‘Don’t demonise informal economy, that is where India’s real economic progress is’

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December 23, 2019 12:19 PM

Improvement in formalisation in the last 50 years has been very slow and thus the government should look towards the informal economy to boost growth.

informal economy, unorganised sector, world bank, indian economy, growth, economic development, india's growthIndia’s informal economy is 90 per cent of the overall economy and this proportion has remained the same in the last 50 years.

India is predominantly an informal economy and the government should focus on increasing the productivity of the informal sector, which is 90 per cent of the overall economy, said Michal Rutkowski, Global Director, Social Protection and Jobs, World Bank, to The Indian Express.  He said this proportion has remained the same in the last 50 years and the improvement in formalisation during this period has been very slow and thus the government should look towards the informal economy to boost growth. Speaking about the demonisation of the informal economy in India, he added that over the last few years in India, especially since demonetisation, the government has put massive efforts to boost the formal economy and the informal sector is seen as corrupt and inefficient.

Even though developing the formal sector is like a continuum and focus on improving productivity across the board, the informal economy is likely to remain the launchpad of India’s growth. Many states in India want to reserve jobs for their locals but Michal Rutkowski believes that migration is a powerful force for development. Highlighting the north-south divide in the Indian labour market, he said that the migration can help to maintain a balance between the abundance of labour in North India and the ageing population of labour in South India.

Also Read: As unemployment in India raises alarm, these reasons keep job seekers away from jobs

From the employment point of view, skills mismatch has been a prolonged problem in India. On one hand, employers complain that they do not get candidates with the required skill sets, on the other hand, job seekers complain that they do not get jobs suitable to their skill sets. Michal Rutkowski said that India has a huge pool of labour but there is still a high unemployment rate and the employers feel that the labours lack the required skills. This signifies that the private sector employer’s views are not taken on board while determining the required skills and training.

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