstructured/opinion questions for
individuals and for groups.
Multiple questions for same item/variable to identify
misinterpretations and ensure consistency
Unstructured/informal interviews and discussions
in groups crucial to get correct information
Indirect estimation through other developmental
indicators like expenditure of food, health or
education or access to any of these problem:
family decision could be culture based
Thank you