SBI Research: 45% of Indian Labor Force Remains Informal, Agriculture Dominates

By Manasi

 Synopsis: A recent report by SBI Research highlights that despite the fast pace of economic formalization, 45% of India's labor force remains informal, with a significant portion employed in agriculture and services. As of now, approximately 29.7 crore unorganized workers have registered on the Government of India's e-Shram portal. The report also indicates a notable formalization of jobs, with 65 lakh jobs becoming formal since FY19 according to EPFO data. Additionally, the informal economy has shrunk from 25.9% in FY16 to 23.7% in FY23, formalizing Rs 26 lakh crore in seven years. However, there remains a significant wage disparity between formal and informal workers.

SBI Research: 45% of Indian Labor Force Remains Informal, Agriculture Dominates

A recent report from SBI Research has revealed that despite ongoing efforts towards formalizing India's economy, a significant portion of the labor force remains informal. As of now, 45% of the labor force falls under the informal category, with a notable concentration in agriculture and services sectors.


E-Shram Portal Registrations

Since the launch of the e-Shram portal by the Government of India on August 26, 2021, around 29.7 crore unorganized workers have registered. This portal serves as the first-ever national database for unorganized sector workers, including migrant, construction, gig, and platform workers. It aims to extend the benefits of social sector schemes to these workers, significantly aiding in their formalization.


State-wise Registrations

The report highlights that the top five states account for 58% of the total registrations on the e-Shram portal, with Uttar Pradesh leading with over 8 crore registrations, followed by Bihar and West Bengal.


Shift Towards Formalization

The report by SBI Research points out that the Indian economy is formalizing faster than the labor force. Since FY19, around 65 lakh jobs have transitioned to formal employment as per EPFO data. The report underscores that 45% of the labor force, or approximately 568 million individuals, remains informal. Agriculture accounts for 25.5% and services for 13.9% of the total workforce, constituting 40% of the total labor force and 88% of the informal workforce.


Reduction in Informal Economy

The informal economy's share, as measured by the gross value added (GVA) in manufacturing and services, has reduced from 25.9% in FY16 to 23.7% in FY23. This translates to an impressive formalization of Rs 26 lakh crore over the past seven years.


Disparity in Labor Wages

The Government's Annual Survey of Unincorporated Sector Enterprises (ASUSE) for 2021-2022 and 2022-2023 provides insights into labor wages. It reveals that on average, a formal hired worker earns Rs 2.45 lakh per annum compared to Rs 1.11 lakh earned by an informal hired worker, highlighting a significant wage disparity.


Growth in Unincorporated Establishments

Rural establishments have demonstrated higher growth rates and robust increases in GVA, with a 2.7-fold increase compared to a 2.3-fold increase for urban establishments. This growth is attributed to rising contributions from the manufacturing, trade, and other services sectors. Additionally, rural establishments have shown a greater increase in GVA per worker, particularly in the other services sector.


In summary, while significant strides have been made in formalizing India's economy, a substantial portion of the labor force remains informal. The e-Shram portal has played a crucial role in documenting and aiding unorganized workers, yet wage disparities and the predominance of informal employment in key sectors persist.

Post a Comment

0 Comments
Post a Comment (0)
To Top