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WB support to India’s informal working class


World Bank said it has approved a USD 500 million (about Rs 3,717.28 crore) loan programme to support India’s informal working class to overcome the current pandemic distress.


GS-III: Indian Economy (Inclusive growth, Government Policies and Interventions), GS-II: International Relations (Important International Institutions)

Dimensions of the Article:

  1. About India’s Informal Workforce
  2. Issues with having a majority in the informal sector
  3. About the World Bank’s Financial Support

Click Here to read about the World Bank and World Bank Group

About India’s Informal Workforce

  • India’s estimated 450 million informal workers comprise 90% of its total workforce, with 5-10 million workers added annually. (As per Periodic Labour Force Survey, 2017-18, 90.6 per cent of India’s workforce was informally employed.)
  • Informal Labour is largely characterized by skills gained outside of a formal education, easy entry, a lack of stable employer-employee relationships, and a small scale of operations.
  • The statistics of the ILO report indicates that 95% of the workforce is in the informal sector.
  • India’s informal sector is the biggest piece in our economy as it employs the vast majority of the workforce accounting for about half of GNP according to Credit Suisse, and the formal sector depends on its goods and services.
  • Between 2004-05 and 2017-18, a period when India witnessed rapid economic growth, the share of the informal workforce witnessed only a marginal decline from 93.2 per cent to 90.6 per cent.
  • Looking ahead, it is likely that informal employment will increase as workers who lose formal jobs during the COVID crisis try to find or create work (by resorting to self-employment) in the informal economy.
  • Further, according to Oxfam’s latest global report, out of the total 122 million who lost their jobs in 2020, 75% were lost in the informal sector.

Issues with having a majority in the informal sector

  • The informal sector remains unmonitored by the government.
  • No official statistics are available representing the true state of the informal sector in particular (and hence the economy as a whole) which makes it difficult for the government to make policies. Unlike the formal economy, the informal sector’s components are not included in GDP computations.
  • Informal sector workers have no job security, minimal benefits, very low pay, and often face hazardous working conditions.
  • There is an expectation of increase in the number of people in informal sector with the issue that about 65-75% (15 million) of Indian youth, that enter the workforce each year are not job-ready or suitably employable.
  • In India Restrictive labour laws- which promotes ad hocism and contract hiring in the labour market to circumvent the rigid labour laws.

About the World Bank’s Financial Support

  • Of the USD 500 million commitment, USD 112.50 million will be financed by its concessionary lending arm International Development Association (IDA) and the rest will be a loan from International Bank for Reconstruction and Development (IBRD).
  • States can now access flexible funding from disaster response funds to design and implement appropriate social protection responses.
  • The funds will be utilised in social protection programmes for urban informal workers, gig-workers, and migrants.
  • Investments at the municipal level will promote National Digital Urban Mission that will create a shared digital infrastructure for people living in urban areas and will scale up urban safety nets and social insurance for informal workers.
  • The programme will give street vendors access to affordable working capital loans of up to Rs 10,000.

-Source: Indian Express

February 2024