*Out of 465 million workers in 2009-10, 437 million (93%) was in the unorganised sector

* Over 90% of unorganised labour engaged in wholesale/retail trade

* This 93% of the work force accounts for, hold your breath, about 50% of GDP

It might surprise some to know that most of the debates on labour issues in India, including the provision of social security & workplace challenges, actually revolve only around 7% of the total workforce.

And yet, as India integrates with the global economy, its the 93% majority that in some ways providing the resources to keep the country competitive and productive. The term is informalisation. And with increased sub-contracting due to globalisation and liberalisation, there is the universe employers are increasingly turning to.

According to the National Sample Survey Organisation, in the year 2009-2010, the total employment in both the organised and the unorganised sector in the country was 465 million. Out of this, only 28 million (7%) were in the organised sector while the remaining 437 million (93%) was in the unorganised sector. But on the other hand, the informal sector that provides employment to 93% of the work force accounts and accounts for, hold your breath, about 50% of the GDP.

Figure 1

The National Accounts Statistics (NAS), a division of the Ministry of Statistics, defines the unorganised sector as enterprises whose activities are not regulated under any legal provision or do not maintain any regular accounts. Incidentally, a whopping 92% of the workers within the informal sector are involved in non-agricultural activities while only 8% are in agriculture.

Figure 2

Figure 2 shows the five main sectors that provide employment within the informal sector in the country. It can be seen from the table that most of the employment in the informal sector is provided by wholesale and retail trade both in the rural and urban (91% and 92%) areas.

Let us now look at the wages in the rural and urban areas:

Figure 3

So, it’s clear from Figure 3 that regular workers get better wages compared to the casual or day labourers. And urban workers are paid better than their rural counterparts in both the categories.

Gender-wise, there are huge differences among regular workers with male regular workers in rural areas paid Rs 144.93 per day while the female regular worker was paid only Rs 85, a difference of Rs 50. Same is the case in urban areas where male workers are paid over Rs 203 while female workers are paid only Rs 153…

Gender Difference

In rural areas, the number of female workers involved in informal agricultural activities is higher compared to their male counterparts. And the number of males in the non-agricultural sector is higher compared to female workers.

The trend continues in urban areas as there are more men in the non-agriculture sector compared to females.

Figure 4

Key Characteristics of Informal Sector

The informal sector is distinguished by the following characteristics:

* The sector is fragmented and also overwhelming in terms of numbers, making it difficult to regulate for the Government.

* There is high level of employment insecurity. Workers do not have stable and durable avenues of employment. Even the ones who appear to be visibly employed are not gainfully and substantially employed, indicating the existence of disguised unemployment.

* There are no provisions for employment benefits for workers. The working conditions are often hazardous to health. And the wages are much lower when compared with the formal sector.

Offering Social Security

So the need to protect the informal sector workers becomes very evident. In response to this, the Government passed the Social Security and Welfare Act in 2008. The Act provides for the constitution of the National Social Security Board to recommend social security schemes viz life and disability cover, health & maternity benefits and old age protection for workers in the informal sector. The Central Government has also launched various free-of-cost social security measures like the Rashtriya Swasthya Bima Yojana (RSBY), a family insurance programme, the Aam Aadmi Bima Yojana (AABY), a rural-India focused insurance scheme and the Indira Gandhi National Old Age Pension Scheme (IGNOAPS).

Rashtriya Swasthya Bima Yojana (RSBY) was launched on 1st October, 2007 to provide smart card-based cashless health insurance cover of Rs 30,000/- per annum on a family floater basis to families (a unit of five) below the poverty line. As per the latest data, the programme has reached around 34 million beneficiaries.

Figures 5 (a) & (b) show the top 5 and bottom 5 states along with the total smart cards issued till 2012. Interestingly, states like Goa, Rajasthan and Tamil Nadu have discontinued the scheme and some states like Tamil Nadu have launched their own programmes.

Figure 5 (a)

Figure 5 (b)

Aam Aadmi Bima Yojana (AABY) was launched on 2nd October 2007 to provide insurance cover to the head of the family or one earning member of rural landless households. The nominees under the programme will get up to Rs 75,000 in case of death of the insured due to accidents. The scheme has already covered 47.5 million people till January 31, 2013.

Figures 6 (a) & (b) list the top 5 and bottom 5 states along with the total number of beneficiaries.

Figure 6 (a)

Figure 6 (b)

Indira Gandhi National Old Age Pension Scheme (IGNOAPS) offers Rs 200 per month to people below the poverty line and above the age of 60 years. Figures 7 (a) & (b) show the top 5 and bottom 5 states

Figure 7 (a)

Figure 7 (b)

How much has the Central Government allocated for these programmes?

Figure 8

RSBY has seen the allocation go up from Rs 350 crore in 2009-10 to Rs 1,568 crore in 2012-13, an increase of nearly 350% in four years.

The National Social Assistance Programme, which funds the pension programme, has seen its allocation decline to Rs 4,218 crore in 2012-13.

Finally, a sum of Rs 2,000 crore has been placed with the Life Insurance Corporation for the execution of AABY.


The Government has evidently recognised the problems of the informal sector and is addressing its concerns… but many informal industries are yet to be brought under adequate legal regulation and protection. And workers for whom these policies are designed are very often unorganised and do not have any idea about the welfare schemes meant for them.

The schemes may have helped people to some extent but the impact is quite inadequate as seen in the limited reach of RSBY. So, even though schemes are in place, there needs to be effective engagement of the informal workers in these schemes. The market itself is, not surprisingly perhaps, playing the strong support role in the meanwhile.