The pandemic wreaked havoc on the unorganized sector. Since the pandemic, the sector is struggling to survive as it is the most affected sector. The sector representatives have requested Finance Minister Nirmala Sitharaman to give support in the upcoming Union Budget. Take a look at how this industry is doing and what are some key expectations of this sector for the betterment of the people who belong to this sector.
Social protection to informal workers
Following the pandemic's initial shock, the unorganized sector has been hit the worst by the lockdowns and other disruptions. Despite progress toward formalization, the informal sector still employs roughly 80% of India's workforce and generates 50% of the country's GDP.
Approximately half of them work in agriculture and the other half in the non-agricultural informal economy. They are in desperate need of assistance as the majority work in construction, manufacturing, and services such as transportation, commerce, hotels, and restaurants.
While the government has attempted to alleviate their anxiety, there is still considerable ground to be covered. From budget 2022, the sector, especially the urban poor who don't come under NREGA looking for better social protection.
Expanding Microcredit to informal employers
Following the sector's unorganized work culture, it is hard for them to get microcredit easily compared to the organized sector.
In Budget 2022, the sector is expecting a major update with this. By extending microcredit and putting additional resources in the hands of formal financial institutions with proven last-mile reach, sustained efforts are needed to remove informal employers from their reliance on informal financing, informal employers require formal finance.
While informal employers lack physical capital, they frequently require short-term working capital to smooth out fluctuating cash flows. NBFCs and banks are prime sources to fulfill these requirements.
Widening availability and lowering the cost of gold loans
In the unorganized sector, most people rely on gold loans to meet their short-term financial demands as they lack the reach of formal credit facilities. These people, without access to banks have long stashed their assets in gold, making it a frequently held asset in India. Small companies, tradesmen, shopkeepers, and others now account for nearly a third of gold loans from NBFCs.
Given the widespread usage of gold loans by informal employers, the union budget must consider strategies to expand their availability and cut costs. However, the government has made multiple efforts to resolve this and strengthen the unorganized sector work living condition previously, but a lot more needs to be done following the increasing dependence on gold loans.