The existence of a substantial share of informal or unorganised labour employment distinguishes the Indian economy. According to the Budget Speech 2007-08, 93 percent of the Indian workforce is self-employed or engaged in the unorganised sector. The Government of India’s Ministry of Labour has classified the unorganized labor force into four categories based on occupation, kind of work, extremely distressed categories, and service categories.(COVID-19 FINANCIAL SUPPORT TO UNORGANISED WORKERS)

            The national lockdown destroyed people’s livelihoods, particularly those in the unorganized sector, whose lives have yet to return to normal. “People working as security guards, drivers, and cleaning staff have been entirely wiped out, as workplaces have not yet fully reopened. COVID-19 has enthralled the globe. The infection, along with the lockdown, had a terrible economic impact. The Indian economy is on the verge of a double-digit decline, while the number of cases continues to rise. Despite the widespread economic impact, the unorganised industry has suffered the most and endures the most. Workers are in a difficult situation. They have not only lost their meager income, but their only alternatives now are to risk acquiring COVID-19 or starve.  

As an outcome, many of them set out to trek hundreds, if not thousands, of kilometers back to their towns, carrying just a few possessions, children on their shoulders, and no sustenance. Workers in India are classified as either organized or unorganized. Those in the first group work in big corporations and have certain formal rights (which are becoming more weakened), but they frequently find it difficult to enforce them. Contract labor offered by contractors from the unorganized sector is increasingly being used by large and medium-sized firms rather than permanent staff. Businesses pay the subcontractors, who in turn pay a share of the money to the employees. As a result, corporations claim to pay the minimum wage, while their employees do not. When even the minimum wage is insufficient to live a respectable life, what employees earn cannot guarantee a civilized lifestyle. This article seeks to analyze the harm and offer possible remedies.


The unorganized sector is made up of unincorporated businesses owned by individuals and families that produce and sell goods and services with fewer than ten employees. The pandemic had a profound impact on the sectors listed below:

1. The labor force and migrant laborers

Because of the pandemic, the already-declining labor market experienced a further fall. According to 2018-19 data, self-employment accounts for 52% of the labor force. The remaining 24 percent were regular paid workers, while 24 percent were casual employees with little financial security. The pandemic shock had an uneven impact on the labor force. The pandemic shock had an uneven impact on the labor force. The crisis exacerbated already-existing inequalities in the labor sector. The following is the laborer hierarchical rank based on salary and social security:

1.Employed regularly

2.Regular casual employment

3.Working for oneself

4.Workers on a part-time basis

The least impacted are the regular official employees. They are in a favourable position due to the length of their work, high income, and social security. They can work from home if they like. In the event of regular informal work, the situation is identical. The self-employed are also impacted, although depending on the business, they are compensated well to support themselves. The casual employees who are less educated and work for low pay are the most affected. They work in insecure environments and are vulnerable to layoffs. Casual employees are left to bear the brunt of the epidemic due to physical separation, safety precautions, and the fear of getting the disease itself.

Furthermore, the CMIE (Centre for Monitoring Indian Economy) forecasted 112 million job losses between April and May 2020, the vast majority of which will be self-employed or temporary employees. As per the World Economic Forum, India has over 139 million migrant labourers. The epidemic put migrants through a lot of trouble.

The majority of migrants are day laborers or casual employees. Many people were out of work as a result of the lockdown. According to the ILO, the pandemic would force 400 million workers into poverty.

The migrants were obliged to return to their communities due to their precarious position. Many migrants returned by walking or cycling since they lacked money, food, and transportation. Traveling in big groups resulted in physical distancing impossible. Also, more than 300 migrant laborers died for a variety of circumstances, including malnutrition, accidents, and a lack of adequate medical attention. As the governments relaxed the lockdown limitations, there was an inflow of migrants.

2. Food and Agriculture Sector:

India’s economy is based on agriculture. Food and agriculture account for 16.5 percent of GDP, the greatest contribution of any industry. Agriculture employs 43 percent of the entire employment in the country. The epidemic struck during the peak of the Rabi season, which is also when the product arrives at mandis (whole seller places) for sale by government agencies.

The scarcity of labor has resulted in lengthier harvesting times, which has increased the daily wage for harvesting crops. Fields and farms with sophisticated equipment were spared from the epidemic. Restrictions on interstate and intrastate transportation exacerbated the problem. The inability to produce harvested commodities, along with the refusal to repay previous debts, exacerbated the situation.

3. Fishing Sector:

The fishing sector employs over 14 million people and accounts for 1.1 percent of GDP. Small-scale fisherman account for 80% of those employed. The lockdown enforced fishing restrictions, reducing supplies to markets. Higher fish and other marine product costs, along with the epidemic, resulted in losses for sellers. The lack of suitable storage choices exacerbated the problem. Reduced exports have had a significant impact on the fishery and other connected businesses.

4. Security Guards:

The PSI employs around 9 million people (Private Security Industry).  Security guards are primarily recruited by shopping malls, movie theaters, and workplaces.

As a result of the pandemic and the closure, several structures were shuttered. The closure of the malls, theaters, and workplaces meant that the guards’ services were no longer necessary. However, the lifting of the lockdown and the reopening of offices may increase the demand for security guards.

5. Restaurants Services:

In India, there are around 500,000 restaurants, not counting the countless roadside shops offering food. The organized restaurant business is estimated to be worth 4.2 lakh crore, employs 7.3 million people, and amounts to 3% of the GDP.  Physical distance, business scheduling constraints, and limited seating space all contribute to the lack of people dining at restaurants. Online meal delivery has saved the restaurant business from certain extinction. However, the future of restaurant eating is bleak. Cooking at home has become commonplace in every family, thanks to guides and movies. Waiters and cleaning workers can only start working once the epidemic has passed.

6. Handicraft & Micro, Small, and Medium Organizations:

The handloom and handicrafts industries have also been seriously impacted by the epidemic. The epidemic aggravated an already drab industry. The lack of exhibits, the prohibition on the sale of non-essential objects, and decreasing demand all contribute to their downfall. The industry’s exports plummeted by 40% to $2.1 billion from $3.53 billion.

Also in micro, small, and medium firms have investments of Rs. 1 crore, Rs. 10 crores, and Rs. 50 crore, respectively. The MSME sector has been particularly heavily hit. It employs 120 million people, accounts for 45 percent of exports, and accounts for 37 percent of GDP. The MSME sector is the most susceptible under a climate of fear, reduced demand, and a restriction on the selling of non-essential items. Further, The main obstacles include paying workers and rentals, as well as dealing with creditors. Garments, logistics, and consumer products are all experiencing significant declines. Businesses that rely on imports, such as medicines, electrical devices, and consumer durables, are suffering as a result of value chain disruption.

7. The sector of Online Business/Internet business:

In contrast to other sectors, the Internet business sector saw a surge during the epidemic. By 2024, the epidemic will have increased the internet commerce industry to a whopping $85 billion. The imposition of physical distance, the closure of offline establishments, and the rising demand for products have prompted consumers to make purchases through an online medium. As a result of the epidemic, major businesses like Amazon and Flipkart are seeing historic sales. Delivery efficiency, time savings, and broad internet access have all contributed to their expansion. Online meal delivery businesses such as Swiggy and Zomato have aided not only in the delivery of meals but also in the employment of many. The availability of Internet services for practically every need is a boon at these times. G pay and Phone pay are reliable, convenient, and confidential transactional systems. The digitization of local stores aided in the shift to a digital economy.


  • Before Covid-19, the informal sector was feeling the effects of demonetization and a poorly administered GST (Goods and Services Tax). The unorganised sector, sometimes referred to as the informal sector, is separated into two parts. It refers to both informal employment and informal sector businesses.
  • Informal work includes day laborers, self-employed persons, street sellers, and so on. The norm is a lack of regular wages and social security.
  • Small stores, marketplaces, and eateries are examples of informal sector firms. The owners are crucial to the operation. They may or may not have an organizational structure, lack appropriate inventory and competent staff, and typically do not obey minimum wage laws because the companies themselves make very little profit.
  • Another notable element of the unorganized sector is the high proportion of working women. According to the NCEUS (National Commission For Enterprises in the Unorganized Sector), 98 percent of the agricultural sector, 75 percent of the industrial sector, and 72 percent of the service sector are in informal employment. The unorganized sector must be improved to provide better salaries, living circumstances, and a means of subsistence for individuals who work in it.


The administration has taken immediate action to assist the destitute, homeless, and elderly. Other requirements include compensating migrant and construction workers for economic disturbance, giving a welfare pension, ensuring employment, and distributing food. The payment of loan installment was put on hold for three months.

To ease the crisis, the national and state governments collaborated and implemented a host of remedies including as crop insurance, subsidies, agricultural loan, and MGNREGA incentives (Mahatma Gandhi National Rural Employment Guarantee Act,2005).

Moreover, The centre also instructed the immediate payment of 52,000 crores of rupees collected under the BOCW (Buildings And Construction Workers Cess) to the accounts of the workers. States have also launched assistance programmes to help the underprivileged.


1. For migratory workers and the labour force:

Several initiatives for migrants were announced by the finance minister. The states’ proper implementation of MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) would help to return migrants find work in rural regions. Each citizen will receive 5 kilograms of food grain and 1kg of channa for two months, distributed among the states. This is also available to non-beneficiaries under the National Food Security Act. The implementation of the One Nation, One Ration Card would allow migratory workers to get access to food in their respective working states. The Pradhan Mantri Awas Yojana allows migrants to rent low-cost housing in cities. A credit package of 5000Cr for merchants will make credit policies easier to implement. Crop loans in the amount of 30,000 crores have been made available to rural and cooperative banks.

2. In the Farming Sector:

E-NAM has been improved by the government (National Agriculture Market). The goal was to decongest the marketplaces and improve agricultural marketing.

The CSIR developed the Kisan Sabha App.  Farmers may use the app to connect with suppliers and transportation providers. By removing the intermediary, dramatically increases profit. Contract farming brings together customers and farmers, with consumers assisting farmers with their requirements and farmers supplying them with products. The use of DBT (Direct Benefit Transfer) has assisted farmers in mitigating their losses.

3. Micro, Small, and Medium-Sized Businesses (MSME):

The government announced the adoption of the TReDS platform, which will allow NBFCs (Non-Banking Financial Corporations) to lend money to MSMEs. FinTech may be used to improve transaction-based financing. It has been stated that a FOF (Fund of Funds) would be established to help MSMEs expand. A loan guarantee programme was formed by SIDBI (Small Industries Development Bank of India) and the Ministry of Micro, Small, and Medium Enterprises. Local involvement would be ensured by limiting worldwide tenders in government procurements up to 200 crores. According to sources, the country saw the lowest policy repo rate at 4.4 percent to act as a cushion against the imposed shock. Banks in the public sector have declared a 5% loan rate.


1. APMC Restructuring (Agricultural Produce Market Committee):

APMC’s are outdated, ineffectual, and inefficient. There is an urgent need to organized APMCs and replace them with direct purchases from FPOs (Farmer Producer Organizations), which are more efficient and effective. The purchaser is excluded from the market charge while making a direct purchase.

The epidemic has shown our country’s digital inequalities. The advantages of Jan Dhan and Aadhar have not reached everyone. The vast majority of Jan Dhan’s accounts are inoperable. The number of banks in rural regions is insufficient. It is critical for recovery to close the digital gap.

2. Enhanced implementation of the 2008 Unorganized Workers Social Security Act:

After registering with the Unorganized Employees Social Security Act, workers will be able to receive benefits and preserve their legal rights if they are given electronic chip-based ID cards. A government-supported trade union might assist employees in unionizing and registering for and relocating.

During the lockdown, several difficulties were generated by a lack of cooperation between the central and the states. They should collaborate to guarantee that food is distributed uniformly through the PDS (Public Distribution System). The food should be distributed by the states through the PDS outlets.

3. Improving social and health security:

Unorganized sector workers have next to no welfare and medical security. The lack of security not only generates tension and uncertainty but also has an impact on productivity. The government must take initiatives to improve the living conditions of its citizens. The level of life of a country’s population determines its progress.

4. Alternative Marketplaces:

Alternate markets, through decentralization and home delivery, can greatly reduce overcrowding and congestion in urban markets, guaranteeing increased involvement by farmers and customers. Better transportation infrastructures will guarantee that higher-quality items get to their destination faster. The use of modern infrastructure will boost the amount and quality of stored products.


To summarize, the pandemic has had a tremendous impact on the unorganized sector. Although the authorities acted quickly, the magnitude of the devastation was enormous. Radical reforms and inclusive laws with strict enforcement might assist to alleviate the problem.

In the future, workers and the government should be prepared to adopt several initiatives for their benefit and to recover from the situation.



Article by – By Prabal Pratap Singh

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