Govt Plans Study to Assess Impact of Formalisation on Workers

Why It Matters

Understanding whether formalisation translates into stable jobs will shape policies that can bridge the informal‑formal divide and boost inclusive economic development.

Key Takeaways

• Informal sector employs 90% of workforce.
• Formal payroll grew 54% YoY, 6.9M jobs.
• EPFO to lead study via Pandit Deendayal Academy.
• eShram portal creates digital database of unorganised workers.
• Findings will guide inclusive policy and social security.

Pulse Analysis

India’s push toward formalisation—spurred by the 2017 GST rollout, aggressive digitisation, and shifting consumption patterns—has reshaped the employment landscape. While the number of incorporated firms and limited‑liability partnerships has surged, the informal sector still accounts for roughly 90% of workers and 45% of GDP. This structural imbalance raises questions about the durability of new formal jobs and whether digital tools are truly extending benefits beyond the formal economy.

To answer these questions, the finance ministry has tasked the Employees’ Provident Fund Organisation, in partnership with the Pandit Deendayal Upadhyaya National Academy of Social Security, to conduct a comprehensive impact study. Central to the effort is the eShram portal, launched in 2021, which aggregates Aadhaar‑linked data on unorganised workers, creating a granular view of labour market dynamics. By linking this database with EPFO’s payroll records—showing a 54% YoY increase to 6.9 million formal jobs—the study aims to isolate the effects of policy interventions from broader economic trends.

The study’s outcomes will be pivotal for shaping remedial policies that ensure the gains from formalisation and digitisation translate into lasting employment and social security for vulnerable workers. Policymakers can use the insights to fine‑tune tax incentives, expand digital payment infrastructure, and strengthen social protection schemes. As India eyes developed‑nation status by 2047, aligning formal sector growth with inclusive labour outcomes will be a litmus test for the nation’s broader development agenda.