Informal Sector in India: Migration and Poverty Implications

Abstract

For assessing the role of urbanization in reducing poverty this paper based on secondary datatries to examine the nature of relationship among urbanisation, migration and informal sector employment. Findings suggest that the informal sector also tends to attract migrants as the probability to get work opportunities in this sector could be high. Further, rural and urban poverty are inter-connected as rural to urban migration and informal sector employment and other state-specific characteristics are associated, though migration and urbanisation with its spill-over effects reduce both rural and urban poverty. Also,based onthe survey data for unincorporated enterprises, the paper examinesif the unorganized or informal manufacturing, trade and services have the potentiality to grow and contribute to the realization of the inclusive growth objective. The inter-sectoral linkages do not necessarily mean that productivity and wages improve in the informal sector if the units manage to receive business contract from the formal sector enterprises. In fact, a large body of the informal sector is seen to be unconnected to the formal sector and this independent segment is on the rise over time. Finally the paper argues for the introduction of an informal sector policy which may help reduce the welfare losses to labour employed at the lower rungs.