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The share of the same amounted to 53.9 percent in 2011-12.

The digitization campaign and the pandemic-induced emergence of the odd-job economy have led to faster formalization of the economy, with the share of the informal sector declining to only 15-20 percent in 2021 from 52.4 percent in 2018, according to an SBI Research Report.

The share of the informal economy fell significantly to 15-20 percent of gross value added (GVA) or formal GDP in 2020-2021, from 52.4 percent in 2017-18 due to digitization and the booming concert economy, said Soumya. Kanti Ghosh, the chief economic adviser of the SBI group.

The share of the same amounted to 53.9 percent in 2011-12.

According to Ghosh, numerous measures since the note ban in November 2016 have accelerated the digitization of the economy, and the emergence of the pandemic-induced concert economy has facilitated further formalization of the economy, to rates maybe much faster than most other countries.

The ban on tickets hit the informal sector the hardest, which then represented 93 percent of the workforce. The second blow to the informal economy was the GST and the last and hardest hit came from the pandemic.

At least Rs 13 lakh crore have entered the formal economy through various channels in recent years, including the recent program on the E-Shram portal, according to the report.

Real GDP was estimated at Rs 135.13 lakh crore in FY21, but fell 7.3% of FY22 after the worst economic contraction on record due to the pandemic.

The 2011 census fixed the size of the informal sector in commerce, hotels, transport, communications and broadcasting at 40 percent; in construction at about 34 percent; 16 percent of public administration; and 20 percent from manufacturing and almost 100 percent from formalization in finance, insurance and utilities, and to a large extent in real estate and agriculture.

The formal financial sector even expanded by 10% after the pandemic, with DBT transfers gaining traction and that of formalized utilities grew by 1% during the pandemic, according to the report.

The report, citing monthly data from EPFO, states that since FY18, nearly 36.6 lakhs of jobs have been formalized through July 2021 and the report expects this formalization rate tax is higher than that of fiscal year 20 but lower than the level of fiscal year 19.

Since FY18, the agricultural sector has been formalized from 20 to 25 percent due to the increasing penetration of KCC credit and now the informal agriculture sector is 70 to 75 percent.

Over the years, the usage of Kisan credit cards has also grown significantly as the outstanding amount per card has increased from Rs 96,578 in FY18 to Rs 1,67,416 in FY 22, an increase of Rs 70,838. And there are 6.5 crore of such cards, the official amount is Rs 4.6 crore lakh, noted the report.

He also said that payments worth Rs 1 lakh crore have been made at gas pumps alone over the past five years.

A large informal economy is not only a feature of the emerging and developing economy, and according to the IMF, 20 percent of European GDP is an informal economy.

Regarding the impact of the newly launched E-Shram portal, a very first national database of non-union workers, on the formalization of the economy, the report indicates that no less than 5.7 crore of non-union workers union members registered within the first two months of its launch. in August, with 62 percent of workers belonging to the 18-40 age group and 92 percent of registered workers having monthly incomes below Rs 10,000.

Ghosh considers the E-Shram portal a big step towards formalizing employment as to date the formalization rate of unorganized work due to E-Shram is around 17 percent or Rs 6, 8 lakh crore, which is 3 percent of GDP in just two months.

He also called for further streamlining of indirect taxes like GST and excise, claiming that only 11.4 crore of taxpaying households or 8.5 percent of the total population contribute 75 lakh crore or 65 percent of spending. final private consumption and cross-subsidies to 91.5% of the population.

According to the 2014 NSSO survey, up to 93% of the workforce made a living as informal workers, who have also been hit hardest by the pandemic.

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With this, GST collections broke the Rs 1 lakh crore mark for the fourth consecutive month. The GST collection in September was Rs 1.17 lakh crore.


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