Why this chapter matters for UPSC: The urban informal economy, gig workers, street vendors, urban poverty, and social security for unorganised workers are major GS2 and GS3 topics. India's Unorganised Workers' Social Security Act, PM E-VIDHAAN, e-Shram portal, and PM SVANidhi scheme all connect to this chapter.

PART 1 — Quick Reference Tables

Formal vs Informal Urban Economy

Feature	Formal Sector	Informal / Unorganised Sector
Employment contract	Written; legal	Verbal or none
Job security	Protected; difficult to dismiss	No security; can be fired anytime
Social security	PF, ESI, gratuity, pension	None (unless enrolled in govt schemes)
Wages	Minimum wages usually followed; often higher	May be below minimum wage; no overtime pay
Working hours	Regulated (Factories Act: 48 hrs/week)	Unregulated
Examples	Government employees, MNC workers, factory workers (registered)	Street vendors, domestic workers, rickshaw pullers, construction labourers
Share of urban workforce	~10–15%	~85–90%

Urban Occupations — Spectrum

Type	Examples	Issues
Street vendors	Fruit sellers, tea stalls, snack vendors	Harassment, eviction, no tenure; PM SVANidhi scheme
Domestic workers	Maids, cooks, drivers, security guards	No legal protection till 2023; sexual harassment; low wages
Construction workers	Masons, helpers, painters	Building and Other Construction Workers Act 1996; BOCW Welfare Boards
Gig workers	Swiggy, Zomato, Ola, Uber workers	No employment benefits; platform company claims they're contractors not employees
Factory workers	Garment, electronics, food processing	Labour codes; minimum wages; unionisation
Formal sector	Government, IT, finance, corporates	Highest wages and security; tiny fraction of workforce

PART 2 — Detailed Notes

The Informal Economy — India's Reality

Key Term

Informal / Unorganised economy: India's urban economy is dominated by the informal sector — workers without written contracts, social security, or legal protections. This includes:

~45 crore unorganised workers in India (urban + rural)
They produce ~50% of India's GDP but have almost none of the legal protections

Why does informality persist?

Labour laws historically applied only to firms with 10+ or 20+ workers — small firms stayed small to avoid regulations
High compliance costs deterred formalisation
Labour Codes (2019-20): Government merged 29 old labour laws into 4 Labour Codes (Wages, Industrial Relations, Social Security, Occupational Safety) to simplify compliance and expand social security to informal workers — but implementation still pending in many states

Street Vendors and PM SVANidhi

UPSC Connect

UPSC GS2 — Street vendor policy:

India has ~1 crore street vendors — a critical part of the urban food and service economy. Historically harassed by police and municipal authorities (illegal occupation of public space).

Street Vendors (Protection of Livelihood and Regulation of Street Vending) Act 2014:

Gave legal recognition to street vendors
Mandated Town Vending Committees (TVCs) with 40% vendor representation
Surveyed existing vendors given non-removable licences
Stopped forcible eviction without due process

PM SVANidhi (PM Street Vendor's AtmaNirbhar Nidhi, 2020):

Micro-credit scheme; initial loan of ₹10,000 → repay → ₹20,000 → ₹50,000
No collateral; digital transactions encouraged
~67 lakh street vendors benefitted (as of 2024-25)
Designed as COVID-19 relief but made permanent

e-Shram Portal (2021):

National database of unorganised workers
Registered workers get UAN (Unique Identification Number)
Links to PMSBY (accident insurance ₹2 lakh) and PMASBY
30.68 crore workers registered as of March 2025

Gig Economy — New Urban Livelihood Challenge

Explainer

Gig workers: Platform-based workers (app-based delivery, ride-hailing, freelance) — estimated ~77 lakh currently, expected to grow to 2.35 crore by 2030 (NITI Aayog report).

The classification debate:

Platform companies (Ola, Uber, Zomato, Swiggy) classify workers as "independent contractors" — not employees
This means: NO provident fund, NO ESI (health insurance), NO gratuity, NO paid leave
Workers bear all costs (bike/car maintenance, fuel, mobile data) and all risk

India's response:

Code on Social Security 2020: For the first time, includes "gig workers" and "platform workers" — mandates social security fund for them (life/disability cover, health, old age)
Rajasthan Platform-Based Gig Workers (Registration and Welfare) Act 2023: First state law to regulate gig workers; registration; welfare fund; Rajasthan Gig Workers Welfare Board
Karnataka draft Gig Workers Bill (pending)

Global context: UK Supreme Court (2021) ruled Uber drivers are "workers" (not contractors) — entitled to minimum wage and holiday pay; India's courts likely to face similar cases.

Domestic Workers

Explainer

Domestic workers in India: ~4.75 crore domestic workers (ILO estimate); predominantly women; among India's most vulnerable workers.

Historical lack of protection:

Not covered under Minimum Wages Act in most states historically
Not covered under ESIC (health insurance) for long
Subject to abuse, sexual harassment, arbitrary dismissal

Recent improvements:

National Policy on Domestic Workers (2019): Recognises domestic work as work; proposes registration, minimum wages, access to social security
POSH Act (2013): Extended to domestic workers — employers must follow anti-sexual harassment provisions
Several states now notify minimum wages for domestic workers (Delhi, Karnataka, Maharashtra)
e-Shram: Domestic workers can register and access social security benefits

Exam Strategy

Prelims traps:

~85-90% of India's urban workforce is in the informal sector — a surprising but important fact
PM SVANidhi = for street vendors (micro-credit, ₹10,000 → ₹20,000 → ₹50,000); NOT for all informal workers
e-Shram portal = for unorganised workers (wider category than street vendors); 30.68 crore registered (March 2025)
4 Labour Codes consolidated 29 old labour laws (NOT 44 or some other number)
Rajasthan = first state with a Gig Workers law (2023) — NOT Karnataka or Delhi
1 crore street vendors in India (approx) — useful data point for essays

Practice Questions

Prelims:

The PM SVANidhi scheme provides micro-credit loans to:
(a) Rural NREGA workers
(b) Street vendors
(c) Women self-help groups
(d) Tribal artisans
The e-Shram portal was created to register:
(a) MSME entrepreneurs
(b) Gig economy workers only
(c) Unorganised sector workers
(d) Agricultural labourers only
The four Labour Codes enacted in 2019-20 consolidated how many existing labour laws?
(a) 44
(b) 29
(c) 18
(d) 52

Mains:

India's gig economy is growing rapidly but its workers remain in a legal grey zone. Examine the challenges and suggest a policy framework for protecting gig workers while enabling platform innovation. (GS2, 15 marks)

Urban Livelihoods