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Shrinking informal economy rings alarm bells for jobs in India
In the past few years, a lot has been written about the struggles of India’s informal sector, which forms the backbone of the livelihood for millions in the country. A new government survey confirms some of the fears expressed by economists: the non-farm informal sector shrank—both in terms of output and workforce—in the seven years ended 2022-23.
A leaner informal sector could mean greater formalization, but remember that this was also the period in which the Indian economy, particularly the informal sector, was battered by some of its most disruptive economic shocks, from demonetization, a chaotic introduction of the goods and services tax, and the covid-19 pandemic.
The 2021-22 and 2022-23 reports of the Annual Survey of Unincorporated Sector Enterprises, released last week, provided data on the size of the sector at nominal prices. However, a follow-up analysis by India Ratings and Research shows that in real (inflation-adjusted) terms, the gross value added (GVA) by such enterprises declined 1.6% between 2015-16 and 2022-23. (The last time a similar report was released was in 2015-16.)
The analysis also showed that the informal sector’s growth had fallen short of its potential due to the economic shocks, costing India an estimated ₹ 11.5 trillion, or 4.3% of the 2022-23 GDP, over the seven-year period.
India’s informal sector consists of a vast network of small businesses, street vendors, and independent workers, operating outside the formal legal framework, and their sheer size—three-fourths of the workforce—means they play a critical role in job creation. The latest survey covered 458,938 informal sector enterprises between October 2022 and September 2023.
Employment woes
The informal sector had grown 7.4% per year in real terms between 2010-11 and 2015-16. Alongside, the number of workers also rose from 108 million to 111.3 million. But as the informal sector shrank in size in the seven years that followed, the number fell to 109.6 million by 2022-23. This was chiefly due to a decline in the size of the informal manufacturing sector, while trade and other services saw increases.
Although this is higher than 97.89 million in 2021-22, the lower level of employment from the pre-shock year is worrisome at a time when job scarcity has emerged as one of India's major economic issues.
Also read: The spoilers that lie ahead: What ails India’s rosy growth story
Labour productivity within India's unincorporated sector, as measured by GVA per worker, also paints a concerning picture. The compound annual growth rate (CAGR) for GVA per worker was 12.3% during the period of 2010-11 to 2015-16, which dwindled to a mere 4.6% in the subsequent seven-year period. This means a significant slowdown in the pace of growth in the value of goods and services produced by an average worker in the informal sector.
According to Amit Basole, a professor at Azim Premji University, this tends to happen when people crowd into the informal sector due to a lack of other options, which divides the existing market among more workers, leading to a fall in productivity.
Policy correction
Amid the gloomy scenario in the informal sector, the silver lining is that capital investments have picked up, with fixed assets owned by the sector going up by 4.6% per year between 2015-16 and 2022-23 compared to 2.7% a year in the five preceding years. That improvement could be further tapped through the right policy pushes.
In the past few years, the Narendra Modi government has tried to push for more formalization of the economy and a shift away from cash, and it has yielded some results. But the shocks to the informal sector cannot be ignored.
Also read: Consumption data lays bare India’s deep inequality
“No doubt, formalization of the economy is the way forward, but the reduced footprint of the unorganized sector has implications for employment generation," the India Ratings report said. “Therefore, a judicious mix of policy, which allows co-existence of both formal and informal sectors needs to be pursued in the interim."
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Only 1.3 per cent Nigerian informal businesses reach over N2.5m profit
- 📆 08/07/2024 11:53:00
- 📰 DailyPostNGR
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Economy News
Only 1.3 per cent of Nigerian informal businesses reach over N2.5 million profit on a monthly basis, the Informal Economy Report 2024, has shown.
The report, compiled by financial technology provider, Moniepoint, revealed that the network of unregistered businesses, contributing over half of the country’s GDP with teeming street vendors, artisans and service providers, appeared prosperous based on revenue figures. Launched over the weekend in Abuja, the report also showed that businesses in the informal market contributed over half of Nigeria’s GDP as 72.3 per cent of informal businesses surpassed the N1m mark in monthly revenue.
The Minister of Industry, Trade and Investment, Doris Anita, expressed optimism that the report would help the government to better understand the informal sector to know their needs and enhance growth and inclusion in the country. She stressed, 'We will see how we can take every recommendation and move the report forward. We will support you to do much better.
Source: Financial Digest (financialdigest.net)
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A precise definition is almost impossible because the informal economy adjusts to changes in tax, sanctions from tax authorities and to general moral attitudes (Schneider, & Enste, 2000). Overall, the definition of the informal economy will vary depending on the focus of a study.
7 The previous definition acknowledges that the informal economy exists solely because there is the formal economy. Saunders defines the informal economy "as all transactions of goods and services, whether legal or illegal, that contribute to overall economic activity but are currently not recognized by official GDP statistics".48 Becker ...
List of dissertations / theses on the topic 'The informal economy'. Scholarly publications with full text pdf download. Related research topic ideas.
Figure 4.1 Trend of informal economy in Ethiopia over time. l economy in Ethiopia as shown in the above table is highest in 2012 whic. 54.54% and the low. st is in the next immediate year 2013 which is 30.94%. Overall t. size of informal economy in Ethiopia from 1980 to 2016 is 43.3%.
Abstract Analyses of the informal economy are vital to understanding economic activity in developing countries, but challenges abound when analysing something that is so difficult to measure. In this article, we explore these challenges and what they mean for research and research design in studies of the informal economy.
This dissertation has not been previously submitted to any academic institution towards examination for a qualification. This research represents my own reflections and ... 3.2 Defining street trading and the informal economy 20 3.2.1 The informal economy 20 3.2.2 Forward and backward linkages between the formal and informal sectors 25 ...
This paper reviews the literature on taxation of the informal economy, taking stock of key debates and drawing attention to recent innovations. Conventionally, the debate on whether to tax has frequently focused on the limited revenue potential, high cost of collection, and potentially adverse impact on small firms. Recent arguments have increasingly emphasised the more indirect benefits of ...
Abstract This study aims to explore the impact of the informal sector on the sustainability of development. A large panel data set of 50 developing countries that spans over 2010-2019 has been utilized to this end while the informal sector is evaluated in terms of working poverty. Selecting indicators from three dimensions of sustainability, that is, economy, society, and environment, this ...
Abstract This paper surveys the literature on the definitions and theories of the informal economy (IE). It outlines the main differences in the definitional approaches of informality and proposes ...
Abstract: After more than two decades of democracy, South Africa is still faced with challenges of unemployment, poverty and inequality. The informal sector is one that presents opportunities for making a positive contribution towards solving social problems that South Africa is faced with. While the informal sector is large and offers ...
Thesis accepted in fulfilment of the requirements for the degree ... 2011, after the economy dollarized in an effort to broaden the tax base and increase government ... Informal Sector: The informal sector (IS hereafter) concerns legal economic activities that are not
This paper addresses the effects of the informal economy on the relationship between financial development and economic growth, using a panel data covering 20 countries during the period 1993-2020.
An Introduction To The Study Of Informal Economies. December 2010. Urban Anthropology and Studies of Cultural Systems and World Economic Development 39 (4) DOI: 10.2307/41291330. Authors: Tamar ...
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This paper proposes a framework for measuring the informal economy that is consistent with internationally agreed concepts and methodology for measuring GDP. Based on the proposed framework, the informal economy "comprises production of informal sector units, production of goods for own final use, production of domestic workers, and production generated by informal employment in formal ...
ic of taxing the informal sector, querying whether such a move is local economic development or taking from the poor and stifling growth of sm ll firms. Their argument is premised on the view that microenterprises in the informal sector are a major source of livelihoods in developing countries. The researche
This dissertation is being submitted in partial fulfillment of the requirements for the degree of Masters in Business Administration. ... 2.7 The Informal economy in developing countries: regional differences 23 2.8 Poverty and unemployment in rural communities 25 2.9 Relationship between education and Informal Sector 30 ...
This study explores the labour market linkages between the informal and formal sectors, using the first four waves of the National Income Dynamics Study data. The main focus is on three groups of e...
Orthodox economic perspec-tives on informal economy research frequently follow standard methodological choices in economics, including the research methods adopted and techniques applied to the chosen data. The difficulty in measuring the informal economy, however, can result in significant challenges in applying these techniques.
List of dissertations / theses on the topic 'Informal sector (Economics)'. Scholarly publications with full text pdf download. Related research topic ideas.
Introduction There is a burgeoning interest of researchers in occupational health and safety issues among workers in the informal sector. This interest is partly due to the significant role that the informal economy plays in building the nation's economy and also the fact that informal workers have problems and constraints to decent work especially in developing countries1. The incidence of ...
This has culminated in the growth of the informal sector which has become the largest employer constituting about 85 % of the national employment statistics (source, CZI 2014 report). The informal sector has failed to contribute much to the national economy due to a combination of factors such as resistance to transform and non compliance.
The DSpace at UMass is a digital repository for the Economics department's dissertations and theses.
India's massive shadow economy lost output in the last decade, which saw back-to-back economic shocks, an analysis of a new government survey shows. The losses for India may have mounted to ...
Only 1.3 per cent of Nigerian informal businesses reach over N2.5 million profit on a monthly basis, the Informal Economy Report 2024, has shown.