Challenges of India’s Informal Sector
Another wave of COVID, another round of lockdowns, another long journey back home for migrant workers as the pandemic has revealed the precarious state of India’s informal sector.
Impact of COVID-19 pandemic on Informal Sector of India
- Migrant workers entered into web of insecure jobs: The first wave of COVID-19 in 2020 had exposed the abysmal flaws of an economic system that drives tens of millions of people into insecure jobs that they can lose overnight, with no alternative or safety net.
- It is the fate of a majority of the 90 per cent of India’s workforce that is in the unorganised sector.
- Small and marginal farmers gave up farming and entered unorganized sector: Since 1991, about 15 million farmers have moved out of agriculture, many because the economic system simply does not make farming remunerative enough.
- Around 60 million people have been physically displaced by dams, mining, expressways, ports, statues, industries, with mostly poor or no rehabilitation.
- Failure of self-reliant package of government: The government’s “Atmanirbhar Bharat” (self-reliant India), is actually increasing the control of distant markets and companies over people’s lives, and increasing ecological damage.
- Social disturbances: An economy that promotes mass vulnerability only increases social strife, creating an atmosphere ripe for communal, class and caste violence.
- It will eventually engulf all of us, other than the super-rich who will escape to some safer part of the world.
- Three-fold increase in urban-unemployment rate: 67 percent of workers were rendered unemployed, with the urban and self-employed (non-agricultural) workforce hit disproportionately hard.
- About 80 percent to 90 percent of India’s workforce is part of the ‘unorganised informal sector,’ which is outside the ambit of social security frameworks.
Challenges faced Informal Sector in India
- Availability of massive pool of cheap labour: the last few decades of “development”, economic policies have created a massive pool of cheap labour for the state-dominated or capitalist industrial class.
- It has added to the already large numbers of landless agricultural labourers caught in traditional caste, class and gender discrimination.
- The three farm laws introduced by the government will further hand agricultural control to corporates, creating an even bigger pool of exploitable labour.
- Increase in purchasing power gap: The exploitation people desperate for any kind of job has led to minority becoming wealthier by the second.
- The richest 5 per cent of Indians now earn as much as the remaining 95 per cent.
- Jobless growth in formal sector: Since 1991 there has been, for the most, “jobless growth” in the formal sector, meaning those leaving villages end up in some other informal work, mostly very insecure.
- Lack of government’s will on political and economic empowerment: The governments have been most reluctant to enable political and economic empowerment of local communities.
- They believe that it threatens their power, and their ability to hand over lands and resources to corporations as they please.
- Poorly regulated labour market: India’s growth story has been sharply affected by the pandemic, with the country seeing a 24 percent GDP contraction in the first quarter of 2020.
- Issue in India’s structural transformation: Instead of labour moving from agriculture to the manufacturing sector, India witnessed de-industrialisation and an expansion of services at the expense of manufacturing employment.
- High degree presence of caste-based segregation: The scheduled caste and scheduled tribe groups in India are over-represented in low-wage occupations and ‘traditional’ jobs such as the leather industry, even as they are now well-represented in public posts due to successful reservation policies.
Measures to be adopted to support Informal Sector in India
- Focus on local self-reliance for basic needs: Rather than incentivising big industry to take over most production, virtually all household needs can be produced in a decentralised manner by thousands of communities.
- If a community can produce most of its household items locally, they not only save the Rs 40 lakh they spend every month buying these from outside companies, but they also create full local livelihood security.
- Localised exchanges of products and services: It will be more effective in securing people’s livelihoods than are long-distance markets and jobs.
- Increase in employment opportunities in skill sectors: The shortage of purely agriculture-based livelihoods can be made up by crafts, small-scale manufacturing, and services needed by their own or surrounding populations.
- Local self-reliance with workers’ control: It is necessary to have workers’ control over the means of production in order to achieve the true objectives of local self-reliance.
- In central India, communities that have successfully claimed collective legal control over surrounding forests, and mobilised towards adivasi swasashan (self-rule), survived the COVID lockdown much better than those who did not have such control.
- Strong implementation of local self-government in villages: The 73rd and 74th constitutional amendments which meant to empower village and city assemblies, or laws like the Forest Rights Act, have been to be implemented whole heartedly.
- Rethinking the value of work: The crisis has revealed how the ‘essential’ workers’ pay is at complete odds with the value they create for society and the economy.
- The market value of work is evidently not in consonance with lived reality, and this is one of the major reasons for the current precariousness that plagues our economies.
- Re-conceptualising the role of the State: It requires greater public investment and expanded capacity to build robust institutions, state capacity remains poor in India and public spending has actually fallen, from 18 percent of GDP in 1990-91 to 12.2 percent in 2019-20.
Summing up
- The millions of workers would not have to go back to insecure, undignified jobs in cities and industrial zones if they could have economic security in their own villages and towns.
- India must build a vibrant manufacturing sector through robust industrial policy in order to create broad-based quality employment for the masses.
- India needs to consider its vast informal economy as a crucial sector that actively contributes to GDP and not as a temporary aberration in pursuit of formality.
- The pandemic has provided the impetus for academics and policymakers to take on particularly thorny challenges with renewed vigour and moot ideas that were previously considered too radical to be discussed.
- The debates around work and the welfare architecture in India need to be urgently reframed and translated into practical reform.
- India must use the pandemic to switch to a more forward-looking sustainable growth trajectory before it becomes too late to matter.
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