Informal economy down to 15-20% from 52%


  • India’s informal economy down to 15-20% from 52% three years ago following the adoption of GST, enhanced digitalisation, and demonetisation, a report by the State Bank of India’s (SBI) economic research department has said.

Key Findings

  • At least Rs 13 lakh crore has come into the formal economy through various channels over the last few years, including the recent scheme on the e-Shram portal. Informal economy - Wikipedia
  • Since 2016, a plethora of measures, which accelerated the digitisation of the economy and the emergence of the gig economy, have facilitated higher formalisation at rates that are possibly much faster than that of most other nations
  • Over the last couple of years, the government has made many efforts for formalisation
  • Based on this data we estimate almost 36.6 lakh jobs have been formalised till August 2021
    • There is the e-Shram portal, India’s first national database of unorganised workers, on which 5.7 crore workers have registered until October 30. Sixty-two per cent of workers are in the 18-40 age group, and 92 per cent have a monthly income of less than Rs 10,000
    • State-wise data show that the top four states accounted for 72 per cent of total registrations, with West Bengal on top followed by Odisha and Uttar Pradesh.
    • E-Shram is a big step towards the formalisation of employment as our calculation indicates that till date the rate of formalisation of unorganised labour due to e-Shram is around 17 per cent or Rs 6.8 lakh crore or 3 per cent of GDP in just 2 months
    • Workers from the agriculture sector account for 55 per cent of registration, followed by the construction sector (13 per cent).
    • Of the 5.7 crore registered workers, 81.2 per cent — or 4.6 crore — have bank accounts, but only 24 per cent of them (1.1 crore workers) have Aadhaar-linked bank accounts.
  • Even in agriculture, the usage of KCC cards has increased significantly and we estimate Rs 4.6 lakh crore formalisation only through KCC route, with more marginalized farmers coming under the banking sector ambit through such usage.
  • While 25-30 per cent of the GDP comes from SMEs, they are mostly informal; also, over 60 per cent of employment in the farm sector is informal. If you see trade, transport, restaurants, retail, wholesale trade, and mandis, they are not in the formal sector.
  • Around 93 per cent of India’s workforce is part of the informal economy (NSSO 2014). Although the pandemic has impacted all sectors, it has been felt more by the informal sector. While the formal sector is now back to pre-pandemic levels, the informal sector continues to struggle.
  • The informal size of the trade, hotels, transport, communication, and broadcasting sectors, which employ around 17 crore households as per the 2011 census, is 40 per cent.
  • The informal sector in construction is around 34 per cent, and that in public administration around 16 per cent.
  • Manufacturing sector has an informal component of around 20 per cent.
  • But the government’s formalisation efforts have led to almost 100 per cent formalisation in finance, insurance and, to a large extent, real estate.
  • Since FY18, agriculture has been formalised by 20-25 per cent due to the increasing penetration of KCC credit. This implies that in the agriculture sector informal share is now in the range of 70-75 per cent.

Source: IE

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