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- GS 2 || Governance & Social Justice || Vulnerable Sections || Unorganized Sector Workers
Why in the news?
Lockdown in various states is showing decline in the economy and the section which got hard hit by it Covid-19 crisis is the informal sector.
- The pandemic has devastated normal life and led to a massive humanitarian crisis. The COVID-19 global pandemic and its associated containment measures have taken a heavy toll on economies and societies worldwide.
- The lockdown paused most economic activities and delivered a large aggregate supply and demand shock to the economy. The consequences have been unprecedented in scale and intensity, resulting in drastic devastation of livelihoods.
- The lockdown imposed by the India government in response to the pandemic lasted almost two months and was among the most stringent in the world. The first lockdown was announced on March 24, and was to last until April 14.
- It was later extended till May 3rd which was further extended to May 18th. During this period, all travel, schools, colleges, large gatherings and almost all economic activity other than a few essential services were prohibited.
- Limited agricultural activity and transportation of goods were allowed from April 20 in certain areas of the country that reported relatively fewer infections
Impact on unorganised sector:
The unorganised sector consists of unincorporated enterprises owned by individuals and households in the production and sale of goods and services with less than 10 employees. The pandemic severely impacted the following industries:
- Migrant workers and the labour force: The shock of the pandemic affected the labour force unequally. The crisis accentuated the pre-existing inequality in the labour market. The hierarchical order of labourers based on their incomes and social security is as follows:
- Regular formal employed: The regular formal employed are the least affected. Coupled with job tenure, high salaries, and social security, they are in a comfortable position.
- Regular informal employed
- Self-employed: The self-employed are also adversely affected, but depending on the industry, they receive enough remuneration to sustain themselves.
- Casual workers: Most of the migrants are casual workers or daily wage workers. With the lockdown in effect, many were jobless.
- The less-educated casual workers who engage in low paying work are the most affected.
- More than 300 migrant workers died from various reasons like starvation, accidents, and not receiving timely medical care.
- Food and agriculture:
- India is an agrarian economy. Food and agriculture contribute 16.5% in the GDP, the highest by any industry.
- 43 % of the total workforce of the country is employed in agriculture.
- Movement of migrant worker: The non-availability of labour has resulted in longer harvesting time, which resulted in a spike of the daily wage for harvesting crops.
- No more modern equipment were useless: Fields and farms with modernized equipment escaped the pandemic unscathed. Restrictions on the interstate and intrastate transport also deepened the issue.
- No loan repay: The inability to supply the harvested goods, along with failure to repay existing loans, further increased the losses.
- The fishing industry employs around 14 million people and contributes 1.1% in the GDP. 80% of the employed are small scale fishermen.
- No supply in market: The lockdown imposed restrictions on fishing, which reduced the supply to the markets.
- Inflicted losses on the vendors: Higher prices of fish and other marine products, along with the pandemic, inflicted losses on the vendors. The non-availability of proper storing options worsened the situation. Reduced exports have severely impacted the fishing and other allied industries.
- Security guards:
- The PSI (Private Security Industry) employs around 9 million people. Shopping malls, movie theatres, and offices are the primary recruiters of security guards.
- Closure of structures: The pandemic and the lockdown resulted in closing these structures. The closed malls, theatres, and offices meant that the services of the guards were no longer required.
- Demand of security guards: However, after unlock and opening of offices could see an increase in the demand for security guards.
- Restaurants services:
- India has around 500,000 restaurants, excluding the numerous roadside stalls selling food.
- The organized restaurant industry churns out an estimated 4.2 lakh crores, employs 7.3 million people, and accounts for 3% of the GDP.
- People were restricted at home: Physical distancing, restrictions on business timings, and limited seating capacity contribute to the absence of people dining in restaurants.
- Online food delivery has helped the restaurant industry from total doom. However, the future of restaurant dining is not very bright.
- Pandemic affected waiters and cleaner: Cooking at home, with the help of tutorials and videos, became common in every household. Waiters and cleaning staff can begin working only if and when the pandemic subsides.
- Another industry severely affected by the pandemic are the handloom and handicrafts industry.
- Never noticed industry: The already dull industry was made worse by the pandemic. The absence of exhibitions, banning the sale of nonessential items, and lowered demand contribute to their decline.
- Export of handicraft: The export of the industry fell by 40% to $2.1 billion from $3.53 billion.
- Micro, Small and Medium Enterprises:
- Worst-hit sectors: Micro, small, and medium enterprises are enterprises that have an investment of 1Cr, 10Cr, and 50Cr, respectively. The MSME sector is one of the worst-hit sectors.
- High employment in sector: It employs 120 million people, produces 45% of the exports, and contributes 37% of the GDP.
- Most vulnerable sector: In a situation filled with fear, lowered demand, and a ban on the sale of non-essential commodities, the MSME sector is the most vulnerable.
- The key challenges were to pay wages, rents, and pressing creditors. Businesses like garments, logistics, and consumer goods face a sharp decline.
- Disruption in the value chain: Businesses dependent on imports such as pharmaceuticals, electronic gadgets, and consumer durables are declining due to disruption in the value chain.
Need for fixing and focusing upon the informal sector:
- Daily wage labourers: Informal employment consists of daily wage labourers, self-employed individuals, street vendors, etc. The absence of regular pay and social security is the norm.
- Businessmen should be given security to worker there in: Informal sector enterprises consist of small shops, stalls, and restaurants. The entire business revolves around the owners. Security should also be given to workers working in these small places or informal sector.
- Skill worker should more enhanced: They may or may not have an organizational structure, lack proper inventory, and skilled workers, minimum wage rules are often not followed, as the employers themselves earn very little profit.
- Women in informal sector: Another striking feature of the informal sector is the strong presence of employed women. In time of pandemic women faced many financial issues, informal sector should provide insurance (heath and finance)
- Improvement of the informal sector is necessary for better wages, living conditions, and livelihood of those employed in it.
Initiative taken by government:
- In the agricultural sector:
- The government introduced changes in E-NAM (National Agriculture Market). The object was to decongest the markets and to strengthen agricultural marketing. CSIR developed the Kisan Sabha App.
- The implementation of DBT (Direct Benefit Transfer) has helped the farmers to mitigate the losses suffered.
- For migrants and the labour force:
- The finance minister announced several measures for the migrants. Proper implementation of MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) by the states will benefit the returned migrants in rural areas to find employment.
- Implementation of the one nation one ration card allowed the migrant workers to access food in the working states.
- The migrant can rent affordable houses in the cities through the Pradhan Mantri Awas Yojana. A credit package of 5000Cr for vendors will facilitate easy credit policies. Rural and cooperative banks have received 30,000 Cr for crop loans.
- Micro, Small and Medium Enterprises:
- The government announced the use of the TReDS platform, through which NBFCs (Non-Banking Financial Corporations) can lend money to MSMEs.
- Facilitating the growth of MSMEs through FOF (Fund of Funds) is announced. SIDBI (Small Industries Development Bank of India) and the Ministry of Micro Small and medium enterprises announced a credit guarantee scheme.
- Alternate markets: Alternate markets can significantly reduce overcrowding and congestion in urban markets, thereby ensuring greater participation between farmers and consumers.
- Strengthening digital infrastructure
- Better implementation of the Unorganized Workers Social Security Act, 2008
- Ensuring better social and health security
In conclusion, we can see that the pandemic has caused a significant impact on the unorganised sector. The government was quick to respond, but the scale of the damage was large. Radical changes and inclusive legislation with stringent enforcement could help remedy the situation.
Mains oriented question:
The pandemic has devastated normal life and led to a massive humanitarian crisis. What are the impact of Covid-19 on the informal sector? (250 words)