{"id":147433,"date":"2021-11-18T20:50:55","date_gmt":"2021-11-18T15:20:55","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=147433"},"modified":"2021-11-18T20:50:55","modified_gmt":"2021-11-18T15:20:55","slug":"understanding-why-the-informal-sector-really-shrank-during-the-pandemic","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/understanding-why-the-informal-sector-really-shrank-during-the-pandemic\/","title":{"rendered":"Understanding why the informal sector really shrank during the pandemic"},"content":{"rendered":"\n

News: <\/strong>Increase in formalisation is not a consequence of micro and small informal firms transitioning to formality.<\/p>\n

A recent study by SBI estimates that the share of the informal economy has fallen to a mere one-fifth of GDP \u2014 a figure comparable to many advanced economies.<\/p>\n

However, the supposed formalisation that happened during the pandemic is mainly an outcome of shrinkage of the informal sector under extreme duress.<\/p>\n

Understanding the basic difference between formalisation and infomalisation and the objectives of formalisation will help us to understand this issue better.<\/p>\n

What are the basic differences between formalisation and infomalisation?<\/strong><\/p>\n

As per ILO, the Informal sector includes<\/strong> those industries that are;<\/p>\n

-Private unincorporated enterprises owned by individuals (or households) that are not constituted as separate legal entities independently of their owners.<\/p>\n

– For which no complete accounts are available.<\/p>\n

– Not registered under specific national legislation (such as Factories\u2019 or Commercial Acts).<\/p>\n

Formal workers in India<\/strong>\u00a0are defined as those having access to at least one social security benefit such as a provident fund or healthcare benefits.<\/p>\n

What are the basic objectives of formalisation?<\/strong><\/p>\n

Transitioning to formality requires a reduction in dualism in production and an improvement in employment quality.<\/p>\n

Formalisation is not simply about legal considerations. Importantly, it is about increasing their productivity.<\/p>\n

The final objective of formalisation is to improve the working and living conditions of those in the informal economy.<\/p>\n

Hence,\u00a0 formalisation does not simply mean registration on a portal(E-shram), it includes a development strategy that requires stepping up investment in physical and human capital to boost productivity and the extension of social security benefits for all workers.<\/p>\n

Why the formalisation during the pandemic cannot be counted as a transition to formality?<\/strong><\/p>\n

Firstly, a decline in the share of informal sectors GDP cannot be accounted for as formalisation<\/strong>. Because the informal sector, which was badly affected by the economic contraction during 2020-21, didn’t receive much policy support. Most of the supply-side measures were mainly focused on firms in the formal sector.<\/p>\n

Secondly, a decline in the informal sector\u2019s share in GDP has not been accompanied by an expected reduction in its employment share. <\/strong>For instance, the PLFS survey shows, the employment share in non-agricultural informal enterprises has increased from 68 percent in 2017-18 to 69.5 percent in 2019-20.<\/p>\n

Lastly,<\/strong> just registering firms cannot be counted as formalization.<\/p>\n

Source:<\/strong> This post is based on the article \u201cUnderstanding why the informal sector really shrank during the pandemic<\/strong>\u201d published in Indian Express on 18th November<\/strong> 2021.<\/p>\n","protected":false},"excerpt":{"rendered":"

News: Increase in formalisation is not a consequence of micro and small informal firms transitioning to formality. A recent study by SBI estimates that the share of the informal economy has fallen to a mere one-fifth of GDP \u2014 a figure comparable to many advanced economies. However, the supposed formalisation that happened during the pandemic… Continue reading Understanding why the informal sector really shrank during the pandemic<\/span><\/a><\/p>\n","protected":false},"author":10316,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[216],"class_list":["post-147433","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704784840},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/147433","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10316"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=147433"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/147433\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=147433"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=147433"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=147433"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}