Indian Economy Part 10 - Concepts of Micro Economics for UPSC / SSC / RBI / RRB / NABARD Video Lecture | Indian Economy for Government Exams (Hindi) - Bank Exams

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hello and welcome to steady iCube in the
previous lecture we were discussing
about unemployment in India we have seen
what is unemployment we have seen full
employment we have seen underemployment
we have also seen what this unemployment
we have also seen the types of
unemployment where in which we discuss
about frictional unemployment structural
unemployment cyclically unemployment
seasonal and disguised unemployment we
have also discussed about the
measurement of employment and
unemployment in India we have also
discussed an important concept that is
the occupational structure in India we
have compared the GDP growth rate and
also the contribution to the growth in
employment by different sectors of the
Indian economy we have also seen jobless
growth and we have seen the water the
causes of jobless growth in Indian
context and now in this lecture we will
continue with the discussion on
unemployment let us start with the
differences between the organized and
unorganized sector in the Indian economy
organized and unorganized sector
organized sector is also known as formal
sector of the economy unorganized sector
is also called the informal sector of
the economy formal and informal sector
we call it sector as formal if the
sector meets the following criteria the
first criteria is that one thing idea is
that there should be 10 or more hired
workers 10 or more hired workers the
second criteria is that electricity
should be an input electricity should be
an input in that organization the third
criteria is the quality of employment of
employment should be better for example
better wages better working conditions
job security Social Security benefits
Exeter so if any of this criteria is met
we call it as an organized sector
unorganized sector on the other hand
does not have any of these and examples
of unorganized sector walls are almost
the interior almost the entire
agriculture in India comes in the
organize sector small-scale industries
small industries self-employed etc are
considered to be in the unorganized
sector of Indian economy according to
the illnesses of survey only 14 to 15
percentage of the Indian workforce works
under the organized sector only 14 to 15
percentage but on the other hand around
85 to 86 percentage of the Indian
workers comes under the unorganized
sector or the informal sector of Indian
economic this is the data given by the
analysis of National Sample Survey
office as we discussed in the criteria
for considering as a formal sector we
said that if ten or more workers are
hired it is considered to be a formal
sector but there is an exception to it
there is a construction workers so
construction workers there can be 10 or
more construction workers in one
organization but they are not considered
as formal sector employees or they does
not come under the category of formal
sector because the quality and nature of
the work is very poor so to study this
problem a committee was appointed then
that committee was headed by Professor
Arjun Sengupta professor Arjun Sen Gupta
so this committee was constituted for
analysing the problems in the
construction workers and also in
categorizing whether there whether they
come under the formal or informal sector
of the economy so remember the name of
the committee Professor Arjun Sen Gupta
Committee we discussed about organized
and unorganized sector so with that
exception of the construction workers
the informal sector of the economy got a
new definition so informal sector of the
Indian economy has a new definition and
that is workers in the unorganized
sector unorganized sector workers plus
those who are employed in formal sector
but nature of work is unorganized but
nature of work is unorganized or
informal nature of work informal so we
can say that the informal sector
comprises of the
who work in the unorganized sector as
well as those who work in the organized
sector but the nature of their work is
informal or unorganized so that is an
informal sector of the economy according
to the National Sample Survey office in
NASA so during the financial year 2004
five the percentage of the workforce in
an organized sector was around ninety
one percentage in the year 2009 ten the
end SSO came up with a new data and the
data said that around ninety two
percentage of the Indian population
works with the unorganized sector so 91
and 92 percentage and it is quite a very
big percentage and here we will see that
in 2009-10 the percentage has increased
from 91 to 92 so an increase in the
percentage of people working in the
unorganized sector refers to in
formalization of an economy in
formalization of an economy so in
formalization of an economy refers to a
situation where the percentage of people
working in the unorganized sector
increases or the informal sector
increases this is known as in
formalization of an economy another
notable fact here is that more the in
formalization in an economy more will be
the 14 an economy so if an economy has
more informal ization or more informal
work the economy will have more rates of
poverty also in formalization and
poverty and directly connected or linked
you must remember this point also if you
have seen the Economic Survey of this
year Economic Survey in the volumen
there were 10 interesting facts about
the Indian economy 10 facts about the
Indian economy in that 10 facts the
second fact was related to the
unemployment all related to the formal
and informal sector of the Indian
economy the fact said that the formal
non agricultural payroll is much more
than expected payroll is greater than
expected greater than expected the
second fact says that the formal known
Greek cultural payroll is much more than
the expected or believed what does this
mean it means that the economic survey
is coming out with a new fact that it
says that we believe that the informal
sector of the Indian economy's around 91
now or 92% is according to the NS a-- so
but the new economic survey has come out
with different facts
let us analyze what are the facts given
by the economic survey this year
according to the economic survey there
are two criterias to be considered as
informal sector of the economy one
criteria is that the organization should
provide some Social Security benefits
Social Security benefits the second
criteria is that the organization must
be included in the tax Nanette must be
included in the tax net so what does the
Social Security mean the employer or the
organization must provide some Social
Security benefits to its employees like
insurance or health coverage or
education so Social Security benefits
must be provided to the employees by the
employer or by the organization that is
the Social Security benefits and the
second criteria the organization or the
employer must be included in the tax net
of the country it means that the
employer or the organization must be
paying the GST goods and services tax
and you must remember that this new data
released by the Economic Survey is based
on the GST figures and that is why it is
important so these are the two criterias
given by the Economic Survey and
according to this criteria the survey
says that more than 30 percentage of the
Indian workforce gets some Social
Security benefits that is more than 30
percentage of the indian workforce this
benefiting from Social Security from it
from their employers or from their
organizations and considering the second
criteria that is a tax net the survey
says that more than 50 percentage of the
employees or organization pays taxes or
they are included in the tax
it so 30 percentage or more employees
are benefitted out of Social Security
benefits and more than 50 percentage are
included in the tax net of the country
these data gives countering figures from
that of the NSA sir
let us analyze the these two conditions
or these two criterias so the GST data
GST data was actually reacts amening the
formality of Indian economy so every
examination of the formality of Indian
economy formality you means whether it
is formal or informal formality of
economy so with the GST data the new
Economic Survey has bought some new
figures
let us analyze them as we said the first
criteria is whether some social security
benefits are provided social security
benefits the first criteria is that
whether some social security benefits
are provided in India government
provides social security benefits for
its employees so for the government
employees the government provides social
security benefits and for the private
employees EPF for that is the Employees
Provident Fund organization the
Employees Provident Fund organization
provides social security benefits for
the private employees and this is in the
form of pensions and Provident funds
pensions and Provident funds so EPF or
provides through its employees pension
and Provident funds also for the private
employees employees State Insurance
Corporation that is es IC employees
state insurance insurance corporation
employees State Insurance Corporation
provides for medical insurance medical
insurance try to remember this facts the
EPF for that is the Employees Provident
Fund organization the contribution of
the EPF for is compulsory for compulsory
compulsory for industries employing more
than 20 workers that is if an industry
has more than 10
workers EPF is compulsory and the second
criteria is that the monthly the monthly
wage or salary is less than 15,000 if
the wages or salaries is less than
15,000 and Aoife industry employs more
than 20 members employs Provident Fund
it's compulsory and above this level it
is voluntary so I bought this level it
is voluntary taking into this factors
into consideration Social Security
benefits Social Security benefits is one
criteria to analyze whether a sector of
an economy's in the formal or in the
informal category so Social Security
benefits is is one criteria according to
the Economic Survey so the second
criteria is whether belonging to the tax
net included in the tax net or not being
a part of the tax net means that the
firms are the industries the firm's are
registered are registered under the GST
so the second criteria is that whether
the firms are registered under the GST
or not this is the second criteria
according to the economic survey let us
see what are the key findings of the
Economic Survey with regard to these two
criterias of with regard to these two
criterias of concluding whether a
particular sector belongs to informal or
formal sector the first finding is that
around 0.6 percentage of the total
employees or the total workforce belongs
to the hard coal the first key finding
is that around 0.6 percentage of the
total firms of the total firms belongs
to the hardcore hardcore industries or
hardcore firms what is this hardcore
mean the hardcore means that these
industries are these firms meet both the
criterias that is the GST criteria as
well as the so
insecurity criteria both the criterias
are met by this firms and this have
found us hardcore firms of the country
so it is around 0.6 percentage this is a
very smaller number so hardcore firms
the second finding is that around 87
percentage of the total firms are
considered to be purely informal 87
percentage purely informal it means that
purely informal firms are excluded from
both the GSD as well as from the Social
Security benefits
so GSD not applicable Social Security
benefits are also not applicable that
means around 87 percentage of the total
forms in our country are purely informal
they don't either come under the GST tax
net or under the Social Security
benefits criteria the third finding is
that around 12 percentage of the total
firms around 12 percentage of total
firms come under the GST net but not
under the Social Security benefits so
GST is applicable for them but not
Social Security benefits they don't
provide Social Security benefits to its
employees but they come under GST that
is they are registered under the GST the
next finding is that zero-point-one
percentage of total firms provide some
kind of social security benefits to its
employees but they don't come under the
GST tax net so they provide social
security benefits to its employees but
GST is not applicable they don't come
under GST or they are not registered
with the GST now let us analyze the
figures coming to the Social Security
benefits Social Security benefits it is
estimated that around 7.5 crore people
comes under the social security net this
equals to around 31 percentage of total
workforce excluding agriculture so
taught 31 percentage of total workforce
excluding agriculture agriculture
is not included you must remember that
excluding agriculture this is what we
discussed 31 percentage this was the
figure we discussed when we started this
discussion on economic surveys findings
we said that survey says that around 30
percentage of the employees in the
country are benefited of social security
so the survey says that 31 person is or
7.5 crore employs in the country are
benefited with Social Security benefits
and this is excluding the agricultural
workforce in the country even though
agriculture is excluded this includes
government stuff includes government
employees which is around 1.5 crore of
the workforce that is agriculture is
excluded but government employees are
included that is 7.5 crore in which 1.5
crore are government employees coming to
the GST tax net around 12 point 7
million comes under the GST tax net
which is around 53 percentage of the
total so around 53 percentage 12 point 7
million here also agriculture is
excluded agriculture excluded here you
must notice two things one thing is that
these data is entirely based on the
industries industry based data not based
on households not household based so the
survey has taken the data based on
industries not on households second
thing is agriculture is excluded
agriculture is excluded so you must
understand that these data's are arrived
because agriculture is excluded also it
is industry based data that is well
these are the figures and when we
considered these two things around 31
percentage of the workforce comes under
the social security net and around 53
percentage under the GST net and the
service is that these two figures are
more than what we have believed about
the Indian economy or the formality of
Indian economy this is more than
believed about the formality of the
Indian economy and this is the second
unknown fact about India given by the
economic survey survey has given ten
important facts about the Indian economy
and this is a second fact now let us
analyze what are the reasons for a
greater percentage of informality in the
Indian economy reasons for informality
in the Indian economy the first reason
for this large percentage of informality
in the Indian economy is that our
agricultural sector is informal and a
large number of people more than 50
percentage of the population is directly
dependent on the agriculture so there
does not come under the formal sector
because they don't either pay the GST or
they don't provide any social security
benefits for that reason agriculture is
a informal sector and more than 50
percentage of Indian population is
directly dependent on agriculture first
reason is because our agriculture is in
the informal sector the second reason is
the lack of industrial growth in India
lack of industrial growth in India the
industrial growth rate in India is poor
also there is a mismatch between
mismatch between the skills required by
the industry and also the skills which
are imparted by the employers mismatch
between skills required by the industry
and the skills possessed by the
employees so this mismatch has also
contributed to a large percentage of
informality in the Indian economy and
for this reason that is the lack of
industrial growth in India the
government has come up with many
initiatives and schemes a very good
example is make in India program another
reason would be rigid labor laws if we
take the example of the Industrial
Disputes act Industrial Disputes act
1947 we will see that the first
condition according to this Act
the first clause in this Act was that if
there isn't
dispute between the employee and the
employer the employer and the employee
must try to have you chilled out sense
all the problem if it does not get
solved it will go to labor tribunal and
again if it's not solved it will go to
the judiciary and most of the times
judiciary was favorable for the
employees
judiciary favored the workers so this
discourage the employees and if they're
closed in this actor is that if there
are more than 100 workers in an
organisation if there are more than 100
workers the employer should get the
permission from the government in order
to fire an employee so these clear all
this closes became rigid for the
employer and this discouraged the
employer to create more employment in
the organisation so in order to solve
all these issues we have the ease of
doing business in India now you must
remember that the labor loss is a state
subject labor loss is a state subject
the states can make legislations
regarding the subject so it will depend
on state to state whether they perform
well or not we can see that in India
itself there are industrially well
performing states like Mumbai Gujarat
etc where in which the state laws are
favorable for the traders or for the
industrialists so we will see that you
must remember that there are you must
remember that the labor law is a state
subject the state can make legislations
regarding the labor law in India we will
see that there are well performing
states like Maharashtra Gujarat etc in
industries so the states can make
amendments or make legislations
regarding the labor laws labor laws are
applicable to the organized sector labor
laws applicable to organized sector so
when labor laws become rigid what will
the industrialists do this industrialist
will try to keep more employees
the informal sector so industrialists
will try to keep more employees in the
informal sector when the labor laws are
more rigid so if government makes
flexible labor laws what will happen it
will be good for the employees so that
they will keep Moore and Royce in the
formal sector if flexible labor laws are
adopted more employees can be in the
formal sector of the economy
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you