Informal sector in India is broadly characterized as consisting of units engaged in the production of goods and services with the primary objectives of generating employment and incomes to the persons concern. These units typically operate at low level of organisation, with little or no division between labour and capital as factors of production and on a small scale. Labour relations, where they exist, are based mostly on casual employment, kinship or personal or social relations rather than contractual arrangements with formal guarantees.  Thus, production units in informal sector are not constituted as separate legal entities independently of the household or house hold members that own them and for which no complete sets of accounts are available which would permit a clear distinction of the production activities of the enterprises from the other activities of their owners. The  owners of their production units have to raise the finance at their own risk and are personally liable, without limit, for any debts or obligations incurred in the production process. Expenditure for production is often indistinguishable from household expenditure. For statistical purpose, the informal sector is regarded as a group of production units, which form part of the household sector as household enterprises or equivalently, unincorporated enterprises owned by households. In India, the term informal sector has not been used in the official statistics or in the National Accounts Statistics (NAS). The terms used in the Indian NAS are ‘organised’ and ‘unorganised’ sectors. The organised sector comprises enterprises for which the statistics are available from the budget documents or reports etc. On the other hand the unorganised sector refers to those enterprises whose activities or collection of data is not regulated under any legal provision or do not maintain any regular accounts. The informal sector can therefore, be considered as a sub-set of the unorganised sector.

The organised sector consists of workers in the larger factories and establishments where workers are employed following laid-down procedures and their terms and conditions of work are well defined by the laws of the land.

These include all services under the government (central and state), local bodies, public sector undertakings and factories using power and employing at least 10 workers or those without power and employing at least 20 workers.

Characteristics

• low scale of organisation
• operation of labour relations on a casual basis, or on the basis of kinship or personal relations
• small own account (household) or family-owned enterprises or micro enterprises
• ownership of fixed and other assets by self
• risking of finance capital by self
• involvement of family labourers
• production             expenditure indistinguishable from house­ hold expenditures and use of capital goods
• easy entry and exit
• free mobility within the sector
• use of indigenous resources and technology
• unregulated or unprotected nature
• absence of fixed working hours
• lack of security of employment and other             social   security benefits
• use of labour intensive technology
• lack of support from Government
• workers living in slums and squatter areas
• lack of housing and access to urban services
• high percentage of migrant labour

Workers in Informal sector

The informal sector consists of  casual and contract workers,  workers in small industries and the  self-employed ventures. (e.g. petty shopkeepers, skilled artisans such as carpenters, mechanics etc. who are not employed in factories but work on their own, unskilled manual labour such as porters, home based workers etc.). In this sector usually no laid-down procedures or laws are

Casual Labourers

Workers who are not permanently employed but are employed for a limited number of days.

These workers are usually granted no rights, except for their minimum wages. They have very little security of employment and they can be removed from employment at any time.

Contract Labourers

The employers in this case get workers not through direct employment but through labour contractors.

The contract worker at times is employed by a contractor who in turn is engaged by the employer to undertake certain types of work.

Problems and Features of workers

Workers who are employed in the informal sector donot enjoy privileges which make them different from those in the formal sector.

• These workers donot enjoy permanent employment. Their jobs can be terminated by the whims of their employer.
• This sector also employs a large number of women and children because they are cheaper.
• The biggest drawback that the workers face is that they rarely have trade unions. They are thus unable to ensure that the existing laws are used in their favour. The workers are thus helpless and accepts the unregulated exploitative work conditions because there is no other alternative.
• They are however under the purview of some of the other Acts such as Minimum Wages Act, Contract Labour Regulation and Abolition Act.

Almost 400 million people - more than 85% of the working population in India - work in the unorganised sector. Of these, at least 120 million are women. The recent Arjun Sengupta Committee report is a stark reminder of the huge size and poor conditions in this sector. The term 'unorganised' is often used interchangeably with the term 'informal', or employment in the informal sector. Strictly speaking, 'informal' is used to denote those forms of enterprise that are not governed by any legal framework (for example, registration under Company Laws). Although it is quite logical that an 'informal' enterprise will employ 'informal'/'unorganised' labour, it must be remembered that 'formal' enterprises also have 'unorganised' employees, and, in fact, there is an increasing tendency to informalise employment relationships in the formal sector.

Workers engaged in the unorganised sector do not have the benefit of several laws such as the Minimum Wages Act or the Factories Act. They are also not covered by statutory welfare measures such as maternity benefits, provident fund, gratuity, etc, all of which were put in place after intense struggles by the Indian working class in the pre- as well as post-Independence period.

Two National Labour Commissions, along with several other international and national commissions, committees and conferences in the last 50 years have documented the socio-economic conditions of workers in the unorganised sector in India . The latest is the National Commission for Enterprises in the Unorganised Sector (NCEUS), also known as the Arjun Sengupta Committee, which submitted its report to the Government of India in 2006.

The Committee's report estimated that there are over 340 million (approximately 34 to 37 crore) workers in the unorganised sector in India , and that they contribute around 60% to the national economic output of the country. Around 28 crore work in the rural sector, of which an estimated 22 crore are in the agricultural sector. Around 6 crore are in urban areas. Women make up 11-12 crore, of which around 8 crore are engaged in agriculture.

In terms of overall employment, the Committee's report estimates that over 92% of the country's working population is engaged in the unorganised sector, and that the majority of women workers also work in this sector. Yet, in spite of their vast numbers, and their substantial contribution to the national economy, they are amongst the poorest sections of our population. It is therefore imperative that urgent steps are taken to improve their condition -- this is the Constitutional obligation of those who govern the country.

By and large, there are three types of issues of unorganised sector workers that need to be addressed.

• One is the regulation of their working conditions,
• the second is provisioning for conditions in which they are unable to continue to work, such as old age and disability, and
• the third is measures to help them overcome situations of insecurity, such as major illnesses and the liability of losing employment or being laid off at the will of the employer, for which they have no legal remedy.

Unorganised sector work is characterised by low wages that are often insufficient to meet minimum living standards including nutrition, long working hours, hazardous working conditions, lack of basic services such as first aid, drinking water and sanitation at the worksite, etc. Even a cursory glance will identify several such occupations, including agricultural labour, construction workers on building sites, brick-kiln workers, workers in various service industries ranging from transport and courier services to the hospitality industry.

A large 'invisible' section of workers are employed in what is called 'home-based work' where, typically, workers use their own premises to do piece-rated work. This not only includes traditional crafts, handloom weaving, beedi rolling, but also more modern industry such as electronics. A survey done by AIDWA (All-India Democratic Women's Association), as far back as 1989, in Pune city identified over 150 occupations where women did home-based work that ranged from making flower garlands, folding paper for the book printing industry, supplying chappatis to caterers, making agarbattis , weaving plastic seats for office chairs, de-seeding tamarind, and packing sweets.

Parents often take the help of children to supplement their own earnings, and this is a major reason for the widespread prevalence of child labour in the unorganised sector. Women are given low and unequal wages. Sexual harassment is common but unarticulated due to fear of loss of employment. There is no question of paid leave and maternity benefits. The use of cheap labour in the unorganised sector is the major source of profit for employers and contractors who exploit the workers' lack of collective bargaining power and state regulation.

Living in abject poverty, most workers in the unorganised sector barely manage a subsistence existence. There is no question of saving, particularly for times when they are unable to work. Hazardous work conditions often cause accidents, loss of limbs, etc. Such disability is disastrous because there are no other sources of income for these households. More importantly, there is no provision of old age security such as a pension.

The lack of savings and support systems also mean that there is no fall-back in other emergencies, especially major illnesses or the death of an earning member in the family. The rising costs of private healthcare and the systematic dismantling of the public health system in these times of liberalisation are a major reason for the huge indebtedness of households in the unorganised sector. There is a pressing need to provide insurance, especially health insurance cover to the workers.

Recent developments in the Unorganized sector

Unorganized sector workers’ Bill

The Parliamentary Standing Committee on Labour has redrafted “The Unorganized Sector Workers’ Social Security Bill, 2007”

To ensure that the Bill covered the entire workforce of the country—irrespective of the sectors—the committee suggested that it be called “The Unorganized Workers’ Social Security Bill.”

Important fetaures

The term ‘unorganized sector’ in the body of legislation was further elaborated to specify that in the case of agriculture, ‘enterprise’ would mean landholding that was less than two hectares. Therefore, The term ‘unorganized sector’ should would include both agriculture or non-agriculture.”

Also cover all casual and contract workers of the unorganised sector, besides categories such as anganwadi workers, who do not fall within the ambit of either the organised sector or the unorganised sector.

The bill provides legislative backing to all the social security schemes. These include the ‘Aaam Admi Bima Yojana’, National Old Age Pension Scheme and the Health Insurance Scheme.

The Bill also envisages setting up of Advisory Boards at the national and the state levels having representation from all the stakeholders. The programmes and schemes to be worked out in future based on the advise of these Boards.

State Boards and the State Governments will play key role in implementing various schemes as well as in registration of workers and issue of smart cards. It should also have validity for migrant workers so that they do not face difficulty while moving in search of jobs elsewhere.

Definition of ‘identity card’, should be a multi-purpose and multi-sectoral one having details of all dependent family members of workers.

The panchayats and municipalities to be involved in the issuance of identity cards.

National Commission for enterprises in the unorganized sector

India’s National Commission for Enterprises in the Unorganized Sector (NCEUS) has recommended setting up of a National Fund for the Unorganised Sector (NAFUS) on the pattern of NABARD, exclusively to meet the financing and promotional assistance need of the non farm unorganised sector.

The Commission set up under the Ministry of Micro, Small and Medium Enterprises had presented its reports on the ‘Financing of Enterprises in the Unorganized Sector’

Social Securities initiatives

Government is committed to provide social security and social protection to all workers in the informal sector and a conscious attempt has been made through the National Rural Employment Guarantee Scheme which provides for at least 100 days of employment guarantee in a year to unemployed rural workers.

‘Aam Aadmi Bima Yojana’ which provides for life and disability cover to all the rural landless households in the country and

The Rashtriya Swasthaya Bima Yojana wherein the health cover would be provided to all the Below Poverty Line workers in the unorganized sector during the next five years.

Making available foodgrains at highly subsidized rates to beneficiaries living below the poverty line and those coming under the category of poorest of the poor under the Targeted Public Distribution system (Antyodaya Anna Yojana).

Unorganized Sector Workers Social Security scheme

The Government has approved the ‘Unorganized Sector Workers Social Security Scheme on pilot basis in 50 districts.

This is a fully funded scheme, which will be implemented through the Employees Provident Fund Organization.

All workers in the age group of 18-35 years in the unorganized sector drawing pay/wages/income not more than Rs. 6500/- per month are eligible under the scheme.

The worker in the age group of 18-35 years will contribute @ Rs. 50/- per month and the workers in the age group of 36-50 years will contribute at the rate of Rs. 100/- per month. The employer in both cases will contribute @ Rs. 100/- per month.

Triple benefits to the workers

(i) A flat rate registered pension of Rs. 500/- per month on retirement at the age of 60 years and total disablement and family pension in case of death of the worker.

(ii) A personal accident insurance cover for rupees one lakh; and

(iii) Convergence of the Universal Health Insurance Scheme for a worker and his family at the cost of Rs. 548/- per annum for a family of five members or Rs. 365/- per annum for a family of three members.

EPFO will issue Unique National Social Security Number and Identity Card to the workers.