Informal Sector In India A Glimpse Commerce Essay


In Indian context the formal and informal sector are categorized as Organized and Unorganized sector. Organized sector includes that of formal sector characteristics legally registered, restrict to entry, available statistics budget document reports, annual reports, tax payment and etc. and the Unorganized sector comprises of informal sector characteristics such as enterprises whose collection of data is not regulated under any legal provision, not maintaining any regular accounts, no regular information about the enterprise and etc. (National Sample Survey Organization 2001).

India's high level of economic growth has been accompanied by unorganized or informal sector and plays an important role in the Indian economy. More than 90% of workforce and about 50% of the national product are accounted for by informal economy; high proposition of socially and economically underprivileged population of the society are concentrated in the informal economic activities (National Statistical Commission: Govt of India 2012). In India it had been a complex debate on defining the informal sector; For statistical or data collection purposes on the informal sector different departments (such as The National Commission for Enterprises in the Unorganized sector (NCEUS), National Statistical Commission (NSC), System of National Accounts (SNA), National Accounts Statistics (NAS), National Sample Survey Office (NSSO) and Delhi Groups of Experts) within India have defined informal sector according to their research objectives. However overall, India has built up an elaborate and competent statistical system both in terms of institutions as well as professional manpower, also within the ILO and beyond it; India's 'Delhi Group' is recognized as a leader in setting standards for informal economy statistics (ibid). Table 3.1 briefly explores the definition of informal or unorganized sector in the Indian context.

Table 3.1 Definition of informal/unorganized sector in Indian Context


Definitions and recommendations

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International Conference of Labour Statisticians (ICLS)

Evolving different aspect of in-formalization in gradual conferences, ICLS says that: Informal sector is a group of production units as household enterprises unincorporated enterprises owned by households engaged in non-agricultural businesses

System of National Accounts (SNA)

Enterprises do not constitute separate legal entities independently of the household members who own them and a fixed capital is used in the production of good and services either for own use for market

National Commission for Enterprises in Unorganized Sector (NCEUC)

Differentiating the informal enterprises and informal employment, NCEUC says that the unorganized sector consists of all unincorporated private enterprises owned by individuals or households, engaged in the sale and production of a goods and services operated on a proprietary or partnership and with less than ten total workers

Delhi Group Expertise

Unorganized Sector consists or should consist: Unincorporated Enterprises, no complete set of accounts maintained, not specification of workers/should consider, enterprises less than 5 employees, differentiation between agriculture and non-agriculture should be made, as well as to include paid domestic services

National Sample Survey Office (NSSO)

Focusing on the Socio-Economic aspect, it captures two dimension of unorganized sector basically on The context of enterprises and Nature of employment thus try to organize a definition as non-agriculture activities, Manufacturing, services and trade areas are covered with branded as well as partnership owned enterprises which are unincorporated.

Ministry for Small Medium Enterprises (MSMEs)

Puts into simple terms as: those are unregistered enterprises come under unorganized sector.

Source: {{341 National Statistical Commission: Govt of India, 2012}}.

On one end the OCED's report says that informal becoming increasingly normal on the other end there is still no clear agreement with authors and institutions on a single definition of informal sector, however in general building on Gerxhani informal sector can be defined as what Sahoo and Ten Raa (2009), say that informal sector is the unregistered sector with the self-employed micro enterprises and family-owned activities, which is marked by less or no tax payment, less capital endowment, lower technology, less capital, lower wages and producing wage-goods compared to that of the formal sector (Sahoo and ten Raa 2009). Adding to that, it helps include Chaudhuri (1989), recognizing the Fields (1975) and Starks (1982) views the city migration plays a crucial role as it is the entry point to the city migrants who leave their village in search of job, with the hope earning more than what the agriculture pays them (Chaudhuri 1989). A wide range of distinct characteristics have been used by different researchers, was pointed in the previous chapter 2; having said that there is a clear distinction made in informal sector as concern, which is enterprises informal by nature at the starting point and enterprises of informal employer.

3.2 Informal Fast Food, A review

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Before understanding informal fast food sector, it is important to know what is meant by fast food. In general the foods which are ready to eat are considered as fast food. In entrepreneurial perspective Gabriel (1988), defines fast food enterprises are companies that supply catering services on a fast turnover basis (Gabriel 1988). Fast food comprises list of menu such as hamburger, chicken, hot dogs, pizza, coffee, pastry and ice cream and etc. (Gabriel 1988);(Kwate 2008). The increasing growth of fast food sector has different reason as Gabriel points to the main reason is social change, in simple term urbanization influenced by globalization and industrialization have increased women participation in workforce, weakening of housework, change in family structure, hectic lifestyle and the children as consumers, different taste of food, advertising for consumer all influenced greatly for growth of fast food sector (Gabriel 1988). Levitt (1972), says that the possibilities of the manufacturing mode of thinking and technological use in the sector have given the chance to growth of fast food sector (Levitt 1972).

In fact there are not much literature/researches on informal fast food sector; however there are researches on street food and mobile food vending as part of informal perspective. Generally researchers have referred informal fast food sector as street food vendors or mobile food vendor. Bhowmik (2005), in a review on street food vending in Asia says that 2.5 of the urban population in India have involved in this occupation (Bhowmik 2005).

Researchers have found it complex to collect the data on informal sector and have been using different definition to have a track on the sector for policy implementations. The gap here is that the researches have been focused more on informal sector as a whole, but it is not. There are different types of enterprises; forms within, which make it more complex and one single policy for the whole set of informal enterprises can't address the problem of varieties of informal micro enterprises. Therefore there is a need to study these informal micro enterprises, which would make it easy to understand the sector more deep as well as to collect appropriate data on the same.

The trend in informal fast food sector can be categorized into four different forms (see Table 3.2). Even though these categories of entrepreneur may have chosen the this business as a mean to survive without employment opportunities they have different working style, working hours, working place, motivation level as well as challenges faced and impact created in terms of income generation, job creation and improved quality of life.

Building on the analytical framework I define informal fast food sector as an autonomous entrepreneurial activity carried out by an individual/group of individuals aimed at producing a positive effect on income, in four different forms known as street food vendors, mobile food vendors, semi-established food vendors and established food vendors classified into survivalist entrepreneurs and growth-oriented entrepreneurs and for which the terms of legislation and regulations applicable to the activities but not being met as well as monetary transaction not been declared to the state.

Table: 3.2 Different form of Informal Fast Food Sector

Form among informal fast food sector

General definition

General Characteristics



Street food Vendors

Pre-cooked food at home been offered for sale to the public without having a permanent built-up structure/building from which to sell the food.

. Mean of survival

. Easy entry

. Low productivity

. Low capital investment

. Sell food once in a day

. Seasonal

. No sustainable or competitive strategies

. Stress and Health related issues,

. Police Harassment

. Problem of place

. Weather

. Stable impact on income generation as well as job creation

Mobile food vendors

This category of entrepreneurs constantly moving from one place to another place with pre-cooked food either in pot carrying on their head selling food at door steps of the customer or in push cart and

. Mean of survival

. Easy entry

. Low productivity

. Low capital investment

. Sell food once or twice in a day

. Seasonal

. No sustainable or competitive strategies

. Stress and Health related issues,

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. Police Harassment

. Problem of place

. Weather

. Stable impact on income generation as well as job creation

Semi Established food Vendors

Entrepreneurs sell the Pre-cooked food (at home) from a permanent own/rented building without a kitchen and water connection, sometimes with few eating tables outside the building, where the customers have to stand and eat.

. To be self-employed with previous work experience

. Carrying the as the traditional/ family occupation

. Increase income level

. Motivated to expand the business/sustainable strategies

. Sell food twice or three times a day

. Labor issues, in terms of can't afford to hire extra employees while there is more work to be done.

. Water and Electricity Problem

. Sometimes increased price of raw goods

. Can make positive change in income to an extant

. Employee family members and sometimes low paid part-time/full time employees

Established food Vendors

An enterprise established with kitchen, water and electricity connection, food pre- and on site cooked, also with standing eating table arranged.

. Highly profit motive

. Having a license

. Capital intensive

. Having a name for Enterprise

. Motivated to expand the business/sustainable strategies

. Sell food three times a day

. Attracting a wide range of customers

. Division of labor and etc.

. Labor issues as when the labors take off or leave the job, it is difficult to serve the people

. This category can increases considerable income and profit

. Hire external full paid staffs

3.3 Policies history and Changes related to informal fast food sector

In general as a whole, 1991/92's liberalization of Indian economy has had serious impact on informal sector (Siggel 2010). The economic reforms of India-1991 included trade liberalization, currency realignment, an alleviation of industrial licensing and regulation, as well as changed in fiscal and monetary policies (Ibid). In a conference paper Indrajit (2010), post-liberalization economic reform of India; has not only seen the increased annual grow rate of labor absorption (pre-liberalization 1.38% and post-liberalization 2.76%) in informal sector but also its contribution to total industrial output and total exports (Indrajit Bairagya 2010).

As there are not proper definitions on informal fast food sector, thus there are no policies concerning this topic yet. However there are polices around unorganized micro enterprises as whole and on street food. Among these policies; National Commission for Enterprises in the Unorganized Sector (NCEUS) 2005, Scheme of Up gradation of Quality of Street Food (SUQSF) some of important contribution from government relating to informal fast food sector.

3.3.1 Scheme of Up-gradation of the Quality Street Food

Recognizing the fact that street food is a large source of employment generation and a treasure house of local cooking traditions, The Government of India: Ministry of Food Processing Industries sponsored a study of SUQSF carried out with the objectives of a) provide identity for street food vendors and bring them into national mainstream; b) provide economic sustainability; c) upgrade safety and hygiene; d) ensure waste management system and other focus is to that of Food Streets: which targeted on i) promoting clean, safe and good quality traditional food service at affordable price at tourist places and ii) promoting Indian Cuisine (Govt of India:Ministry of Food Processing Industies. 15-10-2012).

And the study completion proposed a guideline for achieving the objectives and the guideline included: 1) selecting one Food-Street of the selected cities with the support of State governments and Urban Local Bodies; 2) provide adequate infrastructural facilities to those streets; 3) support local authorities in establishing food-streets. The proposed main stakeholders are (for implementation) include State and Unitary Territory governments, Urban Local Bodies, Local Police Administration, Banks and Financial Institutions, Insurance companies, Certification and Accreditation Authorities, Vendors' and Hawkers' Associations, and Consumer Groups and Monitored by Ministry of Food Processing Industries with the Project Management Agencies (Ibid).

3.3.2 National Commission for Enterprises in the Unorganized Sector (NCEUS)

Government of India established NCEUS in 2004, to examine the problems faced by the unorganized enterprises and recommend appropriate policy guidelines to provide technical, marketing and credit support to informal/unorganized enterprises. Based on the commission's terms of references such as a) review the status of unorganized sector in India concerning the nature, size, scope and magnitude of employment; b) Identify constraints of small enterprises regards to freedom of carrying out the enterprise; c) suggest the legal and policy environment that should govern the sector for the growth; and NCEUS submitted number of reports on relating to unorganized sector, however we are highlighting aspects from, Social Security for Unorganized Workers (SSUW) 2006, Notional Policy on Urban Street Vendors (NPUSV) 2006, Financing of Enterprises in the Unorganized Sector (FEUS) 2007, and Creation of a National Fund for the Unorganized Sector (CNFUS) 2007. However we in this research paper focus only on Social Security for Unorganized worker and National Policy for Street Vendors.

Social Security for Unorganized workers (SSUW) 2006

Acknowledging the fact that 94% (NSSO Report) of Indian workforce are involved in the unorganized or informal sector, the Government has enacted the Unorganized Workers' Social Security Act 2008. The Act includes for constitution of Nation Social Security Board to recommend social security schemes viz. life and disability cover, health maternity benefits, old age protection and any other benefit as may be determined by the Government for unorganized workers (India Development Gateway. 2012). Further there are other schemes in relation to social security of unorganized sector such as

Swarnajayanti Gram Swarozgar Yojana (SGSY); The objective of the scheme is to bring the self-employed persons above the poverty line by providing them income-generating assets through bank credit and Government subsidy (Planning Commission, Government of India. 2010).

Swarna Jayanti Shahari Rozgar Yojana (SJSRY): The Urban Self-Employment Programme (USEP) and the Urban Wage Employment Programme (UWEP) are the two special components of the SJSRY (Ibid).

National Policy on Urban Street Vendors (NPUSV) 2006

The draft of the policies comments from different stakeholders such as National Association for Street Vendors in India (NASVI), Self Employed Women's Association (SEWA) and Manushi

Considering the suggestion from stakeholders the policy constituted Town Vending Committees ward-wise under concern municipalities to take up the in charge of Registration process of street vending, providing monitoring facilities to the street vendors, identifying areas for hawking with no restrictions with time and days, set terms and conditions, take action against defaulters, collect revenues

The registered and licensed vendors will have the opportunity to set-up a new shop

The citizen men and women equally have right to adequate a means of livelihood

Simple registration process: Name of the vendor, One nominees from family, Nature of business and category (stationary or mobile)

Children under 14 are not allowed for conduct of business(Government of India 2006)

3.4 Conclusion

There are no proper definitions for informal fast food sector, there are not much data available on this sector, and there are not many actors involved in supporting or addressing the challenges faced by the sector except government. However there are NASVI and SEWA associations working for street vendors as whole and self-employed workers. But understanding the fact that informal fast food sector is huge and can be a separate as a sub-sector of informal sector, therefore there need a more attention on this sector. The increasing importance of the informal fast food sector can be explained through a quote by Tinker (1999), "I believe that street food vending will increase through-out the world in the next century… []… vendors will improve their food handling standards because customers expect it… []… the profitability of the enterprises will increase as government harassment declines but also as a result of benefits secured by organizing" (Tinker 1999).

Informal fast food sector is one of the embedded traditional businesses in Indian society as well as across the world. There are ample of opportunities to support this sector by different actors such Business Associations, Development Organizations, Non-Governmental Organizations and etc.