The Informal Sector In India

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trend observed in the employment in the informal sector, it was 2.44% duing 1972-1982 , 2.02% during the next ten year period and 1.84% in the period 1994-2004. (T.S. Papola , 2012).The RBI (1993) reviewed the changing composition of net value added and relative growth rates with respect to the organized and unorganized sectors for the period 1980-81 to 1988-89 and argued for an increase in the weights of secondary and tertiary sectors as against the primary sector in terms of NDP. Kulshreshtha and Singh (1998) examine the contribution of the unorganized segment of the Indian economy in terms of NDP and the share of different sub-sectors in NDP from the unorganized segment for the period 1980-81 to 1994-95. They found that though the contribution…show more content…
The large fraction of people employed in the informal sector is firstly a result of the retrenching of labour in the formal sector and thereby acting like a reserve army of labour. Secondly there is an ease of entering the informal sector as there are low requirements of education, special skills etc. The rigidity of wages in the urban formal sector has been a major reason for the sprouting of the informal sector economy which has helped people to diversify the sources of income. There have been studies done by researchers on rice processing units, textile manufacturing units etc. in different parts of the country and the common conclusion that has been reached upon through such research is that the increase in informal sector economy has been equally high in industrialized cities as it has been in backward towns because of activities like sub-contracting that is adopted to employ the informal sector enterprises to feed in to the supply chain of the formal sector. Hence it would be incorrect to say that informal sector activities are predominant in less developed areas and less in highly developed areas. The real informal wage for the non-directory manufacturing enterprise (NDME) had increased between the pre-reform and the post-reform decades; while real capital stock in the organized manufacturing has remained stagnant or declined in real terms versus real fixed assets in the informal
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