Challenges for India’s Informal Urban Workforce

UPSC Syllabus: Gs Paper 1- population and associated issues, poverty and

developmental issues, urbanisation, their problems and their remedies.

Introduction

Recent protests in Noida highlight growing insecurity in urban livelihoods. These incidents reflect a deeper structural crisis affecting India’s cities. Around 90% of the workforce is informal, and regular salaried jobs remain limited in urban areas. Over time, the bargaining power of workers has weakened significantly, increasing their vulnerability to state policies and market forces. This situation shows rising urban precarity and the urgent need to address challenges faced by informal workers.

Informal Workers and Their Key Issues

1. Informal workers: They work without formal contracts, job security, or social protection. Most urban workers fall in this category due to low salaried employment.
2. Major Issues of Informal Workers:

• Invisibility and weak protection: Lack of proper data makes them invisible. This leads to unfair employment terms, no labour protection, and no social security.
• Unstable income and unfair wages: They often do similar work as formal workers but do not receive minimum wages. Income remains irregular and uncertain.
• Irregular work opportunities: Work depends on market demand. Interrupted orders prevent long-term planning and stable livelihoods.
• Lack of social security: They are excluded from major laws. They lack support during illness, disability, old age, or unemployment.
• Limited access to resources and state support: They do not get access to skills, funds, or proper health services, limiting their growth.
• Weak organisation and bargaining power: Workers remain scattered and unorganised. This results in very low bargaining power with employers and the state.
• Unsafe working conditions: Poor safety awareness and weak regulation expose them to health risks and workplace accidents.

Reasons for Rising Urban Precarity and Worker Vulnerability

1. Shift in urban economic structure: Cities have moved from industrial production to social reproduction. Formal industries declined, as seen in mill closures.
2. Decline of organised labour: Urban areas are no longer centres of strong labour unions. Workers now focus on basic survival needs like food, water, and shelter.
3. Urbanisation of survival economy: Daily life revolves around managing basic needs rather than stable employment, increasing insecurity.
4. Policy shift towards market-led governance: Under the Washington Consensus, the state reduced its direct role and promoted privatisation and market-based delivery of services. This led to a shift from rights-based public services to user-fee driven systems.
5. From rights-based to market-based services: The state reduced its role in providing water, health, education, and environmental protection. Services became need-based and fee-driven.

Impact of Urban Development Model

1. Housing insecurity and slum conditions: Around 40% of urban poor live in slums. They spend 30–50% of income on rent for poor-quality housing.
2. Exposure to environmental risks: About 60% of informal settlements are in flood-prone or hazardous areas, increasing vulnerability.
3. Privatisation of essential services: Water and electricity shifted to user-fee models, raising costs for poor households.
4. Gentrification and forced evictions: Slums are cleared for high-end real estate and ‘world-class’ infrastructure, displacing workers.
5. Commodification of urban commons: Natural resources and public spaces are increasingly treated as market goods, limiting access for the poor.
6. State shift in housing policy: The state moved from direct provider to facilitator of private real estate. Public land is diverted to high-end projects.
7. Weakening of labour protections: Labour laws have been diluted, reducing job security and worker rights.
8. Financial exclusion and debt traps: According to Reserve Bank of India, lack of collateral forces workers to depend on moneylenders, leading to chronic debt.

Government Initiatives for the Informal Sector

1. Database and Identification:

• e-Shram Portal: It creates a national database of unorganised workers and provides a Universal Account Number (UAN) to enable targeted delivery of benefits.

2. Social Security and Insurance:

• Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM): It offers a voluntary pension of ₹3,000 per month after 60 years for informal workers.
• Pradhan Mantri Suraksha Bima Yojana (PMSBY): It provides accidental insurance coverage at a low premium.
• Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY): It offers life insurance coverage for financial security.

3. Financial Inclusion Measures:

• Pradhan Mantri Street Vendor’s AtmaNirbhar Nidhi (PM SVANidhi): It provides collateral-free micro-credit to street vendors.
• Pradhan Mantri Mudra Yojana (MUDRA): It offers loans to micro and small enterprises to promote self-employment.

4. Livelihood and Employment Support:

• Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM): It supports self-help groups and income generation activities.

5. Skill Development Initiatives:

• Pradhan Mantri Kaushal Vikas Yojana (PMKVY): It provides vocational training and skill certification to improve employability.

6. Employment Generation Programmes:

• Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025 (VB G RAM G): It ensures 125 days of guaranteed wage employment, reducing distress migration.
• Pradhan Mantri Rojgar Protsahan Yojana (PMRPY): It encourages employers to create new jobs and promote formal employment.

7. Labour Reforms and Formalisation:

• Labour Codes (2020): They consolidate labour laws to extend coverage to gig, platform, and unorganised workers.
• Aatmanirbhar Bharat Rozgar Yojana (ABRY): It incentivises employers to hire workers under formal systems like EPFO.
• Udyam Portal: It simplifies registration of Micro, Small and Medium Enterprises (MSMEs) to support formalisation.

What Should Be Done?

1. Restore rights-based delivery of basic services: Ensure water, housing, health, and education are provided as public rights, not through user-fee models. Reduce dependence on privatised service delivery.
2. Extend labour protection to informal workers: Bring informal workers under labour laws and social security systems to ensure minimum wages, safety, and income protection.
3. Ensure access to affordable and secure housing: Control high rent burden and prevent forced evictions. Promote housing with legal protection and basic sanitation.
4. Expand access to formal financial systems: Increase access to institutional credit and banking services to reduce reliance on moneylenders and avoid debt traps.
5. Institutionalise worker participation in urban governance: Create platforms like workers’ councils in city governance, as seen in Kerala Urban Commission, to include informal workers in decision-making.
6. Adopt an integrated and intersectional urban policy: Link informal labour issues with climate risks, disasters, and urban development planning for more balanced and inclusive outcomes.

Conclusion

Urban precarity is a result of structural changes, weak labour protection, and market-driven policies. Informal workers face multiple insecurities in jobs, housing, and services. A shift towards rights-based governance, stronger labour protection, and inclusive urban planning is necessary. Sustainable cities require active participation of workers and balanced development policies that protect livelihoods and dignity.

Question for practice:

Discuss the major challenges faced by India’s informal urban workforce and examine the reasons behind rising urban precarity along with the need for policy reforms.

Source: The Hindu