Labour Code for Informal Sector

  • IASbaba
  • March 1, 2021
  • 0
UPSC Articles
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  • GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation 
  • GS-3: Indian Economy and its challenges

Labour Code for Informal Sector

Context: Finance Minister in her budget speech referred to the implementation of the four labour codes, closing the process that started 20 years ago.

Do You Know?

  • India’s estimated 450 million informal workers comprise 90 per cent of its total workforce, with 5-10 million workers added annually. 
  • Nearly 40 per cent of these employed with MSMEs.

 According to Oxfam’s latest global report, The Inequality Virus

  • Out of the total 122 million who lost their jobs in 2020, 75 per cent, which translates to 92 million jobs, were lost in the informal sector. 
  • The report further highlights that over 300 informal workers died due to the lockdown, with reasons ranging from starvation, suicide, exhaustion, road and rail accidents, police brutality and denial of timely medical care

While there is an urgent need to revive the economy by generating employment, the COVID-19 experience tells us that there is also a need to provide social protection, especially to the 450 million informal sector workers.


Government diluted the labour laws; then they drafted the rules of the Code on Social Security without really taking into consideration the plight of the informal sector workers.

  • Issues of Exclusion: While on paper, the draft rules envisage wider coverage through the inclusion of informal sector and gig workers, at present the draft rules apply to manufacturing firms with over 299 workers. This leaves 71 per cent of manufacturing companies out of its purview.
  • Burden of Administrative Processes: The draft rules mandate the registration of all workers (with Aadhaar cards) on the Shram Suvidha Portal to be able to receive any form of social security benefit. Failure to register (Aadhar –driven exclusion or lack of adequate knowledge about process) will make then ineligible for the benefits. Also, migrant workers face the challenge of mandatary updating information on the online portal at regular intervals.
  •  Ambiguity on applicability of benefits: It is unclear if a migrant worker with an Aadhaar card registered in her/his home state of Bihar be eligible for social security benefits in Gujarat where she/he is currently employed.
  • No-Right Based Framework: The Code does not emphasize social security as a right, nor does it make reference to its provision as stipulated by the Constitution. In addition, it does not stipulate any appropriate grievance redressal mechanism which will leave millions of workers vulnerable without clear social protections.


The Code on Social Security was envisaged as a legal protective measure for a large number of informal workers in India but unless the labour codes are made and implemented keeping in mind the realities of the informal sector workers, it will become impossible to bridge the inequality gap.

Connecting the dots:

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