1. Informal SectorInformal Sector
Protecting the vulnerable: Providing social
welfare to the informal sector workers
Aakriti Chaudhari, Abhishek Shrivastava, Arjun Gupta, Arvind Chhikara, Soumabha Pal
Indian School of Business, Mohali Campus

2. 90% of the Indian workforce engaged in the informal
sector with no legislative rights
Marginalized
Easily uprooted in
Agriculture: landless
labourers, small
farmers, traditional
artisans, animal husbandry
Industry: workers in brick-
kilns, construction, beedi-
making, incense stick
Challenges faced by unorganized sector Snapshot of the Indian Informal Sector
Easily uprooted in
search of seasonal
jobs
Illiterate and poor
Irregularly and low
paid
Work in unsafe
conditions and
exploited
No social security
or provision of
credit, bank loans
Harassed by one
and all
artisans, animal husbandry
Services: workers in local
transport, shops, domestic
servants, community
services like street cleaning,
street vendors, garbage
collectors
Small Workshops: shoe
makers, garment makers and
embroiderers
At Home: garment workers
artisans or craft producers
On Rivers, Ponds, Lakes, and
Oceans: fishermen, shippers

3. Steps taken in the Welfare of the Informal Sector
• Following articles of the Indian Constitution mandate the provision of social welfare to the workers in the
informal sector:
• 38 (securing a social order for the promotion of welfare of the people), 39 (certain principles of policy), 41
(right to work, education and public assistance in certain cases), 42 (just and human conditions of work
and maternity relief), 43 (living wage etc.)
• National Commission of Enterprises in the Unorganized Sector (NCEUS) recommended separate consideration
for agriculture and non-agriculture and prescribed minimum standard of work and wages, safe work
environment, job security, etc.
• The Government of India passed the Unorganized Workers Social Security Act in 2008 to provide social
welfare to the unorganized sector
Constitutional Provisions and NCEUS
• Provisions
• Registration (at district level) of workers in informal sector. Registered workers will be entitled to PF, injury
benefits, housing, educational schemes for children, skill up gradation, etc. Also broadly covers Health and
life insurance, old age protection
• Formation of National and State Level Social Security Boards to advise the government
• Schemes under this act to be funded by state and/or central government
• Criticisms
• Act does not prescribe minimum wage and working conditions for unorganized sector workers
• National or state boards only have an advisory role, no real executive powers
• Prerogative of state governments to set up state level boards (only Chattisgarh, West Bengal, Assam and
Karnataka have state boards)
• Segmented unorganized sector as above or below poverty line, failed to address the unique demands of
each major sector, particularly agriculture
• No provisions for financing support for the sector (pensions, microfinance)
Unorganized Workers Social Security Act – 2008

4. Rural to Urban Migration : A Key Issue
Migration of agricultural labor
to informal sector in urban
areas (Problem of Marginal
Farmers and Informal labor in
the agricultural sector,
fisheries, forestry)
Fragmentation
of landholdings
Inefficiencies
of production,
transportation
and
distribution
Minimal credit
from
institutional
sources
80% of farmers
hold only 39%
of agricultural
land
Issues
Overloading of urban
infrastructure and holding
capacity of urban areas
(Urban Informal sector :
street vendors, domestic
workers, rickshaw pullers)
Creation of agricultural
cooperatives for pooling
land resources and farm
mechanization
Creation of credit
cooperatives for financial
support to marginal
farmers
Creation of distribution
and marketing
cooperatives
Incentivize private sector
to set up irrigation
facilities and processing
units in agricultural
dependent areas.
Solutions

5. Steps for the government implement a cooperative model in the primary sector
informal sector – an example from the agricultural sector
Identify Location for creation of first cooperative and key stakeholders including NGOs,
Panchayat, State Government, Marginal Farmers, Landowners, Laborers ,local
representatives, private sector
Identify sources of funding for NGOs , advocacy groups and setting up of infrastructure
Collaborate with NGOs and media to raise awareness about workers rights, resource
consolidation and cooperatives
Inform workers of their right to unionize and minimum wage lawsInform workers of their right to unionize and minimum wage laws
Collaborate with marginal farmers, landowners and agricultural laborers to implement
formation of farm, marketing and distribution cooperatives and farm mechanization
Collaborate and incentivize private sector to set up infrastructure facilities like irrigation
and farm machines
Set yearly targets for production for each cooperative
Institutionalize a monitoring and feedback system at the cooperative level
constituting representative members from each farmer/laborer category
Create and enforce policies to ensure workers rights

6. Challenges
• Resistance from communities such as landowners, employers, contractors to reforms
• Indifference from stakeholders
• Increased rights of informal sector workers might increase hostility among groups (traffic policemen and street
vendors)
Social challenges include
• Providing minimum wage by employer who are themselves barely making ends meet is difficult
• Loss of employment for marginal laborers, farmers, distributors and transporters with increased efficiencies
Economic challenges
• Loss of employment for marginal laborers, farmers, distributors and transporters with increased efficiencies
• Increased pressure on public funds for benefits and facilities provision;
• Government will need to prioritize funding and allocate resources to the informal sector; could resist
• Informal sector does not have a strong voice both in rural and urban areas; inadequate political representation
• Caste conflicts in rural areas among marginal farmers and laborers
• Corruption
Political
• Redressal time taken by court to resolve legal issues
• Minimum wage regulations for each category within the informal sector need to be set at the local level
• Consolidation of land holdings will affect ownership of property
• Appropriate penalties for defaulters need to outlined and detailed
Legal

7. Mitigation
Large scale communication and
media campaign at the national
level
Engaging the private sector for
rural development in setting up
infrastructure for cooperatives
Identifying additional employment
opportunities in cottage, small and
medium industries for those who
could lose employment in
agricultural sector
Awareness workshops in
workplaces, RWAs, and schools to
raise awareness about the informal
sector
Creation of advocacy groups with
NGOs and civil rights lawyers
Conducting workshops among
government stakeholders and
public servants to sensitize them
about the issue
Engaging the international
community and national/ state
departments Ministry of Labor,
Agriculture, Urban Development,
Human Resource Development ,
Housing and Urban Poverty
Alleviation, Commerce

8. Proposed Solution
“There’s no single pill to cure all maladies”
Our solution: broad, yet
focused on major
industries in the
unorganized sector
Involve NGOs and
volunteers to help set up
registration and
facilitation centers to
implement schemes
under the Act (for e.g.
GIZ in Karnataka)
Agriculture: land
consolidation, cooperati
ve societies, micro
finance
Educate the workers
about benefits of long
term savings (Pension
funds, NSC, PPF, FDs)
and allow multiple
people to contribute to a
single fund. The idea is
to make the people self
sustainable.
Create unions to give the
informal workers a voice
sustainable.
Despite its
criticisms, Unorganized
Sector Social Security Act is
a step in the right direction.
Major challenge for states
that’s hindering
implementation of the Act:
how to begin?
First step is registration of
the workers in the informal
sector: Data Collection

9. Data Collection : A Key Challenge
Workers in the informal sector are marginalized and do not get their share of rights
and are often exploited and mistreatedThe Problem
Key Reasons
Lack of
proper
statistics
No
organized
unions
Insufficient
Awareness
Excessive
Migration
•~90% of the workforce and
~50% of national product
comprises informal sector
•However, proper assessment of
this segment’s interests is a
major challenge as there are no
proper statistics regarding the
number engaged in such
activities nationwide
• Thus ,building such a database
is a necessary step for solving
any and every employability
issue for this sector.
• Another key reason is that the
workers do not have a proper
voice for themselves due to lack
of unions
• Challenges in the formation of
the same involve legal
challenges as many of these
workers are outside the legal
framework.
• Also, the fact that all these
workers are scattered and
mobile makes it a hard task to
organize them into unions.

10. Our Solution : Key Points
Our solution encapsulates use of existing government infrastructure along with a few salient points in order
to effectively implement and solve the problem of employability in the informal sector
Key Stakeholders
NGO’s
District
Authorities
Central
Government
Use of Existing Resources Key Implementation Points
•The provision of UID cards across the country can be
used to effectively gather information about workers in
the informal sect or.
•Funds for this exercise can be generated through
allocation of ~4-5% of ward councilor's budget in the
region where the solution is being implemented
• Additionally, NGO’s should be made responsible for
this process as it directly aligns with their objectives of
effectively serving the marginalized sections.
•The implementation process is to be carried out as follows :
Select a suitable area for a pilot project to be carried out
•Earmark 4-5% of the budget of the ward councilor of the area
for data collection
•Publicize the data collection process through distribution of
pamphlets by NGO’s operating in the area
•Involve volunteers from these NGO’s to encourage the
informal workers to come to offices setup for data collection
purposes
• Once, the data collection process is carried out, use majority
of the funds allocated towards increasing awareness among
these sections of their rights
NGO’s Authorities Government

11. Impact of the solution
Criteria to measure the impact
of the solution
•Reduction in number of
workers below the poverty line
•Number of informal sector
workers registered.
•Number of licenses distributed
to entrepreneurial categories
like street vending
Scalability of the solution
•In urban areas : Pilot
conducted in a city with high
visibility and political
willingness will be most
replicable
•In rural areas : Pilot conducted
in a village or ward where
Sustainability and Monitoring
•The project can become
suistainable only if the initial
actions are carried out with
success
•Independent NGOs which are
not involved in the data
collection process should carrylike street vending
•Reduction in average number
of hours worked among those
employed
•Increase in number of
reported grievances and those
closed with satisfactory results
•Percentage of budget
allocation for informal sector
related activities, benefits
•Enactment of policies and
benchmarks at the local level
to improve the condition of
workers at the local level
in a village or ward where
citizens demand reform and
local representatives are
willing to implement the
solution to ensure success
collection process should carry
out regular inspections and
monitor the progress.

12. References
• http://mospi.nic.in/mospi_new/upload/nsc_report_un_sec_14mar12.pdf?status=1&menu_id=199
• http://www.giz.de/themen/en/24048.htm
• http://labour.nic.in/upload/uploadfiles/files/ActsandRules/SocitySecurity/TheUnorganisedWoekersSocialS
ecurityAct2008.pdf
• http://pib.nic.in/newsite/erelease.aspx?relid=81374
• http://wiego.org/informal_economy_law/informal-economy-india• http://wiego.org/informal_economy_law/informal-economy-india
• : http://wiego.org/informal_economy_law/domestic-workers-india
• http://www.ilo.org/wcmsp5/groups/public/---ed_protect/---protrav/---
travail/documents/publication/wcms_155951.pdf