Expert Speak India Matters
Published on Oct 30, 2019
Will new social security schemes provide relief to the informal sector? What is the actual size of India’s informal workforce? There are various reports citing different numbers of labour activity participation and structure of employment. The economic survey of 2018-2019, released on 4 July 2019, says that 93 percent workers are in the informal economy, while Niti Aayog’s ‘Strategy for New India @75’, released in November 2018, says that “India’s informal sector employs approximately 85 percent of all workers.” While sources may differ on the precise numbers, the enormity of the informal workforce is an accepted and known reality. These workers contribute to 50 percent of India’s national income — they are the norm, not the anomaly. The Periodic Labour Force Survey (PLFS) 2017-2018, released in May 2019 by the Ministry of Statistics and Programme Implementation (MOSPI) can be taken as the most recent and official documentation of the informal workforce. The survey showcases the number of workers in the informal sector, among the workers in the ‘non-agriculture’ sectors and relevant agricultural sectors (such as animal production, aquaculture, fishing, and support activities to agriculture). According to the survey, 68.4 percent of all the workers in the relevant sectors were engaged in the informal sector. Among the male workers, informal workers accounted for 71.1 percent of the workforce, and among female workers, informal workers accounted for 54.8 percent of the workforce. Even if an individual is engaged in salaried labour, s/he does not fall into a formal employment structure unless the requisite employee benefits and contractual arrangements are attached. In India, more women work without these employee benefits than men. In 2017-18, among regular wage/salaried employees in the non-agriculture sector, 49.6 percent workers were not eligible for any social security benefit: 49 per cent among males and 51.8 percent among females. In rural areas, the proportion of regular wage/salaried employees who were not eligible for any social security benefit was 51.9 percent among male regular wage/salaried employees and 55.1 percent among female regular wage/salaried employees. In urban areas, 47 percent of the male salaried workforce were not eligible for any social security benefit, with 50.1 percent women making up the share that were not eligible for any social security benefit.

Benefits and pitfalls of social security schemes

As seen from the data above, there is an overwhelming proportion of the workforce which is engaged and employed in the informal sector. Providing legal and economic protection to these workers is a herculean task. India has numerous policies for social security when it comes to education, healthcare, skilling, food security and pensions — however, most of these schemes are restricted to the organised sector. This leaves the majority of workers in the informal sector without the required social security net. The industry and labour that form this neglected informal economy are neither taxed nor monitored by the government. Its contribution to the overall economy of the country is not properly accounted for as well. Until a viable option is found to integrate the informal economy within the ambit of a government tax regime, currently there are attempts being made to at least protect such workers from the ill-effects of being outside the purview of formal employment and its benefits. The government announced the Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM) scheme, released with this year’s budget, where ₹500 crore has been allocated to provide informal workers with the financial safety net they had been lacking till then. The scheme is meant to provide social security for unorganised workers who are mostly engaged as rickshaw pullers, street vendors, mid-day meal workers, head-loaders, cobblers, rag pickers, domestic workers, washer men, home-based workers, own account workers, agricultural workers, construction worker, beedi workers, handloom workers, audio-visual workers, and in similar occupations.” This list includes agricultural workers, which the statistics for informal labour in the PLFS does not include, thereby spreading the social security net wider. The table below compares 2019-2020 budgetary allocations of the major centrally-funded social security schemes with revised 2018-2019 budget allocation:
Programme/Scheme Budget 2019-20 ( crores) Percentage change over revised 2018-19 estimates
Mahatma Gandhi National Rural Employment Guarantee Programme 60,000 -1.8
Indira Gandhi National Old Age Pension Scheme (IGNOAPS) 6,259 4.8
National Family Benefit Scheme 673 -0.4
Indira Gandhi National Widow Pension Scheme (IGNWPS) 1,939 -1.5
Anganwadi Services (Erstwhile Core ICDS) 19,834 10.9
National Creche Scheme 50 66.7
Ayushman Bharat - Pradhan Mantri Jan Arogya Yojana (PMJAY) 6,400 166.7
As can be seen, there have been changes made to the budget allocations of flagship schemes in order to make room for the PM-SYM, which is focused on the informal workforce. However, a similar scheme, the Atal Pension Yojana (APY) launched in 2015, had only 80 lakh (eight million) beneficiaries by January 2018, accounting for less than two percent of India’s unorganised workers, which makes up 42 crore workers (420 million). The APY, like PM-SYM, is a contribution-based pension plan that enables workers to obtain an amount between ₹ 1,000 and ₹ 5,000 per month after retirement, so long as they have paid a premium for a minimum of 20 years. While the PM-SYM is an upgrade from the APY in terms of an increase in minimum monthly pension to ₹3,000 per month, the strongest criticism has been directed to the strict upper limit of the entry age into the scheme being between the ages of 18 and 40. Such a cap prevents older workers, who have at least 20 years of work left from the age of 40 to 60, from benefiting from the monthly pension that is to be received only after they turn 60. Instead of preserving the same cut-off age as in the APY, the PM-SYM should allow for older subscribers to participate as well. A further criticism of the PM-SYM is that the government is relaxing the burden of providing benefits and entitlements on the employer. The rise in female self-employment in the manufacturing sector shows employer trends of wanting workers for extended hours, without bearing the costs of alleviating risk for female workers. Self-employment in this case refers to a woman partaking in home-based work. These workers are problematically called ‘self-employed’ when, in reality, home-based work does not get recorded in employment statistics. Home-based workers are disguised wage workers as their employers seek to avoid risk-reducing arrangements such as job security and social insurance benefits by employing women working from home. Existing social protection policies in India, such as the Employees’ Provident Fund (EPF) and Employees’ State Insurance Scheme (ESIC), guarantee social security to both private and public sector employees. In theory, these policies should be applicable to both formal and informal workers. The ESI Act primarily applies to premises where 10 or more persons are employed, and since 2011, it has been extended to shops, hotels, restaurants, private medical and educational institutions, cinemas and newspaper establishments employing 20 or more persons. However, in practice, their reach is limited to formal workers with long-term contracts. Stringent arrangements for basic social security should be an enforced statutory condition for companies meeting a specific and adequate turnover. The arbitrary requirement for an organisation to have a certain number of employees in order for the employer to provide benefits must be reformed. In a country where 42 crore informal workers contribute to 50 percent of GDP, it is essential that these workers are provided support until a time where a robust employment generation programme can uplift them into the formal organised sector, where employers must obey labour laws. The current budgetary allocation of ₹500, set aside only for informal workers, seems to be a step in the right direction. The next step is to streamline the “Social Security Code” currently at the parliamentary stage of accepting reviews from stakeholders and the public. This proposed code would not just provide pension, but also health and maternity benefits to unorganised workers. Until a more holistic version of the code is ratified, the current schemes need to ensure that they permeate the entire informal sector.
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Aditi Ratho

Aditi Ratho

Aditi Ratho was an Associate Fellow at ORFs Mumbai centre. She worked on the broad themes like inclusive development gender issues and urbanisation.

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