Globalisation has offered opportunities which were absent before 1991. Willow or cricket bat makers from Jammu Kashmir can now find market even outside the country for e.g. Nepal, Bangladesh, Pakistan or even countries like Afghanistan where access is difficult. And we know this is an informal sector. Earlier they could only sell within India.
Similar evidences can be seen in lock making, paints, candles business, cosmetics, kites, ivory making and others. These industries sometimes employ less than 10 people. But since they find market outside India, they earn.
So with this increase in employment in informal sector, employment in formal sector has decreased. People in formal sector may be more secure from the year round benefits they are provided. However, they prefer informal jobs because of two main reasons. The skills they have inherited from their forefathers offer them a good business. Secondly, they need not migrate from rural to urban or rural to some other rural places.
Increased informalisation is not always detrimental to the development of the country. Until and unless it offers these:
1. Significant contribution to the GDP due to volume of sales.
2. Human capital utilisation of the country
3. Augmenting other sectors of the country which are forwardly linked to these informal sectors. For e.g if some industry source rice husk for their businesses from the informal sectos which is involved in rice husk making. Then both gets benefited in that case.
However, it may affect the economy of the country in following cases
1. If the % of informalisation increases to such an extent that GDP contributed by them is less than GDP contributed by the formal sector. If 60% informal sector of the economy contributed to only 30% of GDP , then there is a serious problem with the structure of economy.
A balance of the formal and informal sector is needed.
Similar evidences can be seen in lock making, paints, candles business, cosmetics, kites, ivory making and others. These industries sometimes employ less than 10 people. But since they find market outside India, they earn.
So with this increase in employment in informal sector, employment in formal sector has decreased. People in formal sector may be more secure from the year round benefits they are provided. However, they prefer informal jobs because of two main reasons. The skills they have inherited from their forefathers offer them a good business. Secondly, they need not migrate from rural to urban or rural to some other rural places.
Increased informalisation is not always detrimental to the development of the country. Until and unless it offers these:
1. Significant contribution to the GDP due to volume of sales.
2. Human capital utilisation of the country
3. Augmenting other sectors of the country which are forwardly linked to these informal sectors. For e.g if some industry source rice husk for their businesses from the informal sectos which is involved in rice husk making. Then both gets benefited in that case.
However, it may affect the economy of the country in following cases
1. If the % of informalisation increases to such an extent that GDP contributed by them is less than GDP contributed by the formal sector. If 60% informal sector of the economy contributed to only 30% of GDP , then there is a serious problem with the structure of economy.
A balance of the formal and informal sector is needed.
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