The Government should ensure that the existing tax structure is favourable to the 11.4cr tax paying population that constitutes only 8.5% of the population but cross-subsidises 91.5% of the population, according to State Bank of India’s economic research report.
Based on specific examples, at least 13 lakh cr has come under the formal economy through various channels over the last few years, including the recent scheme on e-Shram portal, Ghosh said.
The report starts with an assessment of the degree of formalisation by stating that India has a large informal economy with around 93% of its total workforce earning their livelihoods as informal workers (NSSO 2014).
Though the pandemic has led to huge devastating impact on all the sectors of the economy but the impact has been felt more by the informal sector.
Still the report assesses that there is a positive development emerging in the Indian economy amidst the pandemic in form of increase in the formalisation of the economy due to the measures initiated by the government led by PM Narendra Modi.
By taking the shrinkage in economy post pandemic mostly in the informal sector as the starting point and calculating the loss in output across sectors to get a measure of the informal economy through rigorous data validation.
The article estimates that currently informal economy in India is possibly at max 15%-20% of formal GDP in comparison to estimate done by NSC in FY2018 that suggested the size of informal economy at 52% of the GDP.
SIZE OF THE INFORMAL ECONOMY
Occupation wise, workers from agriculture sector now account for 55% of registration followed by construction sec- tor (13%).
However, in some states like Odisha & Chhattisgarh the share of agriculture in total registration is more than 70%.
Age-wise, 62% of workers belong to the age-group of 18-40 years and registered female workers are a tad more than registered male workers.
The report explains, “Informal sector in India consists of enterprises which are own account enterprises and operated by own account workers or unorganised enterprises employing hired workers. They are essentially proprietary and partnership enterprises. The share of unorganised sector is highest in agriculture as the holdings are small and fragmented.”
It argues that since FY18, a lot has changed in Indian economy landscape. IMF has also noted that formalisation of economy has increased since the adoption of GST, enhanced digitalisation and demonetisation.