Labour issues: SBI Research says 45% of labour force is still informal, almost one-fourth in agriculture

SBI Research in its latest report stated that the economy is getting formalised at a faster pace than the Labour Force. It noted that 45% of labour force is still informal. On the other hand, 65 lakhs jobs were formalized since FY19 as per EPFO data.

"Distribution of labour force (~568 million) shows 45% of labour force is still informal, with the usual suspects of agriculture (25.5%) and services (13.9%) accounting for close to 40% of total workforce and 88% of informal workforce," the SBI note stated.

It further said that as on date, ~29.7 crore unorganised workers have registered on e-Shram portal of Government of India. The Centre launched the E-Shram portal, a database of unorganised sector workers, on 26 August 2021. The portal is the first-ever national database of unorganised workers including migrant workers, construction workers, gig and platform workers. It facilitates extending benefits of social sector schemes to the workers in the unorganised sector. So far (as of 20 June), ~29.7 crore unorganised workers have registered

The top 5 states account for 58% of total registration, with Uttar Pradesh on the top (with more than 8 crore registrations), followed by Bihar and West Bengal. 

Share of Informal Economy

As per the SBI note, taking manufacturing as a proxy for industry GVA and trade and other services sector for services GVA, the total informal economy is 23.7% in FY23 compared to 25.9% in FY16.  In absolute terms, Rs 26 lakh crore formalized in just seven years.

Labour wages

The Government has released the factsheet of Annual Survey of Unincorporated Sector Enterprises (ASUSE) 2021-2022 & 2022-2023 which exclusively measures various economic and operational characteristics of unincorporated non-agricultural establishments in manufacturing, trade and other services sector (excluding construction).

The data stated on an average, a formal hired worker earned Rs 2.45 lakh per annum as compared to Rs 1.11 lakh earned by informal hired worker. 

Unincorporated establishments

Rural establishments, apart from embracing higher growth, also witnessed robust growth in GVA (2.7X against 2.3X growth for urban establishments) with traction coming from rise in contribution from other services.
Further, rural establishments have exhibited a rapid pace of increase from GVA per establishment contribution with larger increase in all the three sectors: manufacturing, trade and other services vis-à-vis urban counterparts

Besides, GVA per worker increased more for rural establishments with the other services sector contributing more.