Unorganised Sector In India

Any economy of the world is divided into two sectors (based on the nature of employment) one is the organised sector and the other one is the unorganised sector, their contribution to the economy varies from country to country.

Most of the developed countries are dominated by organised sector but in the developing and the third world country, the unorganised sector is prevalent. The unorganised sector is also known as the informal sector.

What is the difference between organised sector and unorganised sector?

In organised sector, employees work under fixed terms and conditions with a given timing but in an unorganised sector, no rules are followed.

The organised sector employees work in offices, factories, or in government sectors but the unorganised sector labours work in small businesses or units without any rules and regulations.

Organised sector companies or firms are registered and recognised by the government regulatory bodies and follow the rules and regulations. But in unorganised sector, it is largely outside the control of the government and characterized by a small and scattered unit like farmers, the domestic worker,s and street vendors.

Even if a person not employed in a company but has registered with the government and follows the rules in a systematic manner like consultants and advisors also belong to organised sector.

Naila Kabeer (A renowned social economist),  said that the unorganised sector or informal sector not peculiar to developing countries or third world countries, but the vendors seen in New York and London also fall to the category of unorganised or informal sector.

It means that the unorganised sector is not only the character of the developing countries but it is also prevalent in developed countries.

In India, the unorganised sector mostly prevalent in the agriculture sector. Apart from the agriculture sector the self-employed (street vendors, small shop owners), contract labours and household labours also belong to the unorganised sector. The household labours mostly included women and child labours).

Types of Economy:

The economy is divided into three sectors based on economic activity, these are;

1. primary sector: it is mostly accommodated in unorganised manner. It contributes 17% of GDP

2. Secondary sector also known as industry sector: In this sector, the construction sector accommodates in an unorganised manner. Industry sector contributions to GDP is 28%.

3. Tertiary sector also known as service sector: It is mostly do dominated by the organised sector. Its contribution to GDP is a maximum of 57%.

According to the economic survey, 93% of the workforce in our economy are working for the unorganised sector which is approximately 42 crore people.

According to National Sample Survey Office (NSSO) report, the agriculture sector alone contributes to 60% of the unorganised sector.

We can say that out of 10 people 9 are working in unorganised sector.

The unorganised sector contribution to our GDP is 47% which is very high and it shows the importance of the unorganised sector.

The problems faced by the unorganised sector:

1. Seasonal in nature: The majority of the unorganised sector jobs are seasonal in nature like agriculture, which is seasonal in nature and after the lean season the labours are forced to migrate to urban areas for their day-to-day life.

2. There is no provision of overtime, paid leaves, holidays and leave due to sickness.

3. Low salary: Due to very low salary, the labours are hardly able to bear their day to day expenditure and can’t save money which creates uncertainty for the future.

4. Poor skills reduce the productivity of the labours

5. Unhygienic working condition deteriorates the health which leads to out of pocket expenditure.

6. No social security lead problem in old age day when the working-age surpassed.

7. Not permanent in nature.

Importance of unorganised sector:

1. It bridges the gap between the various sectors and worked as a foundation of the economy.

2. It revives the rural economy and activity related to unorganised sector which mostly prevent in rural areas.

3. Low cost of labour provided by the unorganised sector lead to help infant business.

4. Poverty alleviation as it provides basic income in which people can survive with basic amenities.

5. Savings in banks from unorganised sectors help the banking system to provide loans to other sectors.

6. Labour intensive, as unorganised sector is labour intensive it can accomodate a vast range of people which lead to reduce pressure on the government as government can not accommodate all.

Government schemes for the unorganised sector labours/workers:

The government is creating schemes in which they try to provide a dignified life for the unorganized sector like;

1. Pradhan Mantri Shram Yogi Maan Dhan Yojna (PM-SYM):

It is a pension scheme for the unorganised sector workers with a monthly income of up to  Rs 15,000.

It promises to provide an assured pension of Rs  3,000  per month from the age of 60 years, in return for making a monthly contribution of a  nominal sum during the working age.

2. Atal Pension Yojana:

The subscribers of Atal Pension Yojna would receive the fixed pension ranging from 1000 to 5000 per month at the age of 60 years,  depending on their contributions.

Atal Pension Yojana  and PM-SYM

The benefits in PM-SYM are much in line with the Atal Pension Yojana. The Atal Pension Yojana launched in 2015 also targets the unorganised sector.

3. Pradhan Mantri Rojgar Protsahan Yojana:

It aims to promote/incentivize employment generation.

The Government will pay the entire employer’s contribution which is 12  percent or admissible contributions towards the Employees‘ Provident Fund and the Employees‘ Pension Scheme for all eligible new employees for all  sectors for 3 years.

4. Deendayal Upadhyay Shramev Jayate Karyakram:

In this facility of Shram Suvidha Portal is given which is to redress the grievances and provide information. It also includes random labour inspection to monitor various parameters.

5. Atal Bimit Vyakti Kalyan Yojana:

It is to financially support those who lost their jobs and were covered under the Employees’ State Insurance Act, 1948.

6. Aam Admi Bima Yojana:  

The government decided to provide the facility of opening zero balance account from every household in which the overdraft facility has also been increased to  Rs.10,000 with no conditions attached to avail upto  Rs.2000.

The free accident insurance cover for new RuPay cardholders has been doubled to Rs 2 lakh. Also, the upper age limit for availing of the overdraft facility has been hiked to 65 from the earlier 60 years.

It is a Social  Security Scheme administered through  LIC.

It provides death and disability cover to persons between the age group of 18 to 59 yrs.

7. Ayushman bharat:

To achieve the vision of Universal health coverage it establishes the Health and  Wellness Centre and also subscheme like Pradhan Mantri Jan Arogya Yojana aims to reduce out of pocket hospitalisation expenses by providing health insurance coverage upto  Rs.5  lakh per family per year for secondary and tertiary care hospitalization.

Even after govt schemes, there are too much to do for this sector to make it viable as it has huge impact on our rural economy especially

So the need to fill the gap and provide regular assessment of the scheme and modify with the need.

Also, the major steps need to change unorganised sector in to organise sector for the safety and dignity of the people.


Impact of globalisation on the unorganised sector:

Some positive impacts of globalisation on the organised sector:

1. The job opportunity for women is increasing which is making them financially Independent and break the patriarchal customs of the society.

2. The feminisation of the labour force provides opportunities for women.

3. Create awareness about the standard law and regulation of the International Labour Organisation as well as the rules of other countries.

4. Global standards create pressure on domestic lawmakers to adopt new rules and laws for the unorganised sector.

Some of the negative impacts globalisation on the organised sector:

1. Competition increases lead to a wage cut.

2. Availability of labours leads to bypass the law and increasing the trend of contract labours.

3. Increasing workforce with time leads to increase in unorganised sector

4. Increase in micro small and medium enterprises (MSME), which are small in size and hard to be regulated by the government norms hence the nature of employment in MSMEs is mostly unorganised in nature.

5. The bigger impact of globalisation is the competition and entry of giant companies into the market. It leads to the firing of the workforce to reduce the company expenditure (cost-cutting) in many companies. The fired workforce is forced to work in some unorganised sector to fulfill their basic needs.

This article is written by;

Mr. Pankaj Kumar Gupta

(Email ID: [email protected])