REVIEW LITERATURE ON THE GROWTH OF INFORMAL INDUSTRIES

INTRODUCTION

The Informal sector is that part of an economy that is not taxed, monitored by any form of Government unlike the formal sector. Regardless, it is included in

GNP1 .

Keith Hart was the first person to introduce the term “Informal Sector” .

He describes informal sector as that part of the urban labour force which falls outside the organised labour market.

1. GNP= Gross National Product

Examples:

Lady making brick Man working in handloom industry

Barbers under shade treesCarpenters Bicycle repairs at the side of the roadBidi manufacturers

FORMAL AND INFORMAL EMPLOYMENT BY SECTOR

2008-09 BY ESTIMATES

Source:

INFORMAL INDUSTRY

An informal industry is an extra-legal enterprise

It is not normally required to keep financial records.

It may pay for a license, but does not normally pay corporation tax [but may pay informal taxation e.g. bribes to local officials and police].

Informal Activity- It is highly diversified: success rate in the informal sector is pretty diversified. Some firms flourish while others are not so well off. People prefer to work in this sector; but it is quite marginal and employment is precarious.

CHARACTERISTICS OF ENTERPRISES IN THE INFORMAL INDUSTRY

There are low set up costs and entry requirements, which are presented requirements, which are presented above as key factors behind informalization.

Operations are typically on a small scale with only a few workers.

Skills required for the business activities are usually gained outside formal education.

The production of goods and services is labour intensive.

Source: National Commission for Enterprises in the Unorganised Sector

Industry Group

Informal Others Unorganised Organised Total

Manufacturing 1.6 3.4 5.0 8.4 13.4

Construction 3.9 3.9 2.5 6.4

Electricity, gas and water

supply

0.1 0.1 1.0 1.0

Share of Informal Sector in NDP 1 :2001-02

(In percentage)

1.NDP: Net Domestic product

Mining 0.2 0.2 1.8 2.0

Industry Group Unorganised Sector

1999-2000 2004-05 Growth rate(%)

Manufacturing 77579 98605 4.91

Electricity, Gas and Water

1781 1636 -1.69

Construction 45559 72014 9.59

GDP1 Estimates at 1999-2000 prices and growth rates (Figures in crores at 1999-2000 prices)

Source: National Commission for Enterprises in the Unorganised Sector

1.G.D.P: Gross Domestic Product

Mining 12478 9405 -5.05

Share of Labour Input in Unorganized Sector (%)

Tabulation Category / Description 2004-2005

Share of Unorganized Sector

Manufacturing 87.7

Electricity ,Gas & Water Supply 12.4

Construction 92.4

Source: National Statistical Commission ,GOI ,February 2012

Mining 64.4

Source: C.P Chandrasekhar, Jayati Ghosh, India still a vast informal economy, The Business Line ,October 28, 2013

REASON FOR THE GROWTH OF THE INFORMAL INDUSTRIES IN THE 20TH CENTURY

Limited absorption of labour, particularly in countries with high rate of population or urbanisation

Excessive cost and regulatory barriers of entry into the formal industries of few motivated by corruption.

Weak institutions ,limiting education and training opportunities as well as infrastructure development

Increasing demand for low – cost goods and services Migration motivated by economic hardship and

poverty Difficulties faced by women in gaining formal

employment. Family labour – much of it unpaid.

STATE OF INFORMAL SECTOR IN INDIA

The Expert Group on Informal Sector Statistics, commonly known as the “Delhi Group” was set up in 1997 as one of the city groups of the United Nations Statistical Commission to address various methodological issues involved in the treatment of the informal sector.

The NCEUS1 was set up by the GOI2 in 2004 ,to “review the status of informal sector in India including the nature of enterprises, their size, spread, scope and magnitude of employment.”

According to Economic Survey 2002-03,the total number of units in the SSI sector is 33.12 lakh consisting of 26.14 lakh registered and 6.98 lakh unregistered units.

1. NCEUS – National commission for enterprises in the unorganised sector

2. GOI- Government of India

MAJOR DATA SOURCES Central Statistical Organisation(CSO) National Sample Survey Organisation(NSSO) Annual Survey of Industries(ASI) Small Industries Development Organisation(SIDO) Economic Census(EC) Economic Survey(ES) National Statistical Commission(NSC) National Commission for Enterprises in the Unorganised

Sector(NCEUS) National Statistical Commission(NSC) Micro, Small and Medium Enterprises(MSME) National Accounts Statistics(NAS) Ministry of Statistics and Programme Implementation(MOSPI)

FINDINGS

The growth of informal sector could not be checked primarily because the employment opportunities generated in the formal sector did not expand in the same proportion to the population.

Informal Industry are economically better and profitable, free entry and exit is possible hence it attracts a lot of interest .

It attributes to about 47.7% toward NDP according to recent date.

The Informal Sector does not receive any kind of support from the government.

REFERENCES

Contribution of the Unorganised sector to GDP Report of the Sub Committee of a NCEUS Task Force , Working paper no 2(2008)

C.P Chandrasekhar, Jayati Ghosh, India still a vast informal economy, The Business Line ,October 28, 2013

G. Parthasarathy, INDIAN ECONOMY UPDATE volume-4, M R SALUJA, Industrial Statistics in India Sources,

Limitations and Data Gaps, Economic and Political Weekly November 27, 2004

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