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CONCEPT – ORGANISED AND UNORGANISED SECTORS IN INDIA
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- Two sectors : The Indian economy is made up of Organised sector and Unorganised sector. Both are important, and recent policy moves have impacted both.
- Differences :
- Organised businesses are those where the terms of employment are regular and people have assured jobs. Unorganised sector is constituted by the small and scattered units which have remained outside the control of the government.
- Government laid rules and regulations are followed by organized, but not necessarily by the unorganized.
- The salaries etc. are paid as per Basic Wage Act. But in unorganized sector, the wages may be low and irregularly paid. Other benefits are absent.
- These is security of employment in organised sector, but not in the unorganized.
- Insurance and medical benefits exist in organized, but not in unorganised.
- Hiring and firing is not so easy in the organized sector.
- Organised sector has less than 10% of the employed population, but adds 50% of the output. Informal or unorganized has 90% of the employed, and 50% of the output.
- Over the years it has become clear that in terms of the number of enterprises (defined as units that offer for sale at least a part of their output), the share in employment, and, to a lesser extent, in output, units that fall under categories such as ‘informal’ or ‘unorganised’ have retained a position of considerable importance in India’s non-agricultural sector.
- The Economic Survey of 2018-19 says "almost 93%" of the total workforce is 'informal'. The Niti Aayog's Strategy for New India at 75 said: "by some estimates, India's informal sector employs approximately 85% of all workers".
- There is yet another government report, 'Report of the Committee on Unorganised Sector Statistics' of the National Statistical Commission (NSC), 2012, which says the share of the informal workforce is "more than 90%" of the total.
- The government does recognise that the informal sector and workers contribute significantly. The NSC's 2012 report pegs it at "about 50% of the national product" without revealing how it arrived at such a conclusion.
- So the exact size is not known, but it is known that the size is huge.
- The latest jobs data released by the government--amidst much controversy and debate--showed a 45-year high in general unemployment, but these data have also revealed a rise in formal employment--which accounts for 35.8% of all jobs--particularly in urban, non-farm sectors.
- The Periodic Labour Force Survey (PLFS) was released by the National Sample Survey Office (NSSO) on May 31, 2019.
- The share of “regular” workers in urban areas increased over 13 years, from 35.6% in 2004-05 to 47% in 2017-18.
- The share of workers in the “formal” non-agriculture sector--government organisations, public sector enterprises, and public/private limited companies, trust/non-profit institutions and autonomous bodies--increased from 27.8% in 2004-05 to 35.8% in 2017-18.
- The employment rate for those with a job contract and paid leave in non-farm, urban jobs fell over the period we considered. However, jobs for those with social security benefits, the most important measurement of such employment, rose during the last 13 years.
- A new dualism in the urban job market is emerging: a growth in relatively secure formal employment having two sets of workers, one with better employment condition or decent jobs, and another with poor employment conditions almost similar to informal employment.
- The PLFS 2017-18 was conducted after the implementation of the Goods and Services Tax (GST) in July 2017, the data show that the proportion of formal workers has increased since then. The share of “regular” workers in urban areas increased over 13 years, from 35.6% in 2004-05 to 47% in 2017-18.
- Regular employment for men rose from 40.6% to 45.7% and for women from 35.6% to 52.1% this period. Although the GST was widely criticised for its hasty, often chaotic implementation (read our series on job losses following demonetisation and implementation of the GST here).
- The report also showed that joblessness was highest among urban female youth (27.2%); urban, educated Indians--men (9.2%) and women (19.8%)--and among women in general (10.8%).
- Other data sources appear to back the finding that formal, non-farm employment has risen. These include monthly payroll data released by the Employees’ Provident Fund Organisation (EPFO), Employees’ State Insurance Corporation (ESIC) and the Pension Fund Regulatory and Development Authority (PFRDA).
- “Decent employment” is a key government ambition, in line with the sustainable development goals (SDGs) of the United Nations. Goal number eight says: “Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.”
- For the two (written jobs contract, and paid leave) of three indicators for ‘decent employment’, there has been a decline in urban, non-farm employment, a closer look at the data reveals, but by the third indicator (social security benefits) shows an uptick and that, as we explain, is more significant.
- The first indicator for decent employment in non-farm, urban sectors is a written job contract or a formal agreement with the employer about the duration of the job. By this yardstick, the latest PLFS report shows that the share of regular workers (with a written job contract) in urban areas declined from 40.9% in 2004-05 to 27.6% in 2017-18, and 38.8% to 28.6% for women.
- The PLFS report shows that the share of regular workers eligible for paid leave--the second indicator for “decent employment”--declined in urban areas from 54.5% in 2004-05 to 47.2% in 2017-18, and 52.0% to 48.2% for women.
- The third and most important indicator for decent employment conditions is the share of regular workers eligible for social security benefits--provident fund, pension, gratuity, health care, and maternity benefits--which, however, has increased by 6.2 percentage points from 46.6% in 2004-05 to 52.3% in 2017-18, and 40.4% to 49.9% for women .
- The PLFS 2017-18 thus confirms that there has been a decline in the number of regular workers having a written contract and getting paid leaves. Yet, the silver lining is the increase in the number of formal workers in urban areas receiving social security benefits as a result of continued government efforts over the last 13 years.
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