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In the intricate web of urban dynamics, one undeniable truth prevails: The urban informal sector is intrinsically linked to the persistence of urban poverty. Therefore, we must delve deep into understanding this often overlooked facet of our cities if we’re genuinely committed to battling urban poverty.
According to the annual report of the Periodic Labour Force Survey (July 2022-June 2023), the labour force participation rate (LFPR) was estimated at 42.4 per cent. For those aged 15 years and above, it was calculated at 60.8 per cent in rural and 50.4 per cent in urban areas. Digging deeper into the workforce, the worker population ratio or WPR (defined as the number of employed per thousand people) gives us an indication of the country’s employment situation. The WPR in India, for the given period, was 56 per cent for persons aged 15 years and above. In rural areas, it was recorded at 59.4 per cent, and in urban areas at 47.7 per cent. The unemployment rate (UR) for the given period was 3.2 per cent for the whole country and 5.4 per cent for urban areas.
These statistics give us a glimpse of the labour market dynamics, especially in the urban context. The PLFS also helps us with data on the percentage share of self-employed, casual, and regular salaried labour in the urban workforce. This indicator provides us with information on the extent of informality within the labour market (indicated through the percentage share of self-employed workers). Accordingly, the percentage share of the self-employed workforce was estimated at 39.6 per cent. The category of self-employed comprises both own-account workers/employers (including street vendors) and helpers in the household. Concepts like urban poverty and informality are related factors where labour informality pushes the workforce into abject poverty. It is not the only cause perpetuating poverty and inequality but remains a significant contributor.
The term “informal” is employed to describe a wide range of employment situations, encompassing everything from work done at home to unfavourable working conditions, the absence of benefits, and affiliation with small-scale enterprises — all of which suggests a level of insecurity. Informality can also encompass economic activities that are not officially registered or are underreported.
The urban informal sector is not just an afterthought, it’s a potent force for change. It has the potential to be a key player in job creation, particularly for those facing the harsh realities of poverty. Through its capacity to provide employment and generate income, this sector is already making significant strides in reducing the scope and intensity of poverty. However, the work is far from over. We must channel our efforts into further empowering the informal sector to amplify its impact.
Strengthening its ability to produce jobs and elevating the income levels of those involved in informal work should be at the forefront of our urban poverty alleviation strategy. In this pursuit, we’re not merely addressing a single issue but laying the foundation for a more equitable and prosperous urban future. We must recognise the transformative potential of the urban informal sector and harness its energy to create positive change.
At the same time, the government has made numerous efforts to drive formalisation in the labour market. For instance, the Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) scheme incentivised employers and establishments registered with the Employees’ Provident Fund Organisation (EPFO) to increase workers’ employment base. Between 2016 and 2019, a total of 124,000 establishments benefitted, and around 10 million beneficiaries were enrolled with the EPFO under the scheme. Additionally, through the e-shram portal, a national database of unorganised workers has also been created to extend social security benefits to them and assess their employability. The database also includes migrant workers, construction workers and gig and platform workers.
India’s social protection architecture is also at a critical juncture, ready to evolve from a collection of isolated programmes into a more integrated and cohesive system. The PM Street Vendor’s AtmaNirbhar Nidhi (PM SVANidhi), launched by the Ministry of Housing and Urban Affairs, is poised to be a game-changer in this regard. Its core objective is to provide specialised micro-credit to street vendors through lending institutions to reignite their livelihoods. But it’s more than just a loan programme. It’s about reaching out to the street vendors and their families, and about creating a pathway to comprehensive development and socio-economic upliftment.
As we contemplate the potential of PM SVANidhi, it becomes clear that it is not merely facilitating loans but weaving a safety net. The scheme intelligently connects its beneficiaries and their families, based on eligibility, to the existing welfare schemes of the government. These schemes act as shields, protecting the vulnerable from the uncertainties that life and livelihoods can bring. The scheme doesn’t operate in isolation; it’s part of a broader vision to enhance the lives of street vendors and their families. Further, the initiative aims to create a comprehensive overview of the socio-economic status of the beneficiaries of PM SVANidhi and their families. It will evaluate their possible eligibility for different Central welfare schemes and assist in connecting them to these programmes.
Kapoor is chair, Institute for Competitiveness, India, and lecturer, USATMC, Stanford University; @kautiliya. Debroy is chairman, Economic Advisory Council to Prime Minister of India; @bibekdebroy. With inputs from Jessica Duggal
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