Informal economy down to 15-20% from 52%

Last Updated03/11/2021

India’s informal economy has shrunk to around 15-20 per cent of the formal GDP as against 52 per cent three years ago.
It was the outcome of adoption of GST, enhanced digitalisation, and demonetisation as per report by the State Bank of India’s (SBI) Ecowrap report by economic research department.
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.

The informal sector consists of “own-account” or unorganised enterprises employing hired workers, with the highest share of such unorganised activity being in agriculture where holdings are small and fragmented.
An IMF policy paper earlier this year estimated that the share of India’s informal economy in the Gross Value Added (GVA) was at 53.9% in 2011-12 and improved only marginally to 52.4% in 2017-18.
As per a National Sample Survey of 2014, around 93% of the workforce earned their livelihoods as informal workers.

Over the last couple of years, the government has made many efforts for formalisation as per the resport
One of the sources to analyse the extent of formalisation is the monthly EPFO payroll report which provides data on establishments remitting first ECR (Electronic Challan-cum-Return) in a particular month, it said.
Based on this data, almost 36.6 lakh jobs have been formalised till August 2021.

It is 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.
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.
E-Shram is a big step towards the formalisation of employment as the calculation in report 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.

In agriculture, the usage of KCC cards has increased significantly.
Rs 4.6 lakh crore formalisation only through KCC route, with more marginalized farmers coming under the banking sector ambit through such usage.