The COVID-19 pandemic has taken a heavy blow to various sectors of the economy, but the unorganized sector has felt its impact the most. Comprising a vast majority of India’s workforce, this sector includes migrant laborers, daily wage workers, farmers, construction laborers, and small-scale business owners, many of whom were already facing challenges like low wages, lack of social security, and job insecurity. With the onset of the pandemic, these issues have been exacerbated, pushing the sector to its limits.
From the urban unorganized workforce to rural agriculture and the self-employed, every segment of this vast economic landscape has been affected. This article takes a deep dive into the gravity of the unemployment crisis in the unorganized sector, the challenges it faces, and what the future may hold.
Impact of Unemployment on the Unorganized Sector during Covid 19
Migrant Workers
In India, over 90% of the workforce, or over 400 million people, work in the unorganized sector. This sector comprises migrants who move to big cities and state capitals in search of work. Before the COVID-19 pandemic, these workers had jobs and a way to earn a living, but they often faced low wages and a lack of social security. When the pandemic hit, and the lockdown was imposed, these issues became even worse, pushing many workers to the edge. Not only did they lose their jobs, but many were also forced to return to their hometowns under difficult and unprecedented circumstances.
Rural Agriculture Workforce
India’s agriculture sector is also in turmoil. This sector relies heavily on self-employed farmers and unorganized farm laborers. Their income depends on the timely sale of their produce. While this season’s harvest was a bumper one, the pandemic’s impact on logistics has caused a halt in the movement of crops. The closure of state borders and retail markets has only added to the hardships. The farmers are now hoping for faster implementation of Minimum Support Prices (MSP) to help them recover.
Construction & Infrastructure
The construction sector, already struggling with delays, funding issues, and other challenges before the pandemic, has faced even greater setbacks. The halt in construction work and the shutdown of material movement and logistics have left this sector at a standstill. With a significant portion of the unorganized workforce employed, the sector is facing a prolonged freeze.
Indian MSMEs
India’s MSMEs (Micro, Small, and Medium Enterprises) are crucial to the economy, employing over 60 million people. However, the sector was already in recovery mode after GST reforms and a credit squeeze. The pandemic has pushed MSMEs into a deeper crisis, primarily due to a lack of cash flow needed to keep production going. Unorganized workers in this sector now face the threat of losing their jobs and salaries as business owners struggle with limited capital.
Large Enterprises
Large Indian enterprises, especially in sectors like automobiles, are also facing severe disruptions. With inventory piling up and production lines coming to a halt, even these large industries are feeling the strain. While they may be big, they are still sensitive to inventory glutes, which cause widespread issues across the supply chain and related employment.
Self-Employed
Self-employed individuals, including street hawkers, drivers, handymen, and daily wage workers, have been among the hardest hit. With the new social distancing norms and lockdowns, this sector is struggling to adapt to the new realities. A full recovery seems far off, and many workers have already migrated back to their hometowns. This displacement will delay economic recovery as these workers will take time to return and rejoin the workforce.
The Path Forward for India’s Unorganized Sector
The COVID-19 pandemic has revealed the deep vulnerabilities within India’s unorganized sector, which comprises over 90% of the workforce. The government’s announcement of a USD 22 billion relief package and the activation of the Public Distribution System (PDS) and Direct Benefit Transfer (DBT) have provided some immediate relief. However, the road to recovery remains long and uncertain, especially for the unorganized sector. MSMEs need increased liquidity to recover, and prioritizing the flow of credit is essential to ensure that businesses can hire and pay their workers.
While the global crisis has affected economies worldwide, its impact on India’s unorganized workers is especially severe. Millions will be displaced, and re-integrating them into the workforce will create long-lasting socio-economic consequences. As global unemployment surges and vulnerable workers face severe challenges, India must actively support these sectors with more targeted interventions.
India’s economic future depends on how effectively we support the unorganized sector during these challenging times and whether we take enough action to address the rising inequality and poverty risks in the country.
