Skip to main content

India's Economy : 20% or 50%



The Synopsis

When you type "is the informal economy legal" into Google, the first autocompleted result is "is the informal economy criminal." So, let's get things straight. The informal economy is not a criminal enterprise.

Consider the market's fruit and vegetable shops, the hawkers selling your fried peanuts at traffic signals, and the construction workers building the home next door. Nothing they do is against the law. They're all part of the economy, struggling to make ends meet. They all contribute to the Gross Domestic Product (GDP). In reality, the International Labor Organization (ILO) estimates that the informal sector employs approximately 60% of the world's adult workforce. They don't have contracts, paid vacations, health insurance, or social security.

However, there is another issue here – one that reveals itself at a macro level. How can the informal economy be effectively measured? Particularly when no one, including government agencies, seems to understand what the informal economy involves. The fact is that we can't. Because right now all we have are some reasonable guesses, not the most precise. So, if you read tales like India's informal sector accounting for up to 50% of GDP, be aware that they may not be totally accurate. As a result, anybody predicting the magnitude of the informal GDP must proceed with caution.

With everything out of the way, let's get to the point - the SBI Research team's conclusion that India's informal sector has dropped from around 50% to 20%. The team now feels that the gig economy is a major force behind formalisation. Uber and Zomato, for example, have driven a substantial number of unorganised workers into the official sector. And, although that seems to be a fair assumption, are these individuals really members of the organised labour force?

Consider this: these folks are still without social security (for instance, access to Employee Provident Fund). Experts will tell you that this is a crucial quality that distinguishes individuals who work in the formal economy from those who do not. While the government is expected to establish rules in the future to provide a greater safety net for gig economy employees, there is a lot of space for interpretation until then.

Then there's the reality that the SBI used data from a pandemic year to get at the notorious "15 percent –20 percent" statistic. That the majority of their forecasts are predicated on the reality that the informal sector took a beating last year. And that's a concern for a variety of reasons. Pramit Bhattacharya, a data journalist, observes — "The second flaw in SBI's study is that it makes a claim about a fundamental transition in the economy based on an unusual reference point (the pandemic year). Consider a drought that wipes away half of India's agricultural production and jobs. This will reduce the percentage of agricultural employment in the economy, but it will return the next year when the agriculture sector recovers. It would be ludicrous to say that the Indian economy's structure has altered simply after the drought. Similarly, claiming that the informal sector has vanished merely because many informal businesses closed during the epidemic is absurd."


Even the technique they used to calculate the informal economy's proportion has been called into question. "While there is considerable 

Labels:

Comments

Post a Comment

Popular posts from this blog

The Asian Paints Price Hike Stroke

This paint business, which was once a stock market favourite, hasn't had a fantastic year. While the Sensex has increased by more than 50%, Asian Paints has only increased by 30%. The Synopsis Asian Paints, the world's largest paint manufacturer, has raised prices by just 3% a year for the past 20 years. That's correct, despite the fact that we've had to cope with out-of-control inflation everywhere, paint costs have never been an issue. The corporation, on the other hand, has finally rolled up its sleeves and is getting down to work. Asian Paints, the industry leader, is raising prices by 7–10 percent starting November 12th. Yes, it's advising everyone to spruce up their homes before Diwali. But, you may wonder, why the abrupt change of heart. Of sure, earnings are important. Sales increased by 32% year over year, from Rs 5,350 crores to almost Rs 7,000 crores, according to the company's latest figures (July-September). However, its net income dropped by 28%, f...
Post a Comment
Read more

SEBI's New Guidelines : How will it help Investors?

The Synopsis In view of the rising number of Initial Public Offerings (IPOs) flooding the public markets, the Securities and Exchange Board of India (SEBI) has produced a consultation paper. In recent years, the markets have seen three major trends: large-cap IPOs, many technology company listings, and a rise in the number of offers for sale compared to new stocks issues. The SEBI is primarily concerned with concerns that arise as a result of these three tendencies. Companies will be required to provide more disclosures. When a business needs more funding, it will issue more stock shares to investors. Companies must describe how the cash will be used in this situation. Asset-light technology enterprises, on the other hand, do not need funding for typical capital expenditures such as the construction of factories, showrooms, or other traditional capital expenditures. Instead, these organisations put their money towards things like client acquisition, brand promotion, expanding into new ...
Post a Comment
Read more

Live Commerce : A brief Understanding (A Myntra's Gamble)

The Synopsis Is it possible that the ease of shopping for garments online will persuade Indians to abandon the "try-before-you-buy" mentality? That was the wager made by Myntra in 2011. It has just shifted its focus from customised gifts to fashion. And it was successful. Myntra became India's top online fashion platform in only a few years. Flipkart came knocking in 2013. It wants to expand its fashion portfolio, so it bought Myntra. Myntra, on the other hand, continued to iterate. It transitioned from an inventory-led approach, in which they purchased garments from manufacturers before reselling it, to a marketplace one, in which over 3000 businesses could utilise the Myntra platform to present their offerings to buyers. It collaborated with Bollywood stars such as Hrithik Roshan to promote unique products (HRX). Mast & Harbour are two of its own private label brands. To further build its Bollywood cred, it teamed with superstars such as Deepika Padukone (All About ...
Post a Comment
Read more