Time for greater workforce formalisation, expansion of social security coverage: SBI report

New Delhi, May 8
Despite regional differences, informal employment remains the predominant form of employment across all states, an SBI Research report said on Friday, highlighting the need for greater workforce formalisation and expansion of social security coverage.

Female workers are 4.8 per cent more likely to be informal workers compared to male workers whereas construction sector workers are 4.5 per cent more likely to be engaged in informal employment relative to agricultural sector.

“Government training plays a significant role in improving self employment among female. Our results show that government funding is associated with 5.8 per cent rise in the probability of self employment,” said the report.

Punjab records the highest share of informal workers at 82 per cent, followed by Uttar Pradesh and Bihar at 81 per cent each.

Rajasthan, Chhattisgarh, Andhra Pradesh and Madhya Pradesh also exhibit high levels of informal employment, with nearly 74 per cent of workers engaged in informal jobs.

“Higher levels of informality in several northern and central states may be associated with the dominance of agriculture, casual labour and low-productivity employment activities,” the report stated.

States with relatively diversified industrial and service-sector activities such as Haryana, Tamil Nadu, Telangana, and Karnataka exhibit comparatively lower levels of informal employment, it added.

Informal workers remains predominantly rural in nature, with nearly 59 per cent concentration in the rural areas, while urban areas account for around 41 per cent of the informal workforce.

The Industry composition of informal workers indicates that agriculture remains the largest source of informal employment, accounting for nearly 42 per cent of the informal workforce, followed by trade and hotels (17 per cent) and other service activities (14 per cent).

India’s labour force is undergoing structural transformation with share of agriculture in the workforce witnessing a modest 23 per cent decline from 66 per cent in 1987-88 to 43 per cent in 2023-24 over a 37-year period.

Large enterprises (more than 20 workers) now employ 13.7 per cent of the workforce, significantly higher than 10.8 per cent in 2024 with government’s renewed push on manufacturing.