India’s unorganised sector is shrinking

India’s formal sector is considerably bigger than earlier projections, while its informal economy is shrinking. That’s the striking discovery made by the Economic Survey 2018.

Published: 30th January 2018 01:51 AM  |   Last Updated: 30th January 2018 07:01 AM   |  A+A-

By Express News Service

MUMBAI: India’s formal sector is considerably bigger than earlier projections, while its informal economy is shrinking. That’s the striking discovery made by the Economic Survey 2018.
Formal jobs now comprise over a quarter of our employment, higher than previous estimates, which pegged the informal sector employing over 90 per cent (including agriculture) of our 460 million-odd workforce.

In a first, the survey defined ‘formal employment’ based on social security that companies offer and based on tax data. Going by the first metric, formal, non-farm payroll accounts for 31 per cent of all jobs, while based on tax data it’s a whopping 53 per cent. These estimates, though, are not household-based definitions of employment and exclude agriculture.

From a social security perspective, formal employment amounts to 7.5 crore, including government workers (excluding defence), which is 31 per cent of the non-agricultural workforce estimated at 24 crore based on the latest NSSO data.

As per the survey, when ‘formality’ was defined in terms of being part of GST net, formal sector payroll share was over 53 per cent, or in actual numbers 12.7 crore including government employment.
Until now, there is neither a proper definition of jobs nor a scientific way to measure the jobs data, making it difficult to exactly determine how many jobs were created or rather lost (due to demonetisation and GST) and as the Indian economy transitions from informal to formal sector.

Latest labour department data showed that job creation was at one of its low points adding just 1.8 lakh for the quarter ended March 2017, indicating that the economy is coursing through a jobless growth under the National Democratic Alliance government.

Debunking the myth, recent research co-authored by Soumya Kanti Ghosh, chief economic adviser of State Bank of India, based on EPFO data underscored that India will add 70 lakh jobs this fiscal, which was widely contested. Prior to this, former finance minister P Chidambaram took a dig at Modi’s comments including informal sector jobs like that of a ‘pakoda’ seller as job creation.

Formal sector

Formal employment amounts to 7.5 crore, including government workers (excluding defence)

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