In order to have a nudge towards spontaneous formalization, major transformations are required in the informal sector in the country. Explain (200 Words)
Refer - Financial Express
Enrich the answer from other sources, if the question demands.
IAS Parliament 4 years
KEY POINTS
· ‘Vocal for local’, a distinct and decisive shift in consumer preferences towards locally-produced goods and services.
· The size of India’s informal sector accounts for about 50% of GVA and a major share in the export basket.
· Most firms are micro in size and deploy little capital. They have a small scale of production, substandard/unbranded quality of products, and localised scope of procuring raw material and marketing their products.
· They are vulnerable to business downturns and other market uncertainties, as reflected in high mortality. Their access to cheap, reliable and long-term credit sources is highly restricted.
Transformations
· Enterprises must undergo internal transformation, progressively converging at incremental formalisation through spontaneous economically-viable units.
· It requires infusion of capital to ensure enhanced labour productivity and higher wages.
· They must pick their products and markets with utmost care.
· India is a labour-surplus economy. The informal sector employs more than 80% of India’s workforce.
· To generate good quality jobs, diversification (both horizontal and vertical) must be encouraged.
· Vertical diversification entails products not just be partly produced or assembled in India, they must be the end-products of fully indigenised and integrated production and supply chains, from design to made in India.
· Horizontal diversification involves expansion into newer products and markets, smartly aligning with India’s comparative advantage of surplus labour.
