7 PM Editorial |Informal Sector- COVID-19 Induced Issues and Their Solutions| 15th September 2020

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Informal Sector- COVID-19 Induced Issues and Their Solutions

Overview – The effects of low growth on the informal sector and their solutions.


The contraction of the economy raises concern on the employment situation as the shrinking sectors are those that create the maximum new jobs. They include— construction (–50%), trade, hotels and other services (–47%), manufacturing (–39%), and mining (–23%).

While the ‘Garib Kalyan Rojgar Abhiyaan’ launched in June could be an immediate relief, the ₹50,000-crore employment scheme cannot be a substitute for decent urban jobs. The shrinking economy will only lead to either people losing out on jobs or will lead to them failing to get one. Along with this, the sudden lockdown imposed has also led to further issues.

What are the issues for India in the current horizon?
  1. There have been millions of people who have returned home due to lockdown. They will also return back in future, meaning there will be further shortage of employment.
  2. The urban low-end informal jobshave suffered the major brunt. They comprise the major share of vulnerable employment.
Vulnerable Employment: It is characterised by inadequate earnings, low productivity and difficult conditions of work that undermine the basic rights of workers. They are more likely to be informally employed and lack effective representation by trade unions.

Status of Vulnerable Employment in India: According to the International Labour Organization, of the 535 million labour force in India in 2019, some 398.6 million will have poor quality jobs. Despite higher economic growth in recent years, working poverty in India also remains high.

Why does India have a huge share of vulnerable workers?
  1. 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. This leads to a situation where a large proportion of the jobs being created is of poor quality.
  2. The service sector led growth has led to strong job creation in Information and Communication Technology (ICT)- intensive sectorsbut the informal and vulnerable employment continues in other sectors. These vulnerable sections comprise the majority of the employment.
So, what are the challenges that need to be addressed specifically?
  1. There is a need to generate more jobs.
  2. The jobs generated along with the existing ones need to be provided with decent wages and some form of job security.
What are the steps that need to be taken?

The present crisis calls for a multi-pronged strategy to tackle the issue of urban jobs.

  1. The focus on urban employment generation programmesshould be in coordination with local governments as cities also face issues of overpopulation, slums etc. For this, more resources need to be allocated at the local government level. Resource mobilisation could be enabled by the formation of local alliances, involving elected representatives, trade unions, entrepreneurs and community groups’.
  2. Employment-intensive investment policies need to be designed. They should embrace both public and private sector initiatives. Private investments need to be facilitated by conducive contractual relations between labour and capital. Enterprise formation needs to be an integral part of the strategy. Small and micro enterprises need extra supportto balance the interests between labour and capital as neither have collective bargaining powers.
  3. Urban infrastructure needs to be prioritised as it accounts for a large share of total investments in the local economy. Construction of low-cost housing can be carried out using labour-intensive methods, which will yield substantial collateral benefits for urban dwellers
  4. An immediate launch of an urban employment schemeoriented toward building large-scale medical, health and sanitation infrastructure in cities and towns across India is needed.

The capacity of our rural economy to absorb workers who returned from cities is low and the viability of agriculture to provide these workers with a decent living is questionable. It is not valid to assume that the Mahatma Gandhi Employment Guarantee Act (MGNREGA) or its substitutes can absorb a significant proportion of these workers. There will still be 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.

Source: The Hindu

Mains Question:
  1. The COVID-19 induced lockdown has led to huge problems for the urban economy, particularly the informal workers. Discuss how these workers can be re-accommodated into the urban economy.
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