Informal sector has experienced rapid growth in India and has consequently attracted increasing attention of academics, social activists and policymakers. It is often believed that the rapid growth of the informal sector has been influenced by ever rising unemployment, less job opportunities and lack of income avenues in formal sectors.
The informal sector has a long charted history in most of the developing nations of the world. In 1972 the International Labour Organisation [ILO] has defined a social economic system that is now commonly known as informal sector that is “all activities that operate largely outside the system of government benefit and regulation.” Since then informal sector seems to be known by many different nomenclatures, more precisely referred to as the informal economy, unregulated economy, unorganised sector, unobserved employment and so forth. There is no unanimity, as such, over what constitute the informal sector worldwide. It has been used to describe such diverse activities as street vending, hawking, undeclared domestic work, and barter stealing public property, corruption, tax evasion and organised crime. According to experts, a final definition of the informal sector is thus highly problematic. In developing countries the term informal sector has broadly been associated with unregistered and unregulated small scale activities / enterprises that generate income and employment for the urban poor.
The informal sector in India is characterised by a large number of small scale production and service activities that are individually or family owned and labour intensive which does not fall under the purview of organised economic activities. The exact magnitude of the informal sector in India is difficult to estimate due to its elusive nature. The study shows that in Asia and Africa the informal economy is growing at a faster rate. As a result of joblessness among the youths and the inherent flaws associated with the formal sector street vending is also growing very fast in both small and big cities of India.
Activities of the urban informal sector in the public arena of cities are particularly apparent in street based trading which is widely known as street vendors. A majority of these enterprises are hidden from the government tax. But the facts remain that informal sector in form of street vending provides a livelihood for large numbers in the labour force and has been directly or indirectly encouraged by the government, licence issued, protected and backed by politicians, even though the sector continues to have low productivity, poor working conditions, low incomes and limited opportunities for advancement and majority of street vendors operate their business in busy streets, side walk or public space which are considered illegal and unlawful. Obviously the vendors virtually become the victims of harassment and threats from police and the concerned authorities. Owing to push and pull factors of migration that an overgrowing number of people are opting to move to the urban centres. Faced with what was often contracting employment in the formal sector, the migrants turned to the informal sector.
The informal sector in India could also be seen as a self-help initiative to create employment and income by the unemployed youths. At the same time we should not lose sight of the fact that the informal sector provides employment opportunities and serves in the national economy. In this way, one section of the urban poor helps another section of the urban poor to earn bread and butter and more precisely in reduction of abject poverty for the socio-economically challenged individuals of the society.