Informal Sector and Urban Livelihoods
Indian Economy
- PYQs8
- Articles1
Background
Understanding the informal sector is crucial for addressing poverty, inequality, social justice, and sustainable urban development in India. It's a key area for policy interventions related to labor welfare, social security, and economic inclusion, directly impacting a large segment of the population.
The informal sector comprises a significant portion of the Indian workforce, characterized by a lack of formal employment contracts, social security benefits, and regulatory oversight. Workers in this sector often face precarious working conditions, low wages, and vulnerability to economic shocks, contributing significantly to urban economies despite their marginalization.
Facts & tables
- Contribution to Urban Economy
- Informal workers (e.g., waste pickers, daily wage labourers) provide essential services and contribute significantly to urban economies, often reducing the burden on municipal systems.
- Lack of Formal Recognition
- Workers in the informal sector frequently lack formal recognition, integration into mainstream economic systems, and access to government policies for dignity and respect.
- Precarious Working Conditions
- They often experience precarious work, restricted access to workspaces, allegations of theft, and absence of social security or healthcare benefits.
- Social Invisibility
- Despite their omnipresence, informal workers are often rendered 'invisible' by urban planning and societal perceptions, leading to their problems being overlooked.
| Type | Reference |
|---|---|
| Conceptual area | Indian Economy |
| Conceptual area | Social Justice & Development |
Prelims angle
Prelims angle: Multi-statement analysis
Prelims angle: Conceptual understanding
- Large share of India's urban workforce.
- Lack of formal contracts, social security, and regulation.
- Crucial for urban services (e.g., waste collection, daily labor).
- Faces marginalization, invisibility, and precarious work.
- Policy focus on recognition, social security, and dignity.
| Year | Framing tags |
|---|---|
| 2026 | Factual recall, Multi-statement analysis |
| 2022 | Factual recall, Institutional roles and functions |
| 2022 | Multi-statement analysis, Factual recall |
| 2021 | Multi-statement analysis, Factual recall |
| 2020 | Multi-statement analysis, Conceptual understanding |
| 2019 | Multi-statement analysis, Factual recall |
| 2019 | Statement-based questions, Conceptual understanding |
| 2018 | Statement-based questions, Factual recall |
Timeline
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Indian Economy
Conceptual area
-
Social Justice & Development
Conceptual area
-
Prelims 2018
Statement-based questions, Factual recall
-
Prelims 2019
Multi-statement analysis, Factual recall
-
Prelims 2019
Statement-based questions, Conceptual understanding
-
Prelims 2020
Multi-statement analysis, Conceptual understanding
-
Prelims 2021
Multi-statement analysis, Factual recall
-
Prelims 2022
Factual recall, Institutional roles and functions
-
Prelims 2022
Multi-statement analysis, Factual recall
-
Prelims 2026
Factual recall, Multi-statement analysis
-
How a city’s working class is driven to the margins and made invisible
The informal sector in India, particularly in urban areas, provides livelihoods for millions but is marked by precarious work, lack of formal recognition, and social exclusion, posing significant challenges for inclusive growth and welfare.
See also
Past papers
2018–2022 · 5 questions
In the news
How a city’s working class is driven to the margins and made invisible
The informal sector in India, particularly in urban areas, provides livelihoods for millions but is marked by precarious work, lack of formal recognition, and social exclusion, posing significant challenges for inclusive growth and welfare.
Try these PYQs
With reference of the Indian economy after the 1991 economic liberalization, consider the following statements:
1. Worker productivity (per worker at 2004-05 prices) increased in urban areas while it decreased in rural areas.
2. The percentage share of rural areas in the workforce steadily increased.
3. In rural areas, the growth in non-farm economy increased.
4. The growth rate in rural employment decreased.
Which of the statements given above is/are correct?
Statement 1 is incorrect. After the 1991 economic liberalization, worker productivity increased both in urban and rural areas. While urban areas experienced higher growth, rural areas also saw improvements, especially with the rise in non-farm activities. Statement 2 is incorrect. The percentage share of rural areas in the workforce has steadily decreased since liberalization. This is because more people have moved to urban areas for employment in the industrial and service sectors, contributing to the growing urban workforce. Statement 3 is correct. In rural areas, the growth of the non-farm economy increased significantly. With liberalization, the diversification of rural economies into sectors like manufacturing, construction, and services grew, reducing the dependency on agriculture. Statement 4 is correct. The growth rate in rural employment decreased after 1991. While the rural economy diversified, the agricultural sector did not provide enough employment opportunities to absorb all the labor, leading to lower growth in rural employment. Hence, option B is the correct answer.
Consider the following statements:
1. Vietnam has been one of the fastest growing economies in the world in recent years.
2. Vietnam is led by a multi-party political system.
3. Vietnam's economic growth is linked to its integration with global supply chains and focus on exports.
4. For a long time, Vietnam's low labor costs and stable exchange rates have attracted global manufacturers.
5. Vietnam has the most productive e-service sector in the Indo-Pacific region.
Which of the statements given above are correct?
Statements 1 and 3 are correct. Vietnam’s open economic policy of recent years integrating into global supply chains has made the growth success story possible. Vietnam's export-led growth strategy and global integration are among the key factors behind the country's remarkable achievements in growth and poverty. Vietnam was one among the few countries to post GDP growth rate figures in 2020 when the pandemic hit. Vietnam is projected to be the fastest-growing internet economy in Southeast Asia in the next 10 years. Statement 2 is not correct. Vietnam is a one-party communist state, not a multi-party parliamentary democracy. Statement 4 is correct. Thanks to an abundance of low-wage labour, Vietnam's manufacturing sector grew at a compound annual growth in the last decade. As the rest of East Asia developed and wages there rose, global manufacturers were lured by Vietnam's low labour costs and stable exchange rate. Hence, Statement 5 is not correct. According to the Asian Development Bank Report, e-services including digital financial services are at a very nascent stage in Vietnam.
With reference to the casual workers employed in India, consider the following statements:
1. All casual workers are entitled for Employees Provident Fund coverage.
2. All casual workers are entitled for regular working hours and overtime payment.
3. The government can by a notification specify that an establishment or industry shall pay wages only through its bank account.
Which of the above statements are correct?
Statement 1 is not correct: The Government had launched a scheme viz Casual Labourers (Grant of Temporary Status and Regularization) Scheme of Government of India, 1993. As per the scheme, Temporary status would be conferred on all casual labourers who were in employment and who have rendered a continuous service of at least one year, which means that they must have been engaged for at least 240 days (206 days in case of offices observing 5 days week). Statement 2 is correct: The Supreme Court has decreed that casual workers are also entitled to social security benefits as stipulated in the Employees Provident Funds and Miscellaneous Provisions Act. The Court's ruling stemmed from its interpretation of Section 2(f) of the EPF Act, wherein the definition of an "employee" encompasses a broad scope, including any individual engaged directly or indirectly in connection with an establishment's work and receiving wages. A bench of the Supreme Court affirmed this viewpoint. Statement 3 is correct: The government has the authority to specify through a notification that an establishment or industry is obligated to disburse wages exclusively via its bank account.
As per the NSSO 70th Round “Situation Assessment Survey of Agricultural Households”, consider the following statements
1. Rajasthan has the highest percentage share of agricultural households among its rural households.
2. Out of the total agricultural households in the country, a little over 60 per cent belong to OBCs.
3. In Kerala, a little over 60 per cent of agricultural households reported to have received maximum income from sources other than agricultural activities.
Statement 1 is correct: In the NSSO 70th Round survey, Rajasthan had the highest percentage of rural agricultural households at 78.4%, followed by Uttar Pradesh at 74.8% and Madhya Pradesh at 70.8%. Statement 2 is incorrect: Among agricultural households, 45% were from Other Backward Classes (OBC), 16% from Scheduled Castes (SC), and 13% from Scheduled Tribes (ST). Statement 3 is correct: In most major states, agricultural activities were the primary income source, except in Kerala, where 61% earned more from non-agricultural sources.
Which of the following statements is/are correct regarding the Maternity Benefit (Amendment) Act, 2017?
1. Pregnant women are entitled for three months pre-delivery and three months post-delivery paid leave.
2. Enterprises with crèches must allow the mother minimum six crèche visits daily.
3. Women with two children get reduced entitlements.
Select the correct answer using the code given below:
The Maternity Benefit (Amendment) Act 2017 has made several significant changes to benefit women employees - Paid maternity leave has been increased to 26 weeks from 12 weeks. - For women expecting after having 2 children, the leave duration remains at 12 weeks. - Establishments employing 50 or more employees must provide a crche facility, and women employees should be allowed to visit the facility 4 times during the day.
Show 3 more PYQs
In India, which one of the following compiles information on industrial disputes, closures, retrenchments and lay-offs in factories employing workers?
In India, the primary agency responsible for compiling information on industrial disputes, closures, retrenchments, and lay-offs in factories employing workers is the Labour Bureau The Labour Bureau is an attached office of the Ministry of Labour and Employment, Government of India. It plays a crucial role in collecting, compiling, and disseminating labor statistics across various aspects, including industrial relations.
Consider the following statements :
As per the Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018
1. if rules for fixed-term employment are implemented, it becomes easier for the firms/companies to lay off workers
2. no notice of termination of employment shall be necessary in the case of temporary workman
Which of the statements given above is/are correct?
Statement 1 is correct: Fixed-term employment and ease of layoff. The amendment introduces the concept of "fixed-term employment" for the first place. While it doesn't automatically make layoffs easier, it allows companies to hire for specific projects or periods without them becoming permanent employees. This can potentially make restructuring or downsizing during economic downturns easier for companies with fixed-term employees compared to permanent ones (who have greater job security). Statement 2 is correct: Notice period for temporary workmen.
The amendment clarifies that no notice period is required to terminate the employment of a "temporary workman," which is someone hired for a specific, non-continuous job or for a short period.
Which of the following international conventions have **not** been ratified by India?
1. Employment Policy Convention
2. Abolition of Forced Labour Convention
3. International Convention on the Protection of the Rights of All Migrant Workers and Members of Their Families
4. Geneva Convention Relative to the Protection of Civilian Persons in Time of War
5. Convention on Reduction of Statelessness
Select the answer using the code given below:
Statement 1 is Incorrect: The Employment Policy Convention, 1964 (ILO No. 122) is one of the International Labour Organization's governance (priority) conventions. India ratified it on November 17, 1998. Statement 2 is Incorrect: The Abolition of Forced Labour Convention, 1957 (ILO No. 105) is a fundamental ILO convention. India ratified it on May 18, 2000. Statement 3 is Correct: The International Convention on the Protection of the Rights of All Migrant Workers and Members of Their Families (1990) is a UN multilateral treaty. India has neither signed nor ratified this convention. Statement 4 is Incorrect: The Geneva Convention Relative to the Protection of Civilian Persons in Time of War (1949) (also known as the Fourth Geneva Convention) was ratified by India on November 9, 1950, and implemented domestically via the Geneva Conventions Act, 1960. *(Note: The question setter likely confused this with the 1951 Refugee Convention, which was adopted in Geneva and which India has not ratified).* Statement 5 is Correct: The Convention on Reduction of Statelessness (1961) has not been signed or ratified by India. India is not a party to the 1951 Refugee Convention, the 1954 Convention on Statelessness, or this 1961 Convention. *Conclusion:* Factually, only conventions 3 and 5 have not been ratified by India. However, among the given options, there is a discrepancy as no option perfectly matches "3 and 5". Since any correct answer must include the unratified conventions 3 and 5, Option D is the only possible choice by elimination.