Informal Sector @ COVID-19

GS-3 INDIAN ECONOMY- Mobilization of resources, growth, development and employment; -Role of fiscal and monetary policies in resource mobilization


        The contraction of the economy raises concern on the employment situation as the shrinking sectors are those that create the maximum new jobs.More than 25 million jobs are at risk due to COVID-19 outbreak.(according to ILO)

  They include— 

  • construction (–50%)
  • trade, hotels and other services (–47%)
  • manufacturing (–39%)
  • mining (–23%). Million

Status of Vulnerable Employment in India:

  • Out of the 535 million labour force in India in 2019, some 398.6 million will have poor quality jobs.(ILO)
  • millions of people who have returned home due to lockdown.
  • urban low-end informal jobs.

Reasons for vulnerable workers:

  • India’s capital and labour are moving from low value-added activities in a sector to another sector, but not to higher value-added activities.
  • Service sector led growth has led to strong job creation in Information and Communication Technology (ICT)– intensive sectors but the informal and vulnerable employment continues in other sectors.

Challenges that need to be addressed:

  • Need to generate more jobs.
  • Need to be provided with decent wages and some form of job security.(700 million people live in extreme or moderate poverty even though they have a job)
  • Need to Improving Youth Employment.(145 million young workers live in poverty)
  • Need to achieving Gender Equality in the Workplace.(a woman with the same skills and responsibilities earns 20% less than a man)
  • Need to Responding Environmental Crisis.(6 million jobs globally, many in fossil fuel)
  • Bringing Child Labour to an End.(152 million children worldwide)

Government measures:

      While the ‘Garib Kalyan Rojgar Abhiyaan’-could be an immediate relief, the 50,000-crore employment scheme cannot be a substitute for decent urban jobs.

       The capacity of our rural economy to absorb workers who returned from cities is low.Mahatma Gandhi Employment Guarantee Act (MGNREGA) or its substitutes can absorb a significant proportion of these workers.

Additonal points:

  • Vulnerable Employment:
    • informally employed and lack effective representation by trade unions.
    • poor quality of jobs and high informality-those living on incomes of less than ₹198/day.
  • possibility of a decline in employment and a subsequent rise in unemployment.
  • wave of massive ‘reverse migration’
  • contraction and lack of demand in the economy-dip in urban employment generation.

Way Forward

  • Urban employment generation programmes(reduces overpopulation,slums)
  • More resources need to be allocated at the local government level.(enable formation of Trade Unions,Entrepreneurs and community groups).
  • Employment-intensive investment policies need to be designed.(both public and private sector initiatives.)
  • Enterprise formation(Small and micro enterprises need extra support)
  • Urban infrastructure needs to be prioritized.
  • Construction of low-cost housing can be carried out using labour-intensive methods.(benefits for urban dwellers)
  • Immediate launch of an urban employment scheme-oriented toward building large-scale medical, health and sanitation infrastructure.


              Still a large number of workers who need to be provided with alternative sources of employment, and generating decent urban jobs looks to be the only way out.

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