Print Friendly, PDF & Email

Critically analyse the trend of shrinking of the Informal sector in the recent years and the necessary precautions to be taken up with this new trend.

Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

5. Critically analyse the trend of shrinking of the Informal sector in the recent years and the necessary precautions to be taken up with this new trend. (250 words)

Difficulty level: Tough

Reference: Indian Express

Why the question:

SBI says that the share of the informal economy may have shrunk to no more than 20% of the economic output from about 52% in 2017-18 post the pandemic.

Key Demand of the question: To analyse the impact of shrinking of informal sector in India and the necessary precautions to protects the employees in the unorganised sector.

Directive word: 

Critically analyze – When asked to analyze, you must examine methodically the structure or nature of the topic by separating it into component parts and present them in a summary. When ‘critically’ is suffixed or prefixed to a directive, one needs to look at the good and bad of the topic and give a balanced judgment on the topic.

Structure of the answer:

Introduction: 

Begin by stating the informal sector consists of “own-account” or unorganised enterprises employing hired workers for their businesses especially the small rural farmers and constitutes about 94% of Indian economy.

Body:

First, mention that with the introduction of kisan credit cards and digitisation drives and initiatives many of the agricultural activities are being formalised and also the GST regime has formalised the small businesses. This is a positive trend as it would give the benefit of economies of scale, use of technology etc.

Next, mention the harsh impact of the pandemic leading to many in the informal sector getting unemployed.

Next, mention the need for a robust policy to ensure there is smooth transition of businesses and employees from the informal to formal sector through upskilling, financing initiatives etc.

Conclusion:

Conclude by stating the increase of formal sector is a welcome phenomenon provided that the people in the informal sector aren’t left behind but instead helped to have a smooth transition into the formal economy.